UK FinTechs call on the goverment to update regulations

By Puja Sharma

The UK economy and society are being positively impacted by FinTech. Consumers and small businesses are being offered alternatives to incumbent financial service providers by new market entrants, which encourages all players to provide better experiences for the consumer. However, FinTech companies in the country have called on the government to update the “regulatory rulebook”.

Over 70 of the UK’s top FinTech companies – including Monzo, Starling, and Atom Bank – have called on the government to update the “regulatory rulebook” to keep the sector competitive. In the letter, the regulators state that “the regulatory rulebook needs to be updated, and they must have the capability and culture in place to fully embrace innovation while protecting the consumer and financial stability”.

FinTech group Innovate Finance said regulators must be able to embrace innovation while protecting consumer and financial stability. The review, commissioned by chancellor Rishi Sunak, provided a clear strategy and a helpful roadmap set out in five chapters. These focused on policy and regulation, skills, investment, and international and national connectivity.

“The UK has proudly produced the biggest FinTech hub on the planet, attracting talent and investment at an ever-accelerating pace. However,  some issues must be addressed. We must ensure that home-grown businesses have the tools and support they need to keep delivering novel products and services for the benefit of both local and international communities,” Ion Fratiloiu, Head of Commercial, Yobota said.

The sentiments expressed in the Innovate Finance open letter are backed up by data. When Yobota surveyed more than 250 UK banking and financial services firms, two-thirds (65%) agreed that UK regulators are not responding quickly enough to new trends, thereby hindering innovation. Meanwhile, an overwhelming majority (77%) said that the growing popularity of new fintech offerings must be supported with better regulation and companionate measures.

“That is not to say that great strides have not been made to bolster the UK FinTech sector through the helping hand of regulation. The UK is one of the best places in the world to launch and scale a company. However, the message is clear: ambitious businesses in this space need greater certainty and clarity if they hope to push the innovation needle forward. I look forward to seeing what measures are unveiled in the future to cement the UK’s fintech reputation even further.” Fratiloiu added.

The government’s stance so far

On investment, the Government and regulatory agencies have made good progress in overhauling the UK listing regime to make it more attractive to companies from around the world, with the creation of a “golden share” for founders and the lowering of the minimum free float requirement. As part of the Budget, the Chancellor announced that R&D tax credits will be extended to data and cloud computing (boosting investment in FinTech such as artificial intelligence, open banking, and SaaS) and allocated £160m for the British Business Bank to co-invest with regional business angels, helping to address the funding gap in early growth.

On the international front, the Department for International Trade announced a package of export support for the FinTech industry to spur trade, jobs, and economic growth, including the FinTech Export Academy and FinTech Champions Scheme.

In the field of policy and regulation, the Bank of England has begun work on a Central Bank Digital Currency; the FCA has established a scalebox to support FinTechs in their growth and supported the development of Net Zero FinTech solutions through its digital sandbox; and the Department for Digital, Culture, Media, and Sport has advanced the introduction of Digital ID, in conjunction with industry-led task forces. As a result of new trade agreements with Australia and Singapore, FinTech has also been recognized.

In the area of skills, The Department of Education also held sessions with industry to better understand how the FinTech sector is using current government skills initiatives, such as apprenticeships, and what more needs to be done.

The UK economy and society are being positively impacted by FinTech. Consumers and small businesses are being offered alternatives to incumbent financial service providers by new market entrants, which encourages all players to provide better experiences for the consumer. Several FinTech companies are also supporting demographics that have historically been underserved by the sector, including providing growth loans for SMEs and opening up savings and investment options for consumers in a much more convenient and transparent manner.

Key takeaways

• Foster job creation and high-income tech-based employment across the UK, supporting the ‘leveling up’ agenda
• Better leverage the FinTech sector as a core asset for Britain’s international competitiveness, by enabling more UK FinTechs to achieve global scale and reach, and lead on regulation and standard-setting
• Help citizens and small businesses access more, better, and cheaper financial services, creating a more inclusive, democratic, and sustainable financial services sector.
• Regulatory rule books must be updated further, and regulators must have the capabilities and culture in place to embrace innovation while protecting consumer and financial stability.