At the Treasury’s International Fintech Conference last month, Eileen Burbidge told Spotlight what makes London such an attractive launch pad for fintech companies.
You often describe London as the fintech capital of the world. Why does it deserve that title?
First of all, there is its financial services heritage. There’s no question: London and New York alternate in terms of being the financial services capital of the world. The time zone in London means you can conduct a financial services transaction and settle within the same business day as in Asia and America. On top of that, we have this growing digital ecosystem, and we have progressive regulators that are very thoughtful, in contrast to the US and other markets.
It’s like Wall Street, plus Silicon Valley, plus Washington DC operating in one city. There’s no other city that comes close.
How will Brexit affect the sector?
The most immediate impact of Brexit is that it’s a distraction. Entrepreneurs just want to focus on building their businesses. Being concerned about Brexit is an opportunity cost. There is also potential risk attached to attracting talent. Obviously we’re doing a lot to develop domestic talent but, like every other market in the world, we need to rely on international talent as well. I fear that Great Britain looks a little less welcoming now.
That will be a palpable issue because really high growth fintech start-ups need that highly skilled talent. The third point is less material than those first two and that is the risk to regulated entities should we not have full passporting rights after the transition period.
The Treasury is going to work as hard as possible for some sort of equivalence, but there’s also this worst case scenario in which we don’t have full passporting rights and that will be a distraction. But for fintech it’s probably less of an issue than the existing financial services institutions because less than half of them need to be regulated, but it affects the ecosystem and our foundational layer.
Do fintech start-ups represent a genuine threat to legacy institutions?
I think fintech start-ups add a little competitive pressure. Do they actually threaten their existence? No, I don’t think so. TransferWise, for example, couldn’t exist without the incumbent banks.
The biggest existential threat to the banks is going to look like an Alibaba, like an Amazon or an Apple. It’s not the start-ups or small companies.
I think they recognise that now and there’s great opportunity for institutions to work together with small, agile teams to bring innovation into their organisation whether that’s through acquisitions or collaborations. I don’t know if the tech firms will go into banking with a regulated capital B, but they will go into financial services.