By Professor Hirbod Assa, Senior Lecturer in Finance and Fintech, University of Kent
Fintech is changing the financial sector globally. Robo-advisors are replacing humans, traders are now computer algorithms, and money is encrypted not printed. The UK has long been the global centre of exciting trends in this pioneering field, but could this all be about to change?
The UK has hit an ‘inflection’ point of opportunity and risk due to the ongoing turbulence of Brexit, the disastrous impact of Covid-19 and surging competition from countries like Singapore, Australia and Canada that have identified the necessity of Fintech development and thus invested heavily.
With such growing competition and worldwide economic uncertainty, how can the UK mitigate the risks of the changing financial landscape?
Despite uncertain times, I believe the UK will keep its place at the top of the financial technology food chain, due to five key factors that will over-ride political and pandemic changes. They are:
- Training and upskilling
Recently, Ron Kalifa, the former Worldpay Group CEO, led an independent report on the UK strategic Fintech review and to make some recommendations for the UK financial technologies. The report highlighted the opportunities in the UK to create highly skilled jobs. These new roles will boost trade, and extend the UK’s competitive edge across the sector, with focus on the essential industry of Fintech.
The recommendations were followed by an exciting proposal to create a Centre for Finance, Innovation and Technology (CFIT). This centre will help with the supply of domestic and international talent and the means to train and upskill workers, further cementing the UK as the hub of global Fintech.
- Constant Innovation
The Financial Conduct Authority (FCA) recently announced plans to launch a ‘digital sandbox’; an area which will allow innovative firms to test and develop digital concepts by giving access to high-quality data sets.
This will effectively give both smaller and established UK firms the ability to test creative concepts and act out risk-scenarios without negative consequences. Such facility will accelerate solutions in an innovation-centred sector, allowing for greater opportunity for small Fintech businesses and risk-security for larger ventures. This will also be a magnet for international Fintech talent.
- Investment in tech for tomorrow
While all the major tech giants have amongst the strong presences in the UK, sustaining that work for the years following Brexit and the COVID pandemic will be challenging, but will be impossible without investment in training, resources and research of technology. The fact that the UK is losing to the US and China in this area is missing in current discussions, so not only is greater investment is needed now, but great attention too.
Furthermore, Fintech is largely dependent on innovative ideas, necessitating the support of tech start-ups. Proper investment is needed for a successful future.
Whilst many sectors look to ‘Future-proof’ their workers for uncertainties ahead, Fintech is unique as investment will focus on ‘Future-arming’ workers to be able to innovate and adapt according to economic, social, and technological circumstances. In Fintech, uncertainty is the breeding grounds for creativity. From such creativity comes success, but no success come without proper funding.
- Regulating the market
The UK must be a major contributor in setting regulations and introducing supervisory measures in using new financial technologies needing further investment in the area of SupTech and RegTech. This not only allows for greater regard of the sector with UK firms as Fintech Thought Leaders, but it also highlights the highest quality of expertise and insight available, therein acting as a beacon for Fintech talent across the world.
- Leading the future
To keep its Fintech crown, the UK must be competitive in all areas, as a leader and service provider. The future is about financial inclusion and financial experience. More of banking and less of physical banks. Block-chain, as a priority subject, helps financial inclusion, and will be part of all financial activities, and here again the UK must stake out its ground of expertise and opportunity.
Whilst we accept that there will always be uncertain tides and flows that upset sectors, Fintech is not as much immune to change as it is intended for it.
Brexit has undoubtedly led to political and economic uncertainty, whilst Covid reminds us that world trade can in relative terms come to a sudden halt, and a simple blockage in a narrow trading ship route can delay the trade process with a cost to the tune of billions per day. Fintech has evolved alongside such historical issues and the UK has fought to maintain its crown at the forefront of the sector, whilst enjoying the benefits. However, the time has now come for the UK to double-down and make clear that it intends to remain the most prominent player in the world of finance.
Professor Hirbod Assa is Senior Lecturer in Finance and Fintech at Kent Business School, University of Kent. His research covers topics in fintech, insuretech, machine learning and risk management. He has been collaborating with prestigious institutions, such as MUFG (Mitsubishi) Bank, Lloyds Bank and Azur UW (part of AIG) on topics in machine learning and data science. Professor Hirbod’s works have been featured in international conferences and publication in highly regarded journals.