Analysis: The government is putting UK fintech in the spotlight.
Today marks the beginning of UK Fintech week, a Treasury backed series of events focussing on the growing tech sector, in which the UK is a major global player. The event will be formally launched tomorrow, 23rd February, at Number 11 Downing – the official residence of the Chancellor of the Exchequer.
According to City Minister Harriet Baldwin, the week has two aims. "The first is to celebrate our status as a leading global FinTech hub," she wrote. This success has been spurred by the geographical closeness of the country’s financial centre in the City, and its technology hub around Old Street.
According to a report by big four auditor EY, commissioned by UK Trade and Investment (UKTI), fintech in the UK is currently generating revenue of around £20bn a year, while the minister said that 61,000 jobs are generated as a result of fintech.
The second aim of the week is making sure that this status is maintained in the future as other areas try and make their impact in the industry. "We know that if we are to remain a leading global FinTech hub, we need to go further, be more progressive, more ambitious, morefar-reaching. As part of FinTech Week we want to start a discussion around what more we can all do to support UK FinTech," said Baldwin.
The government has been taking some practical measure to boost fintech already. For example, in July 2015 Prime Minister David Cameron took along fintech firms Blockchain and Earthport as part of a trade delegation to South East Asia.
As well as being a congratulatory gathering of the industry, it is clear then from Baldwin’s comments that the government wants this FinTech Week to focus on the support and development of the sector.
Baldwin said that suggestions "could include further action from government or regulators, fostering greater collaboration between FinTechs and traditional financial services firms, and greater adoption of FinTech solutions by businesses and consumers."
Regulation remains a key issue in developing UK Fintech, and was highlighted in the aforementioned EY report. It said: "A range of new regulation introduced in recent years has prompted financial services industry players to monitor their activities more stringently.
"This, in turn, has created demand for a range of new and innovative solutions. The UK regulator has also been dynamic in their approach by keeping an open mind and engaging closely with innovators."
Collaboration and innovation are some of the key things that Jonathan Rogers, partner in the Financial Services Regulatory group at Law Firm TaylorWessing told CBR he wants to see coming out of this week.
"Now is the time for businesses to be incentivised to move to new ways to make and receive payments allowing for greater certainty of payment receipts, decreased fraud, fewer mistakes, quicker cash flow, and less credit risk," he said. "We should be working together to ensure blockchain can be harnessed to create a system in which people feel confident to conduct their business activities or put their life-savings," he said.
The Chancellor used his November 2015 Autumn Statement to spend £1.3bn on digitising tax accounts, announce 18 new Enterprise Zones to help boost start ups, and maintain Innovate UK grants, to the tune of £165m by 2019-20. No doubt that the fintech industry will be hoping this support is maintained when he stands up to announce his next Budget on March 16th 2016.
There are a variety of events happening in the week, including Innovate Finance. It was at the event’s launch in 2014 that Chancellor George Osborne declared "I want the UK to lead the world in developing Fin Tech." He stuck a similar tone in November 2015 when launching the Bank of England Open Forum, and said that he had been talking to Apple CEO Tim Cook about Apple Pay.
No doubt that one of the things that is going to be regularly discussed over the coming days is blockchain, the distributed ledger technology that underpins Bitcoin.
Rogers said: "Blockchain’s potential uses are almost limitless. It’s quicker than traditional methods, decentralised, removes the need for a trusted third party and reduces costs. It’s no doubt that we will begin to see an increase in the development of this technology in 2016, but any blockchain system needs to have stability, transparency, certainty of treatment and pricing and a belief of longevity. However, regulatory moves so far appear to embrace block chain with caution. "
The events also give a clear indication as to where the government, and indeed the industry, thinks UK fintech is going. For example, after the Number 11 launch there is an event called Can I Trust a Robo-Advisor? from Innovate Finance and Lloyds, followed by anaccess to skills and talent roundtable with techUK on Wednesday 24th. Fintech envoy Eileen Burbidge will host a roundtable for fintech investors on Thursday 25th, with the week finishing with a Fintech Pitch10 event at Number 10 Downing Street.
The events emphasise a growing trend in the UK fintech mentioned by Baldwin, that of collaboration between traditional finance firms such as big banks, and the fintech start-ups that are looking to disrupt.
For example, BBVA Compass became the first major bank to sign a deal with Future Advisor, which is a data driven investment tool, or roboadvisor, while banks are also releasing open data APIs to help customer choice. Barclays too are looking to utilise some of the best things that fintech has to offer, but to do it at scale using Hadoop and big data.
These events are always about looking forward. Ultimately, Rogers said that "I predict within 5 years, a sophisticated, mature use (with genuine prospects of longevity) of blockchain will be made. It is too early to predict the demise of traditional systems and these will probably co-exist for a time; but just consider how smartphones changed telecoms within a five year time span."
With the government putting it in the spotlight, UK fintech could continue to thrive.
Key UK Fintech Week 2016 events
Monday 22nd February
- Association of British Insurers event on FinTech and insurance? — ?contact firstname.lastname@example.org
- "UK FinTech: Regulating and fostering a world leader in innovation" event at the FCA?
Tuesday 23rd February
- Launch of FinTech week at No11 Downing Street?
- "Can I Trust a Robo-Advisor?": An event from Innovate Finance and Lloyds Banking Group?
Wednesday 24th February
- Roundtable hosted by TechCityUK on access to skills and talent in FinTech
- "FinTech: rising to the innovation challenge"? — ?a Rise London event showcasing the best of UK FinTech in partnership with Barclays.
Thursday 25th February
- TheCityUK Policymaker Roundtable with HMT on FinTech?
- Roundtable for FinTech investors and VCs hosted by Eileen Burbidge
Friday 26th February
- The London Stock Exchange’s FinTech Investor Forum?
- FinTech "Pitch10" event at No10 Downing Street?
- Roundtable at EngineShed in Bristol?