Today has been a busy day in the UK, we have had the last Budget (2015) before the upcoming May 2015 General Election and a couple of key government reports. The first report published by HM Treasury – Bank for the 21st Century: driving competition and choice, sets out the UK governments plans to increase competition and available products in the banking sector. The second report published by the Government Office for Science – FinTech futures: the UK as a world leader in financial technologies is the focus for this post.
The FinTech Future report sets out the UK strategy to becoming a world leader in Financial Technologies, FinTech. The report highlights the importance and contribution that the UK FinTech sector has made, and will continue to make, to the UK economy:
FinTech Contribution in the UK:
- An estimated UK market value of £20 billion in 2014
- With 2.4 million people working in high tech industries
- Estimates 135,000 people working in financial technology services sector
- In the last 5 years, 25% of all global FinTech foreign direct investment (FDI) projects were in Europe, almost half of those were in London
- The UK and Ireland being a key hub for global FinTech investment
The Importance of FinTech:
- Enabling financial inclusion by reaching the global 2.5 billion unbanked population
- Cites the FCA estimates that smart phone penetration will reach 95% in the future
- FinTech will play a key role in developing technologies such as digital currencies and mobile payments
FinTech Strategy in the UK:
1. Creating a FinTech Advisory Group with representation from a variety of key groups
2. Enabling a programme of FinTech ‘grand challenges’ that would facilitate and enable collaboration across the FinTech community
3. Conducting FinTech Research to better understand FinTech sector itself, and its social economic impact
4. Ensuring that the FinTech Advisory Group partners with regulators and the Bank of England to assess industry risks and emerging dangers
5. Incorporating FinTech subjects into higher education and degree courses
6. Expanding FinTech opportunities throughout the UK, particularly outside of London and the South East
7. Ensuring Government continues to be a key ‘commissioner’ of FinTech, supporting companies in the sector regardless of their maturity levels
8. Enabling FinTech solutions to be piloted in real life situations, but with regulatory controls to ensure that no harm is done to financial systems and / or consumers in the process!!
9. Development of the UK as a FinTech hub supported by UK Trade and Investment and the Department for Business, Innovation and Skills
10. Promoting good collaboration between regulators and the FinTech sector to create a state of the art regulatory reporting and analytics framework which will be called ‘RegTech’
FinTech in the UK….
Its great to see that a very conscious decision has been made to develop, nurture and retain FinTech activities in the UK. Not only that, a defined strategy has been mapped out, and if you read through the report in detail you will see that both benefits (some of which are highlighted above) and threats (such as job automation, cyber security and challenging traditional services) are highlighted. There is also reference to the “unpredictable” (some would say disruptive) nature of some emerging technologies such as blockchain technology. Through the execution of this strategy a delicate balance will have to be maintained. Balancing support for FinTech industries, regulatory bodies and established corporates is where the true success or failure of the stated FinTech strategy will be tested. The speed and vigour with which this strategy is executed will also be critical, as other cities and regions embark on their own FinTech journey’s.