The long-term impact of the evolving Covid-19 pandemic is impossible to predict, but the way people are thinking about and using digital technology in financial services is already undergoing a radical transformation.
While the UK has set the global standard for an effective and supportive approach to FinTech regulation, as the sector matures, change is needed to help launch more firms successfully into the global market, according to a new report from TheCityUK and PA Consulting (PA), the global innovation and transformation consultancy.
The report, ‘Enhancing the UK’s approach to innovation in Financial Services’, found that firms welcomed the UK’s progressive approach to FinTech regulation. However, FinTech leaders say that regulatory hurdles remain a barrier and difficult to understand. The sector is calling for FinTech regulation to be consolidated and made more user friendly, particularly if the UK is to maintain its global leadership in the FinTech market.
Miles Celic, Chief Executive Officer, TheCityUK, said,
The UK has enormous strengths in FinTech, with over 1,600 FinTech firms operating in the country. With the Covid-19 pandemic likely to fast-forward technological trends and adoption in all parts of the economy and globally, it is clear that the sector needs further regulatory support to take its growth to the next level.
“The UK’s regulatory sandbox approach has been hugely successful and internationally acclaimed, but is starting to show limitations as the sector grows and matures. A broader framework needs to be developed with industry to reflect the expansion of the FinTech sector and ongoing regulatory development of maturing firms.”
Alex McGill, financial services expert, PA Consulting, said,
The UK government and regulators have been fundamental to the success of the UK’s FinTech industry, but there is room for improvement to ensure our approach to regulation and innovation remains world leading. This report highlights pragmatic and actionable recommendations that industry and government can take to ingeniously work in partnership with global regulators. As a global leader in this space, the UK should be striving to match the innovation of our FinTechs with the collaboration and support of our regulators.”
The UK is seeing the emergence of an increasingly sophisticated FinTech ecosystem as start-ups, technology firms and established operators step up their collaboration efforts.
The UK’s supportive regulatory landscape is a cornerstone of its FinTech success, and initiatives pioneered by the Financial Conduct Authority (FCA) in particular have been emulated by regulators worldwide. These have enabled the UK to build its reputation as a world leading FinTech hub, attracting and nurturing the companies that are setting the standard for the future of financial services.
More support is needed to help firms take the next step into international markets, both at the regulatory level, as well as the wider challenge of understanding market context, culture and legal frameworks.
TheCityUK/PA Consulting report focuses on four key elements which are essential to supporting the next stage of UK FinTech growth:
- clarifying regulatory support and engagement
- building on success by delivering new initiatives
- integrating innovation across the supervisory framework
- and strengthening support of FinTech expansion into overseas markets.