A new report by the City of London Corporation and Innovate Finance, published today (23 July), takes an in depth look at the global FinTech market and sets out important action needed to support the next stage of the sector’s development in the UK.

UK FinTech Report: Moving Mountains and Moving Mainstream – international perspectives to shape the UK FinTech landscape identifies best practice from comparable international markets and develops specific considerations for the next stage of innovation in the UK financial services sector.

In doing so, it looks at the changes needed to enhance the sector’s performance and to shape a more cohesive and inclusive financial services system, which will support the post-pandemic global economic recovery.

The report outlines six key considerations for government to support the sector (further details in notes to editors):

• A leading scale-up ecosystem: support FinTechs in scaling, promoting greater competition and wider-reaching innovation in financial services
• Globally leading FinTech talent: provide FinTechs with improved access to the world-class talent they need to grow
• A network of vibrant regional clusters: Support development of broad, diverse and unique regional clusters across the country
• Targeted approach to inbound and outbound FinTech: make the UK the destination of choice for overseas FinTechs and support UK FinTechs in scaling
• Integrated national digital agenda: build an integrated, cross-sector approach to digital, underpinned by world-class public infrastructure to accelerate financial services innovation
• Deep and diverse sources of demand: raise consumer, SME, corporate and government awareness and education to support safe access to innovative services

The report comes after the launch this week of HM Treasury’s independent review of UK FinTech. Ron Kalifa will chair the review and the City of London Corporation and Innovate Finance will form the secretariat.

The City of London Corporation has also provided funding to Innovate Finance to support their COVID-19 response.

The UK was the second-biggest destination for fintech investment after the US in 2019, with total capital raised up 38% to a record $4.9bn.

Catherine McGuinness, Policy Chair at the City of London Corporation said:

“Throughout the current pandemic we have seen an acceleration in demand for digital transformation across financial services.

“The development of FinTech in the UK has been a huge success story. So as we look to support the recovery of the global economy, the time is now right for us to focus on how we can continue to provide the solutions that businesses and consumers require.

“By doing so, we will enhance our world-leading reputation for innovation and remain a top destination for FinTech investment.

“I hope that this report provides those working on and around the review with valuable international context to help guide our strategy forwards, and I look forward to discussing these ideas in the months to come.”

Charlotte Crosswell, CEO of Innovate Finance said:

“The importance of innovation and progress in financial services has never been more apparent than now. FinTech has become one of the fastest growing sectors in the UK, and it has a vital role to play in our economic recovery from the pandemic crisis.

“We have the opportunity to build on our success, and this report gives us valuable insights into various markets around the world who are going through similar change. We can learn from them, take stock of the best we have and ensure that we are using all the tools we have at our disposal to drive excellence and innovation in our own market.”

Ron Kalifa, Chair of the independent Review of UK FinTech said:

“Tech based solutions in financial services have experienced wide scale adoption in the UK. For this activity to continue to translate into economic growth, we need to ensure our start-ups can scale up, expand internationally and level up the whole country.

“I am grateful to the City Corporation, Innovate Finance and EY for the important work undertaken to deliver this report. It provides essential insight into leading best practices across other influential markets and a helpful baseline to inform the independent Review into UK FinTech.”

Notes for editors

This is a joint report by the City of London Corporation and Innovate Finance working in conjunction with EY. UK FinTech Report: Moving Mountains and Moving Mainstream – international perspectives to shape the UK FinTech landscape is available here.

About the City of London Corporation

The City of London Corporation is the governing body of the Square Mile dedicated to a vibrant and thriving City, supporting a diverse and sustainable London within a globally-successful UK. www.cityoflondon.gov.uk

About Innovate Finance

Innovate Finance is the independent industry body that represents and advances the global FinTech community in the UK. Our mission is to accelerate the UK's leading role in the financial services sector by directly supporting the next generation of technology-led innovators.

By bringing together and connecting the most forward-thinking participants in financial services, Innovate Finance is helping create a global financial services sector that is more transparent, more sustainable and more inclusive. www.innovatefinance.com

Further information on the report’s six key considerations:

Consideration #1 - A leading scale-up ecosystem: support FinTechs in scaling, promoting greater competition and wider-reaching innovation in financial services

The UK has a strong environment for start-ups, but further support is required to help FinTechs to scale up. The report calls for the development of greater access to late-stage venture capital, growth equity capital and other sources of patient capital and to encourage a ‘serial investor’ culture where investment is recycled back into fintech; a globally competitive local stock exchange for global fintech listings and the provision of ‘scale-box’ support with access to regulatory and operational support beyond the sandbox phase.

Consideration #2 - Globally leading FinTech talent: provide FinTechs with improved access to the world-class talent they need to grow

UK FinTechs have cited attracting suitable talent as their main challenge, particularly in software engineering, system architecture and data science, as well as emerging areas of innovation including AI, machine learning and cryptocurrency. Firms also stated they face considerable difficulties in navigating visa requirements for foreign candidates.

The report recommends the development of a national talent strategy to increase and diversify the domestic supply of talent within financial services and devise a globally competitive visa framework so UK FinTechs can more easily obtain the relevant visas for overseas talent.

Consideration #3 – A network of vibrant regional clusters: Support development of broad, diverse and unique regional clusters across the country

There are currently strong FinTech clusters in a number of UK cities outside of London, notably Manchester, Edinburgh, Newcastle, Leeds, Bristol, Belfast and Cardiff. However, to create a nationally connected UK FinTech sector requires enhanced connectivity and strong infrastructure (e.g. transportation and broadband), and access to some of London’s (as a large global hub) key benefits - capital, talent, regulators and policymakers.

Additional ideas to support regional growth include developing pre-existing industry specialisms within regional clusters; encouraging financial institutions, local government, and academia to nurture talent, specialism and innovation; and promoting initiatives to support virtual working and sustainable travel in order to enable one cluster to easily access and leverage the strengths of others.

Consideration #4 – Targeted approach to inbound and outbound FinTech: make the UK the destination of choice for overseas FinTechs and support UK FinTechs in scaling

The UK has pioneered a number of formal arrangements to enhance international connectedness, such as the UK-US Financial Innovation Partnership, but there are opportunities to build on these and establish closer links. This could be achieved through, for instance, offering a ‘concierge service’ to FinTechs entering a new market - such as providing access to talent, workspace, tech infrastructure, regulatory support and R&D.

Consideration #5 – Integrated national digital agenda: build an integrated, cross-sector approach to digital, underpinned by world-class public infrastructure to accelerate financial services innovation

Given the pace of change globally, it’s not enough for the UK to have a national FinTech agenda in isolation. It needs to integrate with a broader digital strategy centred around enhanced consumer outcomes, financial inclusion, sustainability, security and resilience. The UK has a real opportunity now to shape the future of financial services innovation with world-leading digital public infrastructure at its heart.

Consideration #6 – Deep and diverse sources of demand: raise consumer, SME, corporate and government awareness and education to support safe access to innovative services

While adoption of FinTech services is strong in the UK, more could be done to drive further demand for FinTech solutions – in both the consumer and SME space – by raising overall awareness and promoting campaigns that show safe access to innovative services.