By Nick Lee, Head of Regulatory Affairs at OakNorth
In July last year, John Glen, the Economic Secretary to the Treasury, launched a review into the UK’s fintech sector. The Review is being led by Ron Kalifa OBE, former CEO of Worldpay, and is aiming to establish priority areas for industry, policymakers, and regulators to explore in order to support the ongoing success of the sector. The Review, which is due to be published later this month, is focused on five workstreams: skills and talent, investment, national connectivity, policy, and international attractiveness.
While many will have heard of fintech, they may not be aware that it’s a sector that employs 75,000 people across the UK, contributes over £7bn annually to the UK economy, and that last year, attracted over $4bn in investment across more than 400 deals. Over the last decade, the sector has become a strategic asset to the UK and will play a vital role in both its future outside of the EU and its post-pandemic recovery – helping to rebuild with a focus on the important technology and knowledge-based sectors of the 21st century.
Of course, since the Referendum vote in the summer of 2016, there has been a chorus of commentators who have been predicting that the UK will lose its leading position in fintech and will be left behind by other countries such as France, Germany, the US, China, Singapore and the UAE – who all regard the sector as one which has strategic importance to their economies. However, even with the impact of Brexit on financial services, the UK benefits from several strategic advantages when it comes to fintech: a diverse pool of exceptional talent and expertise (four of the world’s top 10 universities are here), a world-leading financial centre, forward-thinking regulators with an open approach to innovation, a sophisticated and active investor network and a framework of common law – all of which help to develop a unique ecosystem for fintech companies to be born and thrive. As a city, London is somewhat unique in that it is a financial services centre like New York City, a policy and regulation centre like Washington DC, and is home to thousands of tech companies like Silicon Valley. It is also home to world-leading professional services firms with a vast knowledge base to support the industry. This is a combination that is not easily replicable.
However, this doesn’t mean we can become complacent – if we want the UK to maintain its position as a global leader, it’s vital that we remain humble and don’t rest on our laurels given the success that’s been achieved to date. This is why Ron Kalifa’s Fintech Review is so important – we must grasp the opportunity now to ensure that the UK continues to be the best jurisdiction globally to establish and importantly, scale a fintech business. If we don’t, we risk losing ground to our international competitors and potentially undermining the successful industry that has been built here in the UK. It is important that the Government, the Bank of England, the PRA, the FCA and the industry as a whole come together and collaborate to ensure that the UK remains the best place to establish and scale a successful fintech business.
With the UK having left the EU, we have a unique opportunity to create more proportionality in the financial services sector and the regulatory environment. Policymakers and regulators must ensure that facilitating effective competition and innovation, both domestically and internationally, is enshrined in the objectives and their work. We must not forget the painful lessons the financial crisis taught us over a decade ago. We must ensure we create an environment in which competition and innovation in financial services can flourish, within a well-regulated environment that is proportionate and risk-based.
As an ex-regulator with over 20 years’ experience, I know this isn’t always an easy task – it’s incredibly challenging, but it’ss achievable. UK policymaking and regulation must be proportionate, agile, and adaptive to new opportunities and the new technologies of the 21st century. We must ensure that requirements are broadly equivalent with other regulatory jurisdictions, whether that be within the EU, the US or other developed economies. We must lead the way in demonstrating how policymaking and regulation can help enhance competition and innovation in a forward-looking way.
As OakNorth is one of the fastest-growing and most successful UK fintechs, we were delighted to be invited to contribute to four of the five workstreams within the Review. Looking back on the process, what’s become increasingly clear is that none of the pillars exist in isolation - they each overlap and combine to form a comprehensive ecosystem. For example, positive changes in regulation, particularly removing the regulatory barriers to growth, would make it easier to attract investment and funding. This would in turn make the UK a more attractive and competitive place to set up and scale a successful fintech. That would then have knock-on effects in terms of attracting and retaining top talent, as well as making the UK a more attractive market for tech companies to list.
With so many brilliant institutions and individuals involved in the Review, we’re excited to see the outcome and look forward to continuing to play our part in ensuring the UK remains a global fintech leader.