Does the term “fintech” mean anything to you? Chances are in the last month you have bought something using contactless payment or checked your balance on your phone. That’s all fintech, and it is already saving millions of people time and money.
We’re also pretty good at it. UK consumers use fintech services more than any other developed country. Fintech adds £7bn to the UK economy every year and employs over 60,000 people. Durham-based Atom Bank and Edinburgh’s the ID Company are proof that Fintech is thriving outside the M25. But this is just the tip of the iceberg, which is why we are supporting UK fintech to grow and help make financial services faster, fairer and more competitive for consumers.
While the term “fintech” might be relatively new, financial services have long been at the forefront of innovation, from the ATM, which had its 50th anniversary in June, through to the digital-only banks that are currently emerging. New technology can help make costs more transparent and make managing your money so much easier. And it’s no secret that financial services providers that embrace these new technologies can use it to improve customer experience.
Some of the fintech companies leading the charge on innovation are well known, such as Nutmeg or Monzo, but many more exist behind the scenes, powering our world-leading financial services sector. The government wants to see fintech grow further and has made a significant investment in the success of the fintech sector over the last five years. The UK is now recognised as the best place in the world to start and grow a fintech business. This is backed up by new statistics from the first ever UK fintech Census by EY, showing that between 2014 and 2016 revenues were up by over a fifth among fintech firms.
But this success does not mean that we are resting on our laurels. In April, the government held the first ever International Fintech Conference bringing together investors and 101 UK firms. We want to build on that success by hosting another conference next year.
More than that, we will use the findings from the census to ensure we take the right strategic decisions to secure the long-term health of the fintech sector. One of these is around access to capital at different stages of growth, which I know is a concern for some firms. That is why we are currently consulting on a brand new National Investment Fund, specifically designed to help promising innovative firms of all stripes scale-up and take on global opportunities.
The UK is a global leader in fintech and we are paving the way for increased international growth. We are doing this with “fintech bridges”, which deliver the support needed by firms when they expand into a new market or want to set up in the UK with its capital and talent opportunities. This includes obtaining regulatory authorisation, support in setting up a new office and making relevant contacts. We will look to build on the bridges we already have with China, South Korea and Singapore.
I am also delighted that Eileen Burbidge has agreed to recommit to championing UK fintech overseas, as our special envoy for fintech, for a further two years. Encouragingly, a third of UK fintech firms expect their business to list on the stock exchange in the next five years, showing the ambition of the sector and the confidence in Britain’s ecosystem to support their growth.
What is really exciting is the potential for fintech to help improve financial inclusion and provide useful and affordable products. Many people are already benefitting from better and more personalised insurance products, cheaper currency exchange and improved lending to small and medium-sized businesses, but there is scope for many more people to do so.
Just look at how fintech is helping financial inclusion in the developing world. M-Pesa is a mobile-only money transfer, financing and microfinancing service that has revolutionised personal finance in East Africa where few people have a landline or a bank account but where mobile-phones are common.
There are further developments closer to home. From January, “open banking” will mean you will be able to pay in new ways and easily access the best deals for you by sharing some of your account information with third-party providers. The UK is leading the world in its willingness to open up such access.
British excellence in fintech means that we have an enviable comparative advantage and there is real excitement in new business models built around revolutionary technologies, such as artificial intelligence, quantum computing and blockchain.
It is clear that government and industry need to continue to work together to sustain our world-leading position. I want the UK to continue to lead the way in using technology to create better financial services for all.