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12 September 2017updated 08 Sep 2021 6:34am

​Investing in fintech and shaping Britain’s financial future

The CEO of TechCity UK explains why we must not lose focus on fintech if Britain is to continue to lead the world. 

By Gerard Grech

A frenzy of recent deals in the global payments industry have crystallised the value of some of the UK’s biggest fintech companies. Worldpay agreed a £7.4bn sale to US credit card processor Vantiv, while Paysafe, another London-listed company, looks likely to be bought by private equity firms Blackstone and CVC Capital Partners for almost £3bn.

Fintech is broad. It ranges from mobile payment apps to cryptocurrencies such as Bitcoin. The sector contributes billions to the UK economy, provides 60,000 jobs, and is a policy priority. Indeed, it is crucial to the future of financial services .

Changing consumer habits and the fast adoption of simplified digital services are driving fintech innovation. Smartphones are increasingly our remote controls for life, managing how we budget, save, pay bills, and shop. How we secure a mortgage and invest has changed with companies such as Trussle or Nutmeg.

Similarly, financial products for businesses are changing fast. Apple Pay, unheard of five years ago, is now commonplace in shops and restaurants. Companies like DueCourse, a Manchester-based fintech business which arranges invoice financing online, Onfido, an identity verification startup, Tide, a banking service for startups and Clearscore, a credit checking company are all growing rapidly, providing new options for SMEs who were previously dependent on their local bank manager.

Fintech, then, has the power to be transformative not only because it is creating new jobs and companies, but because it gives consumers and businesses far more choice in how they interact with financial services.

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Brexit is both a challenge and an opportunity for British fintech businesses. Though it’s not yet clear how regulatory passporting rights or immigration policies will work in future, I’m confident in how fintech founders will adapt and thrive in the new world. A well-managed Brexit could sweep away the old way of doing things and strengthen the hand of tech businesses, which usually begin with a mission to fix or improve the old way of working.

For the fintech sector to continue thriving, government and regulators must continue to create a world-leading regulatory environment. We are lucky that our financial sector’s two main regulators, the Bank of England and the Financial Conduct Authority (FCA), are engaging proactively.The Bank of England’s approach is pragmatic and encouraging. It understands the benefits of partnering with startups to drive innovation, having launched its own accelerator centered on central bank technology.

Consumer protection will evolve as fintech pushes further into banking and the businesses that underpin our financial system, such as insurance and credit checking. The FCA is tasked with making sure that new systems and innovations develop sustainably. One way it is doing this is through the “regulatory sandbox”; this “safe space” allows fintech firms to test, customise and develop products with real-world customers. Last year, Microsoft singled out the FCA as one of the world’s finest regulators and urged the American Treasury to follow its lead. Meanwhile, a global survey of fintech sectors by EY attributed the UK’s edge to its proactive regulatory system.

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Regulators in other sectors, such as energy and health, should take note. World-leading regulators working with companies that are innovating is one of the smartest ways for the UK to show it remains open for business and understanding of emerging technologies’ impact on business models. It’s crucial that banks, regulators and other institutions respond openly to emerging trends and new sources of competition. TechCity UK’s Upscale programme recently mentored challenger banks such as Monzo and Pockit, and fresh ideas in fintech are constantly emerging. Indeed, the management of regulation itself is even opening up a new subsector, “regtech”. This includes areas scuh as reporting and compliance solutions, risk and identity management and control. Another company recently mentored through our programmes is Sybenetix, a provider of market surveillance and compliance monitoring. It was recently acquired by Nasdaq.

At Tech City UK we have formed, at the request of the Treasury, a Fintech Delivery Panel. This brings together leading fintech founders and experts, alongside global banks and insurers, to drive high impact industry initiatives to encourage competition and innovation. This month the Fintech Delivery Panel will launch Fintech for All, a nationwide competition that showcases how fintech innovation can change the world for the better through promoting financial inclusion and capability. This was set out in the government’s digital strategy and is an exciting contribution to the policy challenge of financial exclusion.

We must ensure that Britain’s fintech sector retains its number one position in the world – creating jobs and prosperity and delivering the best financial services to a global consumer base. The UK’s long-standing combination of business openness, smart regulation and forward thinking has already attracted thousands of fintech investors and entrepreneurs. We must ensure our conditions become ever more attractive.