After a gruelling two-month long election period, the Conservative and Unionist Party has elected Liz Truss to be its new leader and Prime Minister.
Alongside a litany of other policy promises, Truss made a beeline for the financial services sector – recently promising to help the City of London maintain its competitive edge and ‘supercharge growth and investment’ as well as calling for the merger of the Financial Conduct Authority, the Prudential Regulatory Authority and the Payments Systems Regulator.
What could Truss’ election mean for the burgeoning UK FinTech sector? In the opinion of Janine Hirt – CEO of Innovate Finance – the coronation provides an opportunity for the new PM to hit the ground running.
Hirt said, “The new Prime Minister and her Chancellor have the opportunity to build on our FinTech success story of the last ten years to establish the UK as the world’s leading financial centre, led by innovation in digital assets and digital finance.
“Previous Government plans for making the UK the best place to start and grow a crypto firm should be expanded to form a more comprehensive and coherent strategy, and accelerated to make faster progress, with an actionable plan and timetable. This requires urgent action on the immediate market litmus test of workable financial promotion rules for crypto assets through to a roadmap for digitalisation of capital markets and payments. This should also include further commitment on open finance, building on the work on smart data that Kwasi Kwarteng has led as Business Secretary, and digital ID.”
Regulatory-wise, the Innovate Finance CEO also sees a clear opportunity for the current Financial Services and Markets Bill to advance the competitiveness of UK FinTech and financial services.
Hirt also stated that unlocking additional applications of open banking is a key way in which the government and FinTechs can work together on mitigating rising costs for SMEs and businesses.
Open banking itself is an area with huge growth prospects – with a report by the Challenger Banking All Party Parliamentary Group calling for more to be done to allow open banking to offer a view of each person’s financial situation.
IBOS Association managing director Manoj Mistry echoed this push, stating, “The continued roll out of open banking technology is imperative for the future of FinTech in the UK and the wider development of smart data in financial services.
“The election of Liz Truss as the new PM will hopefully see the acceleration of smart data sharing, driven by the government’s Smart Data Council which aims to develop an ecosystem that builds collaboration with industry across sectors. Fresh regulation is also needed as a matter of urgency. A new regulatory framework for open banking and smart data would provide certainty for industry players and protection to end users.”
Market support
While the UK is one of the biggest FinTech markets in the world, there is still a strong belief amongst market participants that more can be done.
Adnan Choudary – policy manager at Wise – believes three key areas can be dealt with. Firstly, internal communications across Whitehall must be improved, “There are currently FinTech teams spread across the Treasury, Department of Culture, Media and Sport, Department of Business, Energy and Industrial Strategy and Department of International Trade to drive forward policy developments in the sector.
“The Government should ensure there is a Whitehall-wide strategic approach to supporting the sector, and proactively engage with industry, using our expertise to guide forward-thinking policy. This will ensure that new rules continue to promote innovation, growth, and attract investment for the industry.
Global support of UK FinTechs must also be boosted. He remarked, “The UK’s financial services system is unparalleled – there is a lot that it does incredibly well, and it should seek to share these best practices in order to support the international export of its FinTechs. The UK’s pioneering approach to modernising and democratising its payments infrastructure is testament to this.”
The final step the government must take in the opinion of Choudary is to boost talent across the sector, “The industry needs more engineers, more analysts and more technical leads to drive forward product design and development. Whether that’s through expedited visa routes or additional funding for sciences education throughout all age groups here in the UK, this talent pipeline needs to thrive.”
Founder of the Corporate Finance Network Kirsty McGregor believes Truss’ election could be key to supporting investment and small businesses. She said, “The new Prime Minister needs to focus on extending investment opportunities, which will be crucial to economic recovery as well as sustained growth in the SME sector.
“Furthermore, while a number of policy measures were previously introduced to spur investment, including the consideration of reforms to capital allowances, the government now needs to build consistency to support small businesses.”
The war on technocrats
Truss’ recent call for the merger of the FCA, PSR and PRA was seen by some in her party as part of her ‘war on technocrats’. The call for the merger has split opinion in the financial services industry, with many seeing the pros and cons.
Martin Hartley – managing director of emagine – offered a warm response to Truss’ plans. “A touted merger of the FCA, PRA and PSR is certainly big news. Is this Truss ‘governing as a conservative’ by slimming down on regulatory bodies and their costs? Anyone who has dealt with these organisations will welcome any opportunity to make them more efficient.
The FCA in particular is not looking like it has done a good job over its perceived lack of oversight on the London Capital Finance scandal and Blackmore Bond collapse, which have left UK savers nursing huge losses. One could argue that merged organisations can share information more easily and potentially help fintech firms compete directly with banks on payments and retail accounts.
Hartley added that Truss will need to see the City step up in order to boost economic activity if her promise to cut taxes can be realised. He concluded, “So, in other words, streamlining regulatory bodies to make London a more attractive place to do business could well support her objectives.”
On the other side, Seb Wallace, investment director at Triple Point Ventures gave the merger a much colder reaction, stating, “The proposed merger of the FCA, PSR and PRA is a distraction and should not be pursued. Instead, the government should ensure that the regulators are addressing competition and ease of doing new business with the same fervour they approach consumer protection.
“Put simply, the FCA’s current approach makes it a significant barrier to financial innovation in the UK, and only the Government can course-correct the regulators in this regard.”
