Covid-19 has been a hugely difficult experience for so many of us in so many ways, shattering for some, seriously challenging for many, and we are still in its midst. For all those who have been taken from us, for all those who have been hit so hard, we are duty bound to seek out the potential from the crisis. In this vein, positive to juxtapose the passion, energy and often values-led hard work that our Fintechs (financial technology companies) have demonstrated right from the outset of the pandemic.
Fintechs have given their time, resources and intellectual property to create innovative solutions to covid related problems; whether by designing a payment platform to allow charities and mutual aid groups to distribute financial aid or a mass payments platform that could – if adopted – revolutionise the distribution of state payments. Through the furlough and coronavirus business loan (CBIL) schemes the government are taking radical measures to support individuals and the economy – coming as this does in the era of open banking – I’m excited about the potential for some innovative and equally radical developments in the methods by which the citizen and state contract financially.
One of the most pernicious problems that I fear may worsen as a result of the economic havoc wreaked by covid, yet I sincerely hope Fintech will one day put an end to, is the scourge of financial exclusion. I co-authored a Lords Select committee report on this topic for a year and we heard some dreadful stories and faced the unacceptable reality that, all too often, those who have the least are forced to pay the most, for: finance, energy and almost every essential service.
Recently I spoke in the House of Lords during a question on the Centre for Social Justice Report into debt, Collecting Dust: A path forward in government debt collection, and concluded by asking the Minister:
Does he further agree that, post Covid, there is a key role for financial technology—fintech—to help with debt management and enable everyone to have a much greater sense of their finances and how best to manage them?Hansard, 23 July 2020
At an excellent session of the Open Banking All Party Parliamentary Group I had an opportunity to ask the Minister John Glen if he and the panel would agree that national and supra-national digital infrastructures must be mandated at government level. I believe the economics do not justify voluntary initiation by private sector stakeholders and I hope we are doing enough in the UK to develop and deploy 4IR opportunities, not least in Fintech and also to understand and explore the potential benefits from Central Bank Digital Currencies (CBDCs) and other global stablecoins? The Minister answered positively around the issues – and the Bank of England has a consultation on CBDCs underway at the moment.
Similarly, on Friday (24 July 2020), Jericho chambers ran an excellent webinar on the potential of fintech in this covid world. Anthony Jenkins of 10X provided the provocation for us to discuss. I was keen to push the potential for fintech to address so many of the current challenges not least financial exclusion, stubborn significant, shattering of lives pre-covid, now an even more horrific economic ill, expanding as I write. We can solve this, we must solve this, fintech offers us the tools, if human led and deployed to do exactly that.
One of the current issues facing the fintech industry concerns the Wirecard collapse and subsequent FCA decision to suspend Wirecard Card Solutions following insolvency filings by its German parent company. There are 70 FinTech clients who rely on WCS who had to suspend operations, simultaneously freezing hundreds of thousands of customer accounts.
There may well be much more to unravel, careful consideration must be given to what impact this might have on the sector’s growth and medium term future. A knee jerk flight from fintech would certainly be premature and in my view the wrong response.
How could this shape the sector’s long-term future? Despite the negative impact created as customers’ discovered their accounts had been frozen, by suspending WCS, the FCA has acted to protect and guarantee consumers’ funds ensuring they couldn’t be “co-mingled” and seized. Arguably it may ultimately be a positive development in terms of improving regulation. This should be judged against the variety of “experiences” in more traditional financial services though, clearly it is not immediately helpful.
The government has just published the terms of reference for the Fintech Strategic Review to be led by Ron Kalifa and I sincerely hope it will act as a catalyst for the UK retaining and further accelerating its position as a leading global fintech hub. The review will consider how the UK can continue to foster innovation, maintain an ecosystem that supports growing firms, and promote the integration of new technologies across financial services.
The review will also seek to advance three objectives: ensuring UK fintech has the resources to grow and succeed, creating the conditions for continued widespread adoption of fintech solutions to benefit businesses and individuals and maintaining and advancing UK fintech’s global reputation for the innovation and transformation of financial services. The work-streams will cover skills and talent, investment, national connectivity, policy and international attractiveness and the Chair will meet with the Treasury every month.
Ron’s review is a thoroughly good thing and will, I’m certain, come up with comprehensive conclusions and recommendations backed by the encyclopedic brains behind it. Simultaneously though, we all need to crack on, the world will be a very different place in six weeks, never mind months. We must deploy “shovel ready” fintech solutions right now. They offer answers to today’s problems; the insulation voucher scheme, the variety of business loan schemes, the ability to “do” identity in whatever environment and more, so, so much more. I urge HMT, HMRC and every Government department to look and look again as to how they can involve fintechs right now. They offer unique opportunities and must be part of our shared recovery.
I also contributed a piece on how to ensure FinTech leads to greater financial inclusion for a Fintech booklet published by the 4IR Parliamentary Group.