By Neeraj Shah, Consultant, London
After several years of vowing to make the UK the global hub of FinTech (financial technology), the Chancellor of the Exchequer George Osborne MP will be delighted to hear that the UK is indeed the leading FinTech centre in the world.
Benchmarking the UK against other seven FinTech rival hubs – Silicon Valley, New York, Singapore, Germany, Australia and Hong Kong – Ernst & Young (EY) describes the UK as having an “enviable lead today in FinTech”.
The factors for the UK’s dominance are perhaps obvious with, amongst other things, London being a leading financial centre, the existence of a light-touch regulatory system and Government Minister, including the Chancellor, who are willing to reiterate the importance of the sector to the UK.
However, the EY report, published during the UK’s inaugural ‘FinTech week’ based on analysis of FinTech practices across the world and interviews with 65 FinTech experts, warns that the UK’s position will increasingly come under pressure. London’s position as a diversified FinTech sector maybe a “disadvantage” according to the report as rival global hubs choose to specialise on a specific aspect of technology. Similarly, the Chinese FinTech sector threatens to tear up the entire global scene with it having outgrown almost all other regions from an almost standing start. In fact, seven of the world’s 31 FinTech unicorns – start-ups whose value has exceeded $1 billion – are Chinese.
One of the report’s recommendations to ensure the long-term position of the UK FinTech sector remains at the top returns us to the familiar and oft-discussed topic of digital skills. With the Commons Science and Technology Committee recently saying that the ‘digital skills gap’ is now approaching ‘crisis levels’, the report will, perhaps, add further fuel to an already burning fire for the Government. The calls for investment in digital skills and an overhaul of the national curriculum and schooling to adapt to the evolving digital environment have always been loud. However, the EY report’s suggestion that the UK Government should consider broadening the Tier 2 Visa to attract foreign tech talent, something that the tech sector and business bodies have raised a number of times, may make for uncomfortable reading for the Government, especially at a time when the debates over the UK’s future in the European Union are on the cusp of dominating the news cycle.
So what next for the UK FinTech sector? Well, one thing is for sure, the UK Government will continue to support the sector wholeheartedly. The report’s recommendations have not been taken lightly by the Chancellor, declaring that the government is “not going to rest on [its] laurels”. Similarly, the Financial Conduct Authority, the body responsible for regulating the sector, has shown a willingness to defer regulation to enable the testing of innovative financial products and services to take place without the normal regulatory consequences typically associated with engaging in those activities. Plans for the ‘regulatory sandbox’ were published only last November so it remains to be seen how exactly this will pan out. In contrast, the digital skills issue is one that the UK Government will continue to scratch its head over, with the seeming need for systemic and generational change required, something that no amount of Government rhetoric can change quickly.