As UK Fintech week kicks off today, Rishi Sunak, Chancellor of the Exchequer addressed members of the industry outlining proposals designed to “enhance the UK’s competitive advantage in Fintech.” This includes regulatory support and reforms to help Fintech firms grow. The Chancellor also commented on the new task force regarding the potential creation of a central bank digital currency (CBDC).
According to a statement by HM Treasury, the Chancellor will be moving forward on many of the recommendations made in the recent Fintech Review, led by Ron Kalifa, as well as the Listing Review, led by Lord Hill.
“Our vision is for a more open, greener, and more technologically advanced financial services sector. The UK is already known for being at the forefront of innovation, but we need to go further. The steps I’ve outlined today, to boost growing Fintechs, push the boundaries of digital finance and make our financial markets more efficient, will propel us forward. And if we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre.”
Prior to Brexit, the UK was widely viewed as the top global Fintech hub. Yet the UK’s separation from continental Europe has raised concern that its prominence in the financial services sector may be challenged.
HM Treasury said that to support Fintech firms to scale up, the Financial Conduct Authority (FCA) will initiate a “scale box” described as a package of measures to enhance its regulatory sandbox, which is said to have been invaluable for allowing start-ups to test new products.
It will also launch the second phase of its Digital Sandbox to enable firms to test concepts that tackle sustainability and climate change-related challenges, helping to deliver a greener financial sector that supports the transition to net-zero.
The Chancellor also backed the creation of an industry-led Centre for Finance, Innovation and Technology (CFIT) and committed to work with regional and national Fintech bodies to make it a reality.
The goal is to launch new initiatives to ensure the UK remains at the cutting edge of the ongoing digital transformation of financial services.
The new regime is said to be inspired by the FCA’s sandbox and HM Treasury will work together with the Bank of England and the FCA to deliver support of the Fintech industry.
HM Treasury announced that the UK will consult on changes to its prospectus regime – which governs the information a company must publish when raising finance – this summer, to ensure the rules are not overly burdensome but provide investors with the information they need, tailored to the type of transaction. The goal is to streamline the public offering process.
Dan Morgan, European Policy Lead at Plaid – a top Open Finance firms, shared his thoughts on the proposals with Crowdfund Insider:
“Today’s announcements are a clear signal that the government sees both the potential of the Fintech sector as a growth engine for Global Britain and how central Fintechs are to the future of finance as consumer demand evolves. The steps set out by the Chancellor are a starting point. By no means do they represent [the] adoption of the full range of recommendations within the Kalifa review, but they do illustrate that a significant deal of support will be given to ensure the UK stays ahead of the innovation curve.”
Morgan said that more can be done.
“Plaid would like to have seen further commitments on open finance and other smart data initiatives. Data is the core infrastructure of Fintech and measures to ensure consumers are in the driving seat will help UK fintech stay ahead. Nonetheless, and dependent on the detail, these are incredibly positive movements from the government to ensure the UK retains its place as one of the key financial centres of the world.”
Morgan added that ensuring that Fintechs can scale and take advantage of open banking while engaging with a supportive regulatory regime is key to growth. He said the diversity of talent within the sector has been an important driver in its ongoing creativity and growth, and reforms to the VISA system to allow it to continue to attract the world’s best talent is an important development.
“Finally, and perhaps most notably, the exploration of a new central bank digital currency (CBDC) through a joint task force– something we’ve seen in Asia, and what many argue will be the future of fiat currencies across the world – shows how far the digitalisation of financial services has come. As we at Plaid look to expand across Europe, with the UK as a key hub, these measures will be crucial to ensure innovation continues to thrive – it should be an exciting few months ahead.”
The UK Government is expected to submit a written response to the Fintech Review in the near future.