UK government launches its first fintech plan

BI Intelligence

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At the UK Treasury’s second annual fintech conference, part of the UK’s ongoing fintech week, chancellor Philip Hammond unveiled the UK government’s first Fintech Sector Strategy, a comprehensive plan to ensure the UK builds on its existing strengths as a global fintech hub, and that the industry retains its competitive edge going forward.

The highlights of the strategy include a new cryptocurrency task force, automating regulatory oversight, a program to give fintechs easier access to talent and a set of industry standards to make it easier for startups to partner incumbents, a new scheme to send fintech envoys to areas outside London to spread fintech activity more evenly across the country, and a new fintech bridge with Australia to give fintechs another growth channel.

The UK — more specifically London — is acknowledged as the world’s foremost fintech hub, but the new strategy points to the challenges mature hubs may start running into as their industries peak:

• Ensuring that innovation can be turned into maturation and growth.The UK already does very well in terms of giving fintechs the resources they need to get their businesses off the ground, including regulatory support, funding, and skilled staff. These latest programs indicate, however, that efforts now have to be made to turn successful startups into sustainable businesses, which may not happen organically without government support. At the conference, Rishi Khosla, CEO of challenger bank Oaknorth, said the government is “great at starting up, not so great at scaling up,” when it comes to fintech, as is perhaps evidenced by the UK’s low number of fintech IPOs as compared with the US.
• Over-concentration of fintech activity in wealthier parts of the country. So far, London has been the predominant beneficiary of the UK’s fintech scene, despite existing efforts like the Northern Powerhouse scheme to distribute fintech activity more evenly across the country. These previous attempts have also been criticized for concentrating too heavily on other big UK cities, such as Manchester. This latest push indicates the government wants to boost the UK’s economy further by bringing more capital injections and jobs to less affluent parts of the country. However, for the plan to succeed, the government will have to start with basics this time: Nigel Wilson, CEO of Legal & General, commented that the UK is not overbuilt but underdemolished, meaning that a lack of infrastructure investment has hindered small firms outside of London from scaling.

This strategy may prove a useful roadmap for other countries with big fintech ambitions. Other established and rising fintech hotbeds, such as New York, Singapore, and Stockholm, would do well to pay attention to the priorities the UK government has outlined in this strategy, as they are likely good indicators of the considerations such hubs will have to prioritize as their own fintech industries grow and mature. Like Australia has, we may see more rising fintech hubs seeking deeper collaboration with the UK, in order to have easy access to its insights and strategies on sustaining fintech industry growth.