Securing the UK’s FinTech Future
By Natalie Ceeney CBE, Chair, Innovate Finance
Today representatives from across the UK’s financial sector gathered to discuss the future of finance at the UK Financial Services Brexit and Beyond Summit. Given the volatile state of current negotiations, I’m pleased to report there weren’t too many sparks flying throughout the debate, despite it being Bonfire Night!
The primary focus of my involvement was to highlight the role FinTech can play in driving the financial services sector post-Brexit. I was delighted to have been invited to champion the FinTech sector in my capacity as Chair of Innovate Finance. Over the coming years there is a real, tangible opportunity to build on the UK’s global leadership in FinTech. The Chancellor himself acknowledged this at the recent IMF/World Bank annual meeting declaring the “UK is a ‘natural global home’ of new and innovative financial services.” It is sentiment becoming more prominent, and actions taken now can ensure we maximise this potential.
This sentiment has been backed up by statistics. Investment into UK FinTech reached £12.3bn in the first six months of 2018, more than any other country. FinTechs are coming to the UK to start up, scale and grow. There are currently over 1600 FinTech-related companies in the UK, which is predicted to double by 2030. The average revenue of these firms grew 22% from 2014 to 2016, whilst employment in the sector is set to rise from the current 76,000 to around 105,000 by 2030.
While I am sure many sectors would argue they are most important, the economic and social scope of FinTech is felt way beyond the sector itself. I highlighted this message in the opening of my speech, indicating how the rest of the economy has the potential to be served more efficiently due to the customer centricity of FinTechs and their focus on reducing key points of friction.
Another key issue I addressed at the summit was how exactly we retain the UK’s leading position and build on it to harness FinTech as a key engine of growth. A dichotomy of strong talent, high capital, engaged regulators, and a government that takes time to listen to the sector has already created an enabling environment for FinTech startups and scale-ups despite Brexit. But now is not the time to stand still.
Without a doubt, we need to grow our domestic talent base. More should be done in schools to promote STEM and explain careers of the future, and to support the training and retraining of people throughout their careers to develop skills in tech industries. This is an important point, given that 58% of EY/IF FinTech Census respondents (2017) reported attracting qualified, suitable talent as 1 of their top 3 challenges.
We feel passionate about this at Innovate Finance, and are looking to coordinate a series of events with schools to help pupils demystify finance and technology. Today’s summit was an opportunity to drive home the importance of developing the talent of the future to key stakeholders across financial services and government. Alongside this, particularly in the short to medium term, we will also need a flexible, skills-based immigration regime allowing the UK to attract and retain the best international talent.
On capital, initiatives like the patient capital fund have been widely welcomed across the industry. It is now vital to continue to promote UK opportunities to investors across the UK, EU and internationally. Especially as funding into the UK from the European Investment Fund has already dropped significantly since triggering Article 50. There is an immediate need to prepare future relationships and review the remit of the British Business Bank in driving sector growth – not just in London but right across the UK.
In our 2017 FinTech Census, 24% of respondents pointed to regulatory compliance as one of the principal challenges for FinTech firms. The UK Financial Services sector currently spends approximately £1bn on compliance per annum, an effort which can place a disproportionate burden on small businesses. This cost alone shows how critical RegTech can be to drive efficiencies and open up competition. We’re making progress, with nascent pilots in areas such as machine-readable rules and automated reporting.
It is important to not lose this impetus looking forward. FinTech offers huge potential for export, while the existing FinTech bridges offer a strong platform for strengthening global relationships. I do believe that FinTech will thrive post-Brexit but we cannot afford to be complacent. The current lack of clarity about the future poses huge risks to this outcome. This summit was an excellent opportunity to give a clear message about these issues.
There is a rising need in financial services to develop innovative customer propositions and adapt to the rapidly changing world we’re in, ranging from changing consumer needs, patterns of work, new tech and the growing trend of Internet of Things. A large proportion of the FinTechs I meet want to make a difference through technological advances that ensure people do not get left behind. This is already happening through offerings such as cheaper credit to low-income wage earners and better money management services.
It was great to see FinTech acknowledged at the summit as a key component of our country’s financial landscape; today, as ever, I and the team at Innovate Finance continue to advocate the needs of the sector and the wider socio-economic benefits that FinTech can bring.
It is clear that FinTech has a crucial role in driving societal change for the better. At Innovate Finance we believe UK FinTech has a bright future ahead and we look forward to working across industry, government and regulators to use the power of FinTech to help Britain thrive post-Brexit.