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A new British Government: what does it mean for fintech?

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July 4th – traditionally the day I think of as American independence – is, this year, the day of British independence. A revolution caused by a sloppy government, who had little competence to run the country, has been over-turned by a leftish political party called Labour. We have swung from right to left after fourteen years of Conservative rule.

What does this mean for fintech?

Well, it’s interesting. Googling “what are Labour’s plans for fintech?” finds the answer of Labour’s plans for financial services, not fintech. Here’s their plan in summary

  1. Deliver inclusive growth of the UK’s financial services sector by scaling regional financial centres alongside established hubs in London and Edinburgh and unlocking the full potential of the mutuals sector.
  2. Enhance the international competitiveness of the UK’s financial services sectorby pursuing a more joined up and innovation-centred approach to regulation and supervision, streamlining the regulatory rulebook in line with the Consumer Duty, strengthening our international engagement in financial services, and building a more collaborative relationship with the EU.
  3. Reinforce consumer protection and financial inclusionby exploring alternative models for increasing financial resilience including longer-term fixed rate mortgages, adopting a coordinated cross-sectoral approach to fraud prevention, creating a national financial inclusion strategy, and regulating the Buy Now Pay Later sector.
  4. Lead the world in sustainable financeby making the UK a global hub for green finance activity, delivering a world-leading green finance regulatory framework, and partnering with the financial services sector to support the decarbonisation of our homes.
  5. Embrace innovation and fintech as the future of financial services by becoming a global standard-setter for the use of AI in FS, delivering the next phase of Open Banking, defining a roadmap for Open Finance, embracing securities tokenisation and a central bank digital currency, and establishing a regulatory sandbox for financial products to reach underserved communities.
  6. Reinvigorate our capital markets by reviewing the pensions and retirement savings landscape, enabling greater consolidation of all types of schemes, empowering the British Business Bank to invest more in growth capital, establishing a British ‘Tibi’ scheme to increase institutional investment in venture capital and small cap growth equity, and increasing investment in infrastructure and green industries through Solvency UK reforms.

On innovation and fintech, they have six specific objectives:

Set international standards for the use of AI in financial services

The development of artificial intelligence will be profound for the future of financial services in the UK, and a key source of innovation in the sector. There is a global race to be the country of choice for the growth of AI, which the UK, with our consolidated expertise and strong reputation for regulation, is well placed to lead. However, consumer protection must come first when regulating new technology. Labour is currently developing its AI strategy to lay out how we will set clear standards for AI safety, and adopt an agile approach to regulation so that the technology can be utilised by FS firms and other organisations to boost growth in every part of the economy.

Deliver the next phase of Open Banking to unlock the potential for increased competition in retail payments

Open Banking has driven competition in payments, improved access to credit, and given customers more ownership of their data. Now there is a need to build upon its early successes to deliver new use cases for SMEs and consumers. Labour supports the efforts of the Joint Regulatory Oversight Committee (JROC) to lay out the roadmap for the next phase of Open Banking and ensure appropriate consumer protections are in place. For example, Variable Recurring Payments could give consumers control of their recurring payments, eliminating penalties for failed direct debits which millions of people with variable income are at risk of incurring. Labour supports the JROC’s work to define the next phase of Open Banking including laying out the long-term regulatory framework, determining the future oversight entity, and establishing an economically sustainable ecosystem. 19

Embrace the potential of Open Finance to improve financial wellbeing

Open Finance can build on the early successes of Open Banking by expanding the system to consolidate data from mortgages, pensions, insurance, and more. Labour recognises the potential for Open Finance to improve financial inclusion, support household saving and investment, and create a new pipeline of data to spur innovation, including personalised solutions for customers. The Data Protection and Digital Information Bill will enable the government to provide the regulatory foundation for the future Open Finance infrastructure. A Labour government will work with regulators and industry to develop the roadmap for Open Finance to prove its value and fulfil its potential to improve individuals’ financial wellbeing.

Advance on-going work to create a UK central bank digital currency

Labour recognises the growing case for a state-backed digital pound to protect the integrity and sovereignty of the Bank of England, and the UK’s financial and monetary system. Labour fully supports the Bank of England’s work in this area, and wants to ensure that issues such as threats to privacy, financial inclusion and stability are effectively mitigated in the design of a central bank digital currency.

Make the UK a global hub for securities tokenisation

Tokenisation, which UK Finance defines as “the digital representation of financial assets using distributed ledger technology,"49 presents a significant new opportunity for the UK. Citi Group estimates tokenised financial assets could be worth nearly $4 trillion globally by 2030.50 Embracing tokenisation could increase liquidity, provide access to new asset classes and fractionalised assets, and strengthen risk management (by reducing counterparty risks and other operational risks). A future Labour government will therefore look to make the UK a global leader in tokenisation by advancing work to clarify the law around tokenisation, and working with regulators to establish a proportionate, outcomes-based regulatory regime to oversee the technology. Labour will advance the initial progress to introduce the financial market infrastructure regulatory sandboxes to work out the regulatory bottlenecks for tokenisation and will explore the possibility of a pilot issuance of tokenised gilts via the Debt Management Office to test the impact of the technology and create the demand for tokenised assets. A Labour government will also look to develop partnerships with other financial centres to establish interoperable standards and enable trade of tokenised assets across borders.

Establish a regulatory sandbox to test financial products to reach underserved communities

A Labour government will ask the FCA and PSR to evaluate the potential to stand up a new regulatory sandbox to encourage development of innovative products to reach excluded and underserved consumers. Other jurisdictions including Ghana, India, and the United Arab Emirates have stood up sandboxes with a particular focus on financial inclusion to deliver better outcomes for consumers. Labour will direct the regulators to also explore a post sandbox roadmap to support participants in receiving regulatory authorisation to bring their products to market.

You can download the detail here.

The interesting nuance here is that, as I reported in April, Innovate Finance has its own agenda for fintech post the election. Innovate Finance’s General Election FinTech Manifesto sets out three ambitions for the next government to deliver, in order to support the continued development of the UK’s FinTech sector.

The manifesto calls on the government to adopt a ‘FinTech first’ approach, recognising the role FinTech can play in tackling some of the biggest challenges facing the UK. From the environment to the economy, FinTech can support the next government and play a positive role across the UK.

The three ambitions for the FinTech manifesto are:

Build the world’s first smart data economy

The UK has played a global leadership role in the development of Open Banking and now has the opportunity to take important steps forward on delivering the future of Open Banking, moving towards Open Finance, and then the wider smart data economy agenda.

Make the UK the most secure place in the world for consumers and businesses to use digital finance

Tackling the rise of fraud is essential for the sector’s continued success so that consumers and businesses feel safe and secure transacting online. The next government must prioritise tackling fraud in a holistic way by bringing together all relevant stakeholders, and focusing on solutions that address online fraud at its source.

Make the UK the world leader in adopting new technology in finance

Numerous factors contribute to the UK’s position as a FinTech hub, such as the regulatory environment, investment landscape, and highly educated population. Each of these creates the conditions for a favourable regulatory environment for FinTechs to grow, secure early stage funding, and find digital savvy consumers to use their products and services. These issues combined create the conditions for the UK to play a leading role in the adoption of new technologies in finance.

You can read more in the full manifesto here.

Will Labour’s plans meet their points? All in all, I just think we need some stability. Under David Cameron, George Osbourne and Boris Johnston, London became the fintech centre of the world. Since that band of politicians were broken the UK seems to have had a new Prime Minister every other month and, for that reason, some would say London has lost its way. For example, Brent Hoberman, chair and co-founder of Founders Forum Group, Founders Factory and Firstminute Capital, recently wrote in The Financial Times about the threat that the UK will fall further behind other European countries in the tech ecosystem. He pointed out that “recent governments have not always had messaging about tech front and centre” and claimed a senior UK politician told him there were “no votes in tech”. Is this where we are now? Will London fail in its fintech future growth or continue to be a major centre? Are Labour’s plans strong enough to reinvigorate the London mojo? And why do I keep saying London, when we mean the UK?

Lots of questions to be answered during the next term of government. Watch this space.

 

Postscript #1:

I just got a note from the Payments Association with a mandate for the new Chancellor detailing the community’s priorities, and highlighting the Minister’s opportunity to help fight fraud and take advantage of the country’s extensive payments capabilities and resources.

The association asks for improved regulation and an increased push into Open Banking, which has created approximately 4,800 jobs in the UK, building a sector worth £4.1bn, with 10% of UK consumers making use of these services.

The UK’s payments industry has been without a Government-supported vision for some years. The association recommends the publication of an ambitious, whole-ecosystem National Payments Vision and Strategy as envisioned by our industry to make the UK’s payments infrastructure competitive and enabling of growth.

The association encourages the Chancellor to help to unleash the digital economy through the use of stablecoins, central bank digital currencies, web3, DeFi, smart contacts and tokenised deposits.

Finally, it calls for the appointment of a dedicated Anti-Fraud Minister to coordinate cross-departmental actions and ensure all parties bear some responsibility – especially regarding APP fraud in the run-up to the PSR’s October 7th deadline.

 

Postscript #2:

London is home to over 1,600 fintech firms. The city’s unique blend of financial heritage, regulatory support, and tech talent has made it a magnet for fintech funding. This ecosystem ranges from banking disruptors like Monzo and Revolut to groundbreaking payment platforms such as Wise and GoCardless — each contributing to the city’s reputation as a cradle of financial innovation. But beyond established names, you’ll also come across tons of fintech startups that promise to disrupt sectors such as banking and insurance by leveraging path-breaking artificial intelligence tech.

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Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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