United Kingdom country guide

The SaaS platform business model is thriving in the UK. Globally, it's second only to the US in number of SaaS platforms, with almost 2,000 and counting. The fastest-growing number of SaaS platforms in the UK are in insurance, hospitality, beauty and fitness, and retail.

"We understand a lot more about the business of our merchants than traditional banks do because they're running all their transactions on our platform. So we can provide them more bespoke services to help them grow."

Jason Downing, Head of Embedded Finance and Data, Epos Now

The competitive landscape in the UK

The UK remains a hotspot for innovation, with more tech unicorns than any other country in Europe. The high market maturity is highly competitive since it attracts investments, giving SaaS scaleups and leading platforms access to resources to grow.

In contrast to the US, the platforms industry in the UK remains fragmented. British business owners often use 4-6 different SaaS vendors to run their business. Examples could include Quickbooks for accounting, Marketman for inventory, or Zonal for POS.

Because the "all-in-one" solution is less common in the UK, SMBs may require more education from their platform on the value of the setup.

Many British SaaS platforms don't fully capitalize on the potential of embedded payments. Instead, they continue to rely on a simple referral model, leaving a significant opportunity for monetizing embedded payments.

One notable success story is KodyPay, an aggregated ordering and payments system built to improve customer experience in restaurants and cafes. After partnering with Adyen, KodyPay is set to exceed US$100M in annualized gross payment volume in only five months.

We see pricing headwinds for platforms competing against the referral model in the UK, with growing competition from non-platform players. An example is Dojo, a payment provider that provides small businesses with robust, flexible, and secure card machines. Dojo is gaining significant market share in F&B and Beauty and Wellness through exceptionally low pricing and aggressive offers.

The SMB perspective in the UK

SMBs in the UK are increasingly adopting platforms and embedded financial technology. 75% already use a platform to run their business, 60% currently use embedded payments through their platform, and 76% express interest in embedded payments.

Additionally, half of UK SMBs are already using Embedded Financial Products (EFP) via their platform, with 57% showing interest in adopting such products in the future.

Customer-centricity is a defining characteristic of leading platforms in the UK market. Research suggests that companies prioritizing the customer see higher profits and revenue growth, growing 4% to 8% faster than their competitors.

"At Fresha, our partners are the center of our universe. At the core, it's about giving value back and freeing up time for our partners for them to focus on what they do best."

Pawel Iwanow, CPO and co-founding team member of Fresha

Local payment methods landscape in the UK

British consumers are tech-literate and enjoy the convenience of buying online. They expect shopping experiences that seamlessly combine digital and in-person elements. The British High Street is changing from purely retail spaces to immersive experiences.

British consumers prefer debit over credit cards for everyday transactions, with shoppers typically holding 2-3 cards. Still, 90% of the adult population uses Visa or Mastercard. Credit cards account for approximately 90% of all online payments.

The dominance of debit and credit cards means that market entry and expansion strategies for SaaS platforms must include card payments. Regarding credit cards, American Express dominates the UK rewards space.

Contactless digital wallets and Tap to Pay options are widely embraced. Apple Pay and Google Pay™ are ubiquitous across the UK, and Amazon Pay is growing. As of 2024, half of UK adults (50%) have used Buy Now, Pay Later (BNPL) services at least once, though 38% of Brits have not used BNPL and do not intend to use it in the future.

The UK is early to adopt regulatory developments like Open Banking. Open Banking lets third-party financial services securely access consumer banking data through APIs.

Consumers choose Open Banking because it's fast, secure, and transparent. For businesses, it's a chance to offer lower-cost payment methods, save on interchange and scheme fees, and reduce fraud. Players like Atoa and Yapily gain traction in the UK with various use cases, including barbershops, jewelers, and large purchases.

Platforms can unlock the potential of this innovation with Adyen's Pay by Bank solution in collaboration with Tink.

The security and regulatory context in the UK

SaaS platforms in the UK face particularly stringent regulatory challenges because they handle vast amounts of sensitive data from multiple users. Failure to meet these requirements can result in legal consequences, financial losses, and reputational damage.

Key considerations:

Adhering to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations to build trust with users and regulatory authorities.
Meeting PCI DSS standards to prevent payment-card data breaches and ensure user-data security
Navigating GDPR data protection laws to safeguard user data and avoid non-compliance penalties
Implementing fraud prevention measures like multi-factor authentication and transaction monitoring to protect your platform and SMBs
Adhering to the UK Data Protection Act 2018 (mirrored in post-Brexit regulations) is essential to operate legally and maintain trust among UK users and international clients.

After Brexit, UK Interchange Fee Regulations (IFR) cap interchange fees at 0.2% of the transaction value for consumer debit and 0.3% for consumer credit on the condition that the acquirer and the issuer are all located within the UK.

In terms of financial services, a key name to note is the Financial Services Register, a public record that shows details of firms, individuals, and other bodies that are or have been regulated by the Prudential Regulation Authority (PRA) and/or the Financial Conduct Authority (FCA).

Our banking infrastructure and compliance teams provide vital support to our platform customers. We handle much of the regulatory burden to ensure continuous compliance, mitigate transaction risks and liabilities, and ultimately let platforms focus primarily on core objectives and support their users.

Key considerations for expansion to the UK

SaaS platforms should prioritize innovation and build a monetization strategy that meets evolving customer needs to gain market share in the UK.

To summarize: