Can London lead?
The environment post-2008 gave everyone the imperative to change, and to build on the UK’s leading position in financial services.
The country’s unique history and geography make it the perfect place for fintech to thrive. Having been at the forefront of financial services for more than thirty years, there are few places which could challenge London’s financial pedigree.
Having a tech-savvy customer base always helps. UK consumers aren’t afraid of trying out new things, exploring the range of financial tools that they’re using. The fact that there are more than 3,000 fintech startups in London alone shows we have the right environment to help them flourish. London and the UK are magnets for startups because they act as a launchpad into huge international markets, which is vital to globally-oriented fintech offerings.
Startups in London can be rapidly accelerated through co-creative schemes, by learning from industry experts, and getting access to resources and investment. The government has done a lot to incentivise the entrepreneurial community here, too. Schemes like EIS, Patent Box, British Business Bank, and others are all great examples of government-backed projects designed to spur the sector on.
For the last four decades, the UK has had financial services at the very heart of its economic strategy, so there are a great many businesses involved in the sector here. From the biggest multinationals, right down to basement developers, a large part of the UK economy relies on financial services. In fact, fintech alone is employing 135,000 people in the country.
Traditional fintech accounts for 75% of investment in the sector. We all may be spellbound by the possibilities of cloud computing, peer-to-peer exchange, and blockchain, but let’s not forget that it’s only the investment in, and successes of, traditional fintech that allow us to experiment with innovative and disruptive products, services, and business models.
Distributed Ledger Technology (DLT) is certainly one of the areas with the potential to cause huge disruption. This technology can overhaul existing systems of value exchange, authentication and security by providing an almost irrefutable, transparent, and decentralised ledger of fact. The technology that helped turn bitcoin from fantasy to fiat in just four years is now promising to revolutionise every industry where a transaction takes place.
Right now, some of the biggest players in financial services are running their very own labs to work out how best to develop and harness the incredible possibilities offered by DLT. I don’t think we’ll see DLT hit the mainstream for some time yet, but there is a lot of exciting work going on here.
The UK government has already done a lot for the industry, but there’s so much more to be done. If we are to see even greater innovation in fintech, the government needs to lead the way in creating sandboxed regulatory environments for experimentation, giving those willing to innovate the support they need. Perhaps it’s time for the government to actually start procuring fintech for themselves, putting this cutting-edge technology into action and creating greater efficiencies and value-for-money for the taxpayer.
Industry bodies are vital to creating an open dialogue between the industry and the legislator. Innovate Finance works with the government on behalf of the sector as its convening voice, and cheerleader. We showcase the successes of our industry and work to improve the commercial and cultural environments that will help us all to thrive.
Future of UK fintech
The firms which have been leading the fintech revolution in the UK over the last few years will go from strength to strength and become much larger organisations than they are currently. These SMEs will grow even more as their products and services become better refined, more widely adopted, and profitable, creating a new generation of financial services players. With a little luck, their diverse range of offerings will go a long way to making us all happier as consumers.
Also I’d look out for biometrics. Britain is in a great position to take the lead here, thanks to its incredible academic and scientific institutions working in this increasingly important field. By tapping into this knowledge, fintech entrepreneurs will be able to use biometrics to set new standards in identity and verification. That could go a long way to creating more trust between banks and the consumer – a relationship that urgently needs to be repaired.