4 Actions to Support UK Fintech Sector

Innovate Finance | Sep 30, 2022

As the industry body for UK FinTech, Innovate Finance has identified four immediate actions necessary for UK FinTech to thrive, drive growth and benefit consumers:

We encourage the rapid adoption of this legislation that will enable smarter regulation to boost competitiveness, unblock existing impediments and accelerate an extensive roll-out of open banking. This could help cut costs for SMEs and consumers and provide people with more effective tools to assess and manage their household finances. For FinTech to thrive and benefit consumers, we need proactive, quick, and intelligent regulation – not deregulation.

See:  UK’s fintech bosses call on government to overhaul regulation

1. legislation to drive competitiveness and innovation in financial services  

  • Financial Services and Markets Bill: strengthening competitiveness of UK regulatory system
  • Data Protection and Digital Information Bill
  • Smart Data
  • Digital ID (or ‘financial passport’)
  • Mandating regulators to extend existing open banking rules
  • Requiring public authorities to release data
  • Encouraging the FCA to agree clear guidelines that enable rapid deployment of robo advice

2. Level the playing field

  • Crucially, FinTech lenders fund the borrowers who are not serviced by the large banks; it is these marginal borrowers that are the swing factor in delivering growth. However these lenders face an unequal playing field in terms of cost of capital versus the large banks. Their input funding cost (based on 5 year gilt rates) has increased by 3.7 percentage points over the last 12 months, 2.3 percentage points of which were added in the last 6 weeks, and this must all be passed on to SME borrowers.
  • We recommend that the British Business Bank is mandated to broaden and deepen its guarantee and funding products so that FinTech lenders are provided with the ammunition to keep SME growth on track during the cost of living crisis. Additionally, appropriate changes to bank capital rules (MREL and IRB) could free up capital for FinTech challenger banks to deploy more lending into the SME market.

See:  1 year on: Kalifa Review of UK Fintech

3. Stimulate funding for all stages of FinTech

  • FinTech accounts for around 50% of all VC investment in the UK. Recent announcements have provided the basis for strengthening access to growth capital at all stages of business growth, from startup to scale up through to IPO. Listing reforms have enabled the UK to catch up with international competitors.
  • Continuation of Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) beyond their 2025 sunset date.

Global Fintech Ecosystems

More NCFA Resources

Subscribe to NCFA's Newsletter

[directiqwp 2]