The UK government is keen to maintain London's status as a fintech capital of the world, despite the challenges posed by Brexit and the ongoing threat of rival cities like Paris and Berlin.
Speaking at the Innovate Finance Global Summit in London yesterday, Conservative MP and economic secretary to the treasury John Glen said: "It is only right that the sector is brimming with confidence. The UK is the best place in the world for fintech."
Glen went on to say that in his role as economic secretary "my mandate is to ensure it remains as such".
When it came to rival fintech hubs, Glen reserved his thoughts for London's closest rival: Paris.
"I hear rumblings from across the channel that President Macron is looking to drag all of you over to Paris," he said. "I understand why, it's a great city. So, pop on the Eurostar, enjoy a weekend away, stock up on croissants and come back to London on Monday morning and carry on making money, go back to work and crack on as you have been."
Glen pointed to last year's Deloitte's Connecting Global FinTech: Interim Hub Review, which identified London as the best city in Europe to launch a fintech firm. "President Macron can't argue against hard truths. The ecosystem that is the City of London and the fintech sector within that is estimated to be worth £6 billion to the UK economy," he added.
In terms of specific advantages, he identified the UK's "talent, minds, market and the regulatory and tax environment," as setting it apart from rivals.
Glen identified three key ingredients to maintaining the UK's position as a fintech leader: competition, capital and connectivity.
When it comes to competition, Glen asserted that he "strongly believe[s] that the free market is the key to create wealth and fuel innovation. Driven by this compelling economic logic, the government champions robust market competition, so we welcome innovation in the delivery of financial services."
On capital, Glen pointed to the government's 2017 Autumn Budget pledges. "The government launched a 10-year action plan to unlock £20 billion to finance growth in innovative firms," he said.
"This includes a commitment to support new technologies, improving the domestic skills pipeline by expanding the range of technical education opportunities, and overhauling digital infrastructure including rolling out our first 5G networks."
Finally, on connectivity he said: "Fintech has enormous potential to transform financial inclusion, for the democratic power of information and universal connectivity. This connectivity is a natural byproduct of such a dynamic ecosystem. By expanding access to the unbanked and underserved and unlocking support across the country, fintech is a route to ensure that happens by helping people make the most for their money."
The economic secretary pointed to the newly introduced open banking regulations as an example of this shift. "It empowers customers to make the most of their data, sharing it with fintechs to get more tailored products," he said. "It opens the door to cheaper and more accessible loans for small business by making it easier for them to shop around for deals."
Three key challenges
Also speaking at Innovate Finance yesterday, Conservative MP and chair of the treasury select committee Nicky Morgan identified three key issues facing the UK's fintech sector if it is to maintain its strong position in the future: the regulatory environment, access to capital and access to talent.
When it comes to regulation, Morgan praised the financial conduct authority (FCA) for being "regarded as being at the forefront of global thinking with its pragmatic and supportive approach".
She went on to say that regulators must continue to adapt to maintain this position: "The challenge is for the balance between protecting customer while not stifling innovation. As the sector grows so do the risks it poses, so regulation must be dynamic and adaptable for a sector where the pace of change can be staggering."
However, when it comes to keeping pace with rival countries, Morgan was keen to ensure that "we don't get dragged into a race to the bottom when it comes to regulatory standards, particularly as I mentioned effective regulation is good for the sector".
For funding access, Morgan wants to see better capital markets for fintech companies looking to scale. "Figures on investment today are promising, but we get wide ranging estimates of the funding gap and the problem is particularly pronounced for companies looking to capitalise on their initial success and those looking to scale," she said.
"The companies with the highest potential for growth are looking to expand overseas and as the UK's sector reaches a certain level of maturity there will be many firms that will fit this description. So we have to ensure that our capital markets are serving these companies and allowing them to reach their potential."
She pointed to the select committee's current examination of the overall issue of SME financing in the UK and the extent that fintech can be part of the solution.
The third challenge she identified is attracting global talent. "We know that the right skills can be hard to find, particularly in the areas of coding and software development. Of course Brexit is going to have a bearing on the ease at which companies in the UK can tap into pools of talent throughout the EU," she said.
Diversity was also raised as an important issue. "Gender diversity in the broader financial services industry is something the treasury has been closely examining through our women in finance enquiry," she said.
"It is clear that diversity pays, improving gender diversity is good for firm's bottom line. There is no doubting that cultural issues are key and many women say the culture in financial services discourages them from taking on senior roles in the sector. We have to recognise that there are unconscious biases at play and a need to tackle stereotypes in financial services. A change here won't happen overnight."
She identified "shining a light" and greater transparency as key to tackling this tricky issue.
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