San Francisco has rising competition when it comes to big fintech startups

London could soon overtake San Francisco as the fintech (financial technology) unicorn capital of the world, according to a new study.

Of the worlds 29 fintech unicorns – private companies valued at more than $1 billion – nine are based in San Francisco, while seven are headquartered in London, the research published Tuesday said.

The report, by London-based recruitment firm Robert Walters and research group Vacancy Soft, said London was showing signs of potential to threaten San Franciscos historic dominance of the market.

It noted that Londons fintech sector received more venture capital (VC) funding than any other EU city in 2018, securing 39% of all European fintech funding. Berlins fintech sector lagged behind slightly, securing 21% of the cash, while Paris came in third with 18% of the overall funding.

Fintechs growth is impacting the U.K.s traditional banking sector, the report also noted, with their core revenue streams coming under attack.

The rise of smartphones and 4G means that increasingly, digital banking is an option, significantly reducing the barriers to entry for new entrants, the reports authors said. It is only now, with the rise of the fintech unicorns, that the banking sector has woken up and started to adapt to the new paradigm.

It predicted that by 2020, more than half of U.K. payment service providers would be digital-only.

For millennials who grew up with mobile devices (fintech) is particularly appealing because they want to conduct financial transactions the same way they would share pictures or apply for a job, James Murray, director of financial services at Robert Walters, said in the report.

The pace of change has been so rapid over the past decade that the perception of digital banking has shifted from an option to a requirement, he added.

However, the report warned that Brexit could create barriers to fintech growth rates, as any hard-border scenario could shrink the U.K.s talent pool.