What next following UK FinTech week?

By Euan Ryan, Senior Account Executive

Earlier this month, the great and the good of the global FinTech sector (and the traditional financial services industry) descend on London for UK FinTech Week 2019. And, tipped as an opportunity to share insights, foster collaboration, and celebrate the UK’s position as a “global capital of FinTech”, it did not disappoint.

Innovate Finance’s recent report, State of the Nation, is chock-full of statistics on the value of FinTech to the UK: a £7bn contribution to the economy; 76,500 people employed, set to grow to over 105,000 by 2030; and over 1,600 FinTech firms, with estimates suggesting this will more than double over the next decade.

But the week was about more than patting our collective selves on the back for all the good work that has been done. It was billed as an opportunity to focus on the value of FinTech to society. From its contribution to financial inclusion to the diversity of the sector internally, attendees stressed both the realised and potential positive impact FinTech could make.

Three core themes were prominent throughout the conference: data; financial inclusion; and skills and automation, each of which tread fine line between risks and opportunities. The potential of reforms such as Open Banking and PSD2 were balanced against reticence over the speed by which such reforms could take place; the ability of FinTechs to address the ‘underserved’ and unbanked was discussed in context of some entrants ‘charging too much to those who can’t afford it’; and whilst various attendees disregarded the ‘apocalypse’ narrative of automation, the risks of ‘unknown unknowns’ were also raised.

Politically, alongside the expected overtures to maintaining the UK’s position by creating the “most pro-growth and pro-innovation” regulator environment in the world – as the Chancellor would say – there have also been a series of policy developments in recent weeks. The Bank of England committed to publishing its blue-sky ‘future of finance’ report within two months and highlighted ongoing reforms to the real time gross settlement (RTGS) scheme that would see payment service providers (PSPs) gain access to the mechanism alongside established banks in order to meet growing consumer expectations around banking and payments. The Financial Conduct Authority (FCA) highlighted the previous successes of its Innovate programme; a domestic success echoed by further progress of the Global Financial Innovation Network (GFIN) which now supports eight companies who are taking part in cross-border regulatory testing. And Innovate Finance launched a FinTech network alongside FinTech Scotland and FinTech North.

But, where do we go from here? As the delegates departed London and the stages collapsed, one is able to assert a more objective analysis of the themes, ideas and ambitions espoused during the conference.

Maintaining the UK’s position at the forefront of innovation

The conference was right to emphasise the UK’s considerable reputation in FinTech and financial services more broadly; the stats speak for themselves. But in recognising this reality, the question inevitably turns to: is this sustainable? A brief glance at the current political environment reveals significant questions over whether our institutions are well-placed to do the necessary work to sustain the UK’s strong position, not only in FinTech, but across the economy. This isn’t necessarily about Brexit, but the wider polarisation among the electorate and political establishment, and the increasing acceptance that potentially radical Government-led solutions to societal and economic issues are warranted. This is particularly true of a potential Labour Government under the stewardship of Jeremy Corbyn and John McDonnell, but the current Prime Minister and her shadow cabinet have also taken a relatively paternalistic approach, at least nominally, to regulation. As was made clear, industry needs to demonstrate that it can be a trusted partner in proactively seeking and delivering solutions for major consumer issues. It also has to be reaching out across Parliament, building broad alliances among MPs, to depoliticise the issue and ensure that favourable remarks for the FinTech sector are backed up by concrete action to maintain a favourable business environment.

Blurred lines: From FinTech to FS

The strong presence of established financial services institutions throughout FinTech week is undoubtedly an endorsement of FinTech’s success. The symbiosis of these two sectors is such that various attendees argued they should no longer be discussed as distinct entities. This adoption of FinTech culture, technology and efficiencies in response to encroaching competition has led to the significant improvement of services more broadly, but this does not come without risks for the FinTech sector. Despite the work done since 2008 to improve the image of financial services amongst the public and policy-makers alike, public trust in the sector is low. For instance, on the tenth anniversary of the financial crisis, YouGov found that 66 per cent of adults in Britain do not trust banks to work in the best interests of society, with only 20 per cent believing that they do. Whether warranted or not, FinTech – for all the benefits of integrating further with the financial services sector – risks being tarred with the same brush and losing its current challenger status altogether.

The need for an honest appraisal of FinTech’s journey and origins

On attending many of the events and speeches of FinTech week, one would be forgiven for thinking they’d entered into some kind of not-for-profit, third sector initiative, what with the predominant focus on values, purpose and social initiatives. And this is undoubtedly a positive tone to strike; not only with regards to currying favour in an increasingly pro-consumer political environment, but also for the betterment of society and consumer experience as a whole. But such lofty ambitions must be rooted in an honest appraisal of where the financial services and tech industries are coming from. These are two industries that have a long way to go in terms of public trust (see the polling described above), and simply asserting FinTech as the inherent solution to various societal woes will not counter the image – one that I disagree with – that such companies might be in the game to essentially earn a ‘quick buck’, despite its implications on personal privacy and consumer protection. This is especially prescient in the wake of failings in the challenger bank space (albeit the minority), and concerns over the greater use of customer data, regardless of the positive intentions of giving the consumer ‘control’ of such information.

Reasons to be cheerful

Criticism is inherent in honest analysis, but it is clear FinTech has the potential to be a force for good in the economy and should be embraced further. The points above are intended to serve as a reminder that – regardless of the positive tone of the conference and current Government support – the sector needs to continue to engage with both Government and Opposition on the need to maintain a favourable environment for innovation to flourish; engage openly with consumers in order to build trust through what can be intimidating technological developments; and relentlessly strive to improve and maintain the conduct and culture of the sector as a whole.  

Get in Touch

Euan Ryan

Senior Account Executive

Luke Seaman

Account Director

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