The United Kingdom has maintained its status as a major global Fintech hub. But will the country be able to capture a significant share of the world’s financial technology business after Brexit and can it retain its dominant status despite the challenges created by the COVID-19 pandemic?
Harry Eddis, Global Co-Head of Fintech at Linklaters LLP, a multinational law firm based in London that works with 2,900+ lawyers across 30 offices in 20 countries (with appr. £1.6 billion in revenue), notes that the UK’s regulators have been quite supportive of innovative projects.
Eddis, whose comments came during a discussion with Bloomberg Daybreak Europe’s Caroline Hepker, talked about his firms’ outlook for the coming months and the overall impact of the Coronavirus crisis on the Fintech sector.
Eddis confirms that there was some “big regulatory news” from the European authorities a month or so back. They have proposed a MiCA regulatory framework (markets in crypto-assets regulation) that aims to regulate the digital assets market, Eddis noted.
He added that European regulators could also be pushing their payments initiatives which may include a retail payments strategy. He claims that his firm hasn’t seen similar developments from UK regulators but he believes British lawmakers can be very supportive of innovation.
Eddis predicts that UK regulators will continue to push or encourage healthy competition in the Fintech industry. While commenting on the expected fallout from COVID-19 as we move into 2021, Eddis noted:
“Digitalization is here to stay. We’re seeing a decreasing use of cash. The UK regulators are clearly struggling with how to ensure that [these issues] continue to be [properly addressed.] I think COVID has caused a lot of imbalances in the industries and it will drive consolidation. We should see quite a lot of M&A in that. I also think people continue to look at new payments strategies and how to increase customer benefits in this particular area.”
He continued:
“Data is getting [a lot] more siloed which will restrict the ability of Fintech to utilize the large amounts of data particularly the big techs … it’s going to be a pivotal year (2021) …. Big techs are already in the payments industries … you know Google Pay, Apple Pay and things along those lines. Clearly, one would expect them to be looking to increase the [types] of services that they are going to offer to their clients [while] regulators will want to keep a level playing field.”
Eddis went on to mention that we’ve got projects like the Facebook-led Libra (now called Diem) that’s trying to introduce some sort of digital payment mechanism. He confirmed that the controversial project has been heavily scrutinized by regulators and that it will be “interesting” to see if it actually manages to launch in 2021.
Eddis further noted that the Bank of England (BoE) is “cautiously” supportive of crypto-assets. He also believes that both UK and European regulators will remain concerned about consumer protection issues.