Why UK fintech still has room to grow

When he was chan­cel­lor of the exche­quer in 2014, George Osborne pro­nounced that the UK would become the glob­al cap­i­tal of fin­tech. The indus­try con­cerned – the dig­i­tal-first, inno­v­a­tive tech­nol­o­gy com­pa­nies serv­ing the finan­cial ser­vices indus­try – there­by secured a place on the Con­ser­v­a­tive party’s pol­i­cy agen­da.

Osborne then launched inde­pen­dent mem­ber­ship organ­i­sa­tion Inno­vate Finance to rep­re­sent the UK fin­tech com­mu­ni­ty at Canary Wharf’s Lev­el 39 co-work­ing space in London’s Dock­lands.

The Trea­sury began to host lead­ing reg­u­la­tors from the Finan­cial Con­duct Author­i­ty and chief inno­va­tion offi­cers from Britain’s largest banks to min­gle at 11 Down­ing Street with the founders and chief exec­u­tives of what are now well-known UK fin­tech brands, such as Star­ling Bank and Mon­zo.

How­ev­er, this was a world before Brex­it direct­ed the UK government’s atten­tion else­where and coro­n­avirus became a pan­dem­ic to throw per­son­al lives and the via­bil­i­ty of busi­ness­es all around the world into tur­moil. 

What was covered in the fintech review?

Fin­tech as a con­cept is about using inno­v­a­tive busi­ness mod­els and emerg­ing tech­nol­o­gy to pro­vide pro­gres­sive finan­cial prod­ucts to help sup­port per­son­al lives and busi­ness­es. In 2020, with COVID-19 sub­ject­ing most of the coun­try to lock­down, the UK gov­ern­ment launched a six-month inde­pen­dent review of the country’s finan­cial tech­nol­o­gy sec­tor, cit­ing it as “vital” to the UK’s eco­nom­ic recov­ery.  

Announced in chan­cel­lor Rishi Sunak’s debut bud­get in March, but launched in July due to COVD-relat­ed delays, the Fin­tech Strate­gic Review is being led by Ron Kali­fa, a for­mer chief exec­u­tive of inter­na­tion­al pay­ment pro­cess­ing com­pa­ny World­pay. It aims to iden­ti­fy pri­or­i­ties for reg­u­la­tors and pol­i­cy­mak­ers, as well as for the indus­try itself.

The review has five work­streams: skills and tal­ent; cap­i­tal fund­ing and invest­ment; nation­al con­nec­tiv­i­ty; pol­i­cy and reg­u­la­tion; and inter­na­tion­al attrac­tive­ness and com­pet­i­tive­ness.

Its report will pro­vide rec­om­men­da­tions on each work­stream and address three objec­tives of ensur­ing UK fin­tech has “the resources to grow and suc­ceed”, encour­ag­ing “wide­spread adop­tion of fin­tech solu­tions” and “main­tain­ing and advanc­ing the UK’s inter­na­tion­al rep­u­ta­tion”.

Anne Boden, founder and chief exec­u­tive of UK chal­lenger bank Star­ling, is par­tic­i­pat­ing in the review’s nation­al con­nec­tiv­i­ty work­stream, which will make rec­om­men­da­tions for sup­port­ing the growth of region­al fin­tech ini­tia­tives through improve­ment of region­al con­nec­tiv­i­ty and lever­ag­ing the strengths of oth­er fin­tech hubs.

“The review pro­vides the sec­tor with a cru­cial oppor­tu­ni­ty to be heard at the high­est lev­els. I real­ly hope the gov­ern­ment is lis­ten­ing. At a time of great eco­nom­ic uncer­tain­ty, the UK’s thriv­ing fin­tech sec­tor is dri­ving inno­va­tion and eco­nom­ic activ­i­ty. My hope is that the review will ensure fin­tech is front and cen­tre of the government’s think­ing on busi­ness and trade poli­cies,” says Boden.

How major players see the future of fintech

UK fin­tech uni­corn OakNorth is a bank for small and medi­um-sized com­pa­nies that pro­vides busi­ness and prop­er­ty loans. It is par­tic­i­pat­ing in four of the five pil­lars of the review. Head of reg­u­la­to­ry affairs Nick Lee says: “The UK fin­tech sec­tor has been very suc­cess­ful over the last five years, but it is imper­a­tive that we don’t rest on our lau­rels and instead work to ensure we can remain a world leader for the next decade and beyond.

“COVID-19 has high­light­ed the strength of the fin­tech sec­tor as the world econ­o­my increas­ing­ly makes a struc­tur­al shift to become more dig­i­talised. There have been count­less exam­ples over the last sev­er­al months of fin­techs pro­vid­ing the solu­tions to many of the chal­lenges aris­ing from the pan­dem­ic.”  

Jamie Camp­bell, co-founder of Front­ed, a recent­ly found­ed UK fin­tech aimed at the UK rental mar­ket, is equal­ly bull­ish on the industry’s role in finan­cial ser­vices and the wider UK econ­o­my.

“The fin­tech indus­try is sole­ly respon­si­ble for the improve­ments in the UK’s bank­ing and finan­cial ser­vices sec­tor since 2008,” says Camp­bell. “It is, in a lot of ways, a metaphor for a new gen­er­a­tion of finance, with­out it an already over-bur­dened crop of young peo­ple would be far worse off than their par­ents and exclud­ed from a finance sys­tem not built for them.”

How­ev­er, more estab­lished sec­tor com­pa­nies cau­tion the review not to ignore the wider fin­tech ecosys­tem and ensure voic­es are heard beyond the cohort of star­tups and entrants that have appeared in the UK over the past decade.

Samir Pandiri, pres­i­dent of Broad­ridge Inter­na­tion­al, which has been oper­at­ing in Lon­don for more than 20 years, says: “What’s vital is that the cru­cial response to COVID doesn’t crowd out longer-term pol­i­cy-mak­ing for eco­nom­ic com­pet­i­tive­ness, and we are con­fi­dent that the chan­cel­lor and the City min­is­ter under­stand that well. What’s crit­i­cal is that clients of fin­techs, large and small, make their voic­es heard, so it’s not just fin­tech firms mak­ing their own case.”

Making products that work across the UK

The impor­tance of tal­ent and growth out­side of the cap­i­tal fea­tures promi­nent­ly among lead­ing play­ers in the fin­tech sec­tor.

Jeppe Rindom, chief exec­u­tive of fin­tech Pleo, a Dan­ish provider of com­pa­ny cards to auto­mate expense reports, with offices in Lon­don, says: “The most valu­able thing this review should offer is a strat­e­gy for nation­al con­nec­tiv­i­ty to help our approach spread out of its organ­ic hubs, which tend to be focused around exist­ing tech hotspots in cap­i­tal cities.

“There’s no point in a prod­uct that works in Shored­itch, but not in Sheffield or Man­ches­ter. If we can tru­ly engage with audi­ences out­side Lon­don, then I expect to see even more tal­ent emerge, which will dri­ve more inno­va­tion and in turn more fund­ing and invest­ment.”

Rosie Turn­er, co-founder and co-chief exec­u­tive of InCho­rus, which pro­vides tools for human resources and employ­ees to ensure inclu­sive work envi­ron­ments, adds: “Recent stats from Sift­ed show that only 17 per cent of fin­tech execs in the UK are women and there is a sig­nif­i­cant lack of eth­nic diver­si­ty too. We con­se­quent­ly believe there is a firm need for the review to focus heav­i­ly on skills and tal­ent, and to ensure greater diver­si­ty with­in the sec­tor.” 

OakNorth’s Lee con­cludes: “We must work togeth­er, gov­ern­ment, reg­u­la­tors and the indus­try, to ensure we remove bar­ri­ers to growth and cre­ate the con­di­tions in which our fin­tech sec­tor can con­tin­ue to inno­vate, bring fresh ideas and com­pete effec­tive­ly. If by the mid­dle of this decade we have exam­ples of UK fin­techs that have scaled up, demon­strat­ed con­sis­tent prof­itabil­i­ty and com­pet­ed glob­al­ly, we will know the strate­gic review has been a suc­cess.”

The Fin­tech Strate­gic Review is due to report to the Trea­sury at the start of 2021.