2020 was such an extraordinary year, a year of incredible suffering and turmoil, Covid-19 turned life as we know it upside down and my heart goes out to all who have been affected. But it was also a year in which technological innovation and digital platforms came to the fore, particularly in financial services. I have been involved in this policy area since the All-Party Group on Fintech, of which I am Vice-Chair, was set up to raise awareness of fintech in Parliament. There has been much progress between then and now and a particular milestone was the publication in February of the Kalifa Review.
It seemed an ideal time to talk to some of the most influential people from this world; fintech figures, if you will, about what is going on. So, over five months, I have sat down with five fintech figures to ask five questions in five minutes, or thereabouts! We looked back at 2020, considered the Kalifa review, the role of fintech in improving financial inclusion and predictions for 2021. A huge thank you to the incredible 5 who agreed to take part in this series with me; Charlotte Crosswell, Adam Afriye MP, Julia Streets, Simon Taylor, Kay Swinburne, they agreed a lot but they also all had something unique and important to say.
2020, a good year for fintech?
Reflecting on those conversations now, one of the key points of consensus was on what a great year for fintech 2020 had been. The superlatives ranged from “phenomenal” to “stellar” to “game-changing” and there were some impressive stats; 6 million people downloaded their banking app for the first time, in the first month of the crisis and, despite initial hesitation over funding, the number of deals increased from around two hundred and nine to around two hundred and twenty-nine as well as overall investments up from about two and a half billion to about three and a half billion. Significantly, as Simon said, the “macro trends of everybody being at home shunted digital forward at least a decade”. The pandemic accelerated trends that were already happening but certainly pushed many more people who may have been nervous about adopting online banking or digital payments into doing so, including Kay Swinburne’s 80-year-old mother. Julia explained beautifully about why that means fintech has proved its value;
“it has been an enormous enabler in helping people to take control of what matters to them. Whether it’s members of the population just wanting to have control of their finances and know where their money is and therefore what they do with it – how they can engage with the banking system in a way they probably have never done it before – and then also in terms of businesses just continuing to trade and continuing to exist.”Julia Streets, Fintech Figures Interview with Lord Holmes
The Kalifa Review
The Kalifa Review provided an excellent focus on the key challenges and opportunities for the UK fintech sector. Charlotte and Kay had both been directly involved in producing the report and Julia hosted the launch event. The broad scope of the review, hundreds of contributors, and an objective to consider the whole ecosystem was welcome. Recommendations were made across five areas: policy & regulation, skills, investment, international and also national connectivity.
Another area of consensus during my conversations was that the Government have done a great job so far in creating a supportive regulatory environment for fintech start-ups. The Financial Conduct Authority’s (FCA) sandbox in particular has been a world class tool for testing and developing early stage fintech businesses, but now there is a real need to address the ‘scale up challenge’. One suggestion, to extend the FCA sandbox for companies that are ready to scale up, was a specific recommendation in the Kalifa Review and the Chancellor has already responded by setting out the FCA’s actions to deliver this ‘regulatory scalebox’.
Another point made more than once was the need for properly joined up, cross-government working. It is hoped that the Chancellor’s commitment to another of the Review’s recommendations; a Centre for Finance, Innovation and Technology, will create this kind of cross departmental impetus but as Simon said getting from implementation to delivery will be key. In a similar vein Kay argued that
“the biggest thing government can do right now is to deliver on […] digital ID in particular.”Kay Swinburne, Fintech Figures Interview with Lord Holmes
Other areas highlighted were central bank digital currencies (CBDCs) and skills, from both a domestic perspective “thinking about different ways we can help people pivot their skills and retrain across the UK” but also internationally. Again, two areas in which the Chancellor has already made specific commitments in response to Review recommendations. Only proving how well-informed and prescient my fintech figures are.
What role for fintech in eradicating financial exclusion?
I asked everyone about the role fintech can play in eradicating financial exclusion. Responses rightly identified the way technology has facilitated access to basic payments and basic financial services, in particular the potential for reduced costs as a result of innovation in both products and processes, for example, alternative credit ratings. Adam pointed out that when it comes to inclusion
“it is not just about having a bank account, it is also about how does the government, how do Local Authorities reach those who may not be on their radar when it comes to traditional banking routes?”Adam Afriye MP, Fintech Figures Interview with Lord Holmes
It is precisely these questions that we must be asking in order to ensure we really do address this most pernicious of problems and “make sure it is a basic human right to have access to the services many of us take for granted.” (Kay)
2021, a good year for fintech?
Finally, when asking what 2021 held in store, there was no shortage of optimism.
The first two weeks of January alone saw investment hit 20% of 2020 total investment.Charlotte Crosswell, Fintech Figures Interview with Lord Holmes
20% in 2 weeks was an excellent start and predictions for 2021 ranged from “a great year for fintech”, to “one of the best years ever”, to “phenomenal”. As Simon said,
“with fintech moving – beyond internet banks and changes to user experience – into every part of financial services (what Charlotte called the start of ‘phase 2’) it’s exciting for the market, it’s exciting for customers and it’s exciting for society.”Simon Taylor, Fintech Figures Interview with Lord Holmes