Mueller Jackson
Jackson Mueller
Associate Director, Center for Financial Markets
Jackson Mueller is an associate director at the Milken Institute's Center for Financial Markets. He focuses on fintech, capital formation policy and financial markets education initiatives. Prior to joining the Institute, Mueller was an assistant vice president at the Securities Industry and Financial Markets Association (SIFMA), where he focused on...
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The UK FinTech build-out: What a difference a decade makes

By: Jackson Mueller
December 05, 2014

Back in June 2006, then shadow chancellor, George Osborne, penned an op-ed in The Times titled, “Where are the British Giants of Cyberspace?” In that opinion piece, published during Osborne’s trip to Silicon Valley, he observed, “Here in Silicon Valley I have seen the future and at present Britain is not part of it.”

Fast forward to 2014, where dejection has been replaced with optimism as the UK Government has recently embarked on a mission to promote the UK as “the FinTech capital of the world,” as Osborne, now Chancellor of the Exchequer, said in prepared remarks back in August. Given the country’s location and the role the City of London plays in global finance, the UK provides the perfect opportunity for Osborne to lay out the red carpet for FinTech firms, according to a UK Trade and Investment (UKTI) report.

Yet competition to attract FinTech companies is fierce. The industry has seen investment triple from just under $1 billion in 2008 to over $3 billion today. While the U.K. and Ireland make up a significant percentage of overall FinTech deals and financing in comparison to the rest of Europe, both countries are overshadowed by activity in the United States, especially in hotspots of Silicon Valley and Wall Street. In 2013 alone, the U.S. received a whopping 83 percent of the global investment in FinTech.

The figures and charts, however, overlook the efforts currently being undertaken by the U.K. government to develop regulatory and policy frameworks conducive to the growth of the FinTech industry. These efforts include:

  • July 11: The Financial Conduct Authority (FCA) announced a call for input regarding the formation of Project Innovate, an initiative designed to help startups and small businesses bring innovative financial products and services to market. As part of the initiative, the FCA proposed an Innovation Hub whereby the FCA would provide an “informal steer” to companies concerned about regulatory compliance issues. In July and August, the FCA held six roundtables with innovators, non-regulated and regulated firms, accelerators and other stakeholders to solicit feedback on Project Innovate.
  • August 6: Launch of Innovate Finance, a new trade body whose mission is to promote the U.K. as the global financial services leader by helping FinTech firms develop innovative products and services. The launch coincided with the publication of a UKTI commissioned report that highlighted the benefits of the U.K. as the premier destination for companies. UKTI also launched a FinTech roadshow to various countries, including the U.S. For example, in late November, London Mayor Boris Johnson traveled to Singapore to showcase the U.K.’s FinTech sector, where companies have raised nearly $550 million – triple the amount raised a year ago. Similarly, the UKTI’s Financial Services Organization, launched last year, is working behind the scenes to assist companies looking to relocate to the U.K.
  • September 24: Hannah Nixon gave her first remarks as the new managing director of the Payment Systems Regulator (PSR). The PSR was incorporated as a subsidiary of the FCA back in April and Nixon was appointed a month later. In her remarks, Nixon discussed how the regulator would approach its goal of promoting competition and innovation in payment services.
  • October 17: The U.K. government launched a consultation seeking input on implementing changes to Individual Savings Accounts (ISAs) to include peer-to-peer loans. The consultation follows the release of the U.K. budget in March when the changes were first announced.
  • October 28: The official launch of the Innovation Hub, part of the FCA’s Project Innovate. Martin Wheatley, chief executive of the FCA, gave prepared remarks at a news conference in London, where he provided an update on Project Innovate and the Innovation Hub’s two main areas of work: providing direct support to innovators and identification of regulatory policies that need to be revised. A feedback statement summarizing the call for input was released alongside Wheatley’s remarks.
  • November 3: The government issued a call for information regarding the benefits and risks of digital currencies. The consultation came about four months after Osborne’s statement that the government would explore the potential of digital currencies.
  • December 3: The Government published its Autumn Statement 2014. The document sets out the U.K. Government’s long-term economic plan, which includes potentially significant reforms to peer-to-peer lending and a reaffirmation of the government’s commitment to make the U.K. the global hub for FinTech companies.

In the U.S., regulatory and policy movements regarding FinTech have been more sporadic, though recent comments and regulatory actions at the federal and state level indicate regulators are aware of the innovation in financial services and are taking incremental steps to promote change without dissolving longstanding customer and investor protections. Whether this results in a unified effort to promote FinTech investment and development remains to be seen.