Will the Real U.S. FinTech Representative Please Stand Up?
In late July, UK Prime Minister David Cameron publicly endorsed a FinTech manifesto authored by Innovate Finance, one of the leading trade bodies in the UK focused on innovation in the financial services space. The document aims to establish the UK as the global FinTech powerhouse by the end of the decade, with the goals of attracting a combined $8 billion in venture and institutional investment and creating roughly 100,000 new jobs.
The announcement comes less than a year after the UK government first began its push to develop its FinTech sector with the backing of Chancellor of the Exchequer George Osborne. Since then, the government has been proactive in developing an understanding of the various FinTech sub-sectors and establishing regulatory frameworks conducive to FinTech development and innovation. The Financial Conduct Authority’s Project Innovate, in particular, is leading the effort to turn the UK into the leading global hub for FinTech.
The announcement also comes less than a month after Chancellor Osborne, in the Summer Budget (Pg. 57), named Eileen Burbidge as Special Envoy for FinTech, with the responsibility of championing the UK FinTech sector both at home and outside the UK. The appointment puts Burbidge at the head of a sector that saw investment increase nearly 140 percent in 2014, to $623 million. This increase accounts for more than 40 percent of combined investment in FinTech across the European Union.
Still, those numbers pale in comparison to total FinTech investment in the U.S., which makes up a significant portion of the more than $12 billion invested in FinTech globally last year. Still, while the UK substantially lags behind the U.S. in terms of total funds invested, it leads the way in supporting its FinTech sector – in the forms of public pronouncements and reshaping government policy and regulation to address the realities of the 21st century marketplace. I can think of no individual or group in the U.S. who is championing the crucial policy/regulatory needs of the FinTech sector at home and who has made the effort to invite international FinTech players to set up shop in the U.S.
While the U.S. may be ahead in the investment race, we’re falling drastically behind on our marketing campaign. It’s not just the UK that’s publicly trumpeting its FinTech sector and taking measured steps to foster FinTech development and investment in the country. Luxembourg’s Finance Minister Pierre Gramegna has sought to turn his country into a FinTech hotspot, and South Korea’s Financial Services Commission (FSC) Chairman Shin Jae-yoon and Hong Kong’s Secretary for Financial Services and the Treasury, Professor K C Chan, are working to update financial services regulation to boost FinTech investment and opportunity in their respective countries. Australia’s Chairman of the Financial System Inquiry David Murray released recommendations, which included a section on financial innovation and the regulatory system. Beyond the public efforts, the Australian Securities and Investments Commission, the Hong Kong government, the Monetary Authority of Singapore, and Korea’s Financial Services Commission have established consultative bodies or innovation groups designed to provide recommendations to their respective governments on how to develop an innovative financial economy supportive of FinTech development.
But maybe that’s OK. From a cultural perspective, Americans are skeptical of government taking an active role in the promotion of any one industry or sector. Separately, the U.S. remains the world leader in FinTech investment, with a financial marketplace that is deep, vibrant, and broad, and that includes a strong angel and venture capital network. Maybe this is attractive enough to succeed without the need for promotion. But for how long, given the scale of active support FinTech is enjoying in other markets?
In my view, it is odd that while the U.S. is the “top dog” in the FinTech investment space, there is rarely any mention of the FinTech industry overall by senior U.S. government officials, nor a strong effort to adjust to the innovations of today and tomorrow. Still too small a sector? Perhaps, but if the recent reports from Goldman Sachs, Santander, UBS, and Morgan Stanley about the great potential for FinTech prove accurate, and if countries around the world increasingly compete for FinTech firms and investment, now may be the time for the U.S. to start the search for its own FinTech champion.