Driving innovation on the Isle of Man

This piece was co-authored by Simon Pickering, head of insurance and pensions at Finance Isle of Man.

The fintech landscape is constantly evolving. It has the potential to transform everyday life, change the way businesses are run and define the economy of the future. In recent years, we have already seen how the integration of digital and open banking, as well as the increase in the use of cryptocurrencies, have made financial trading more accessible to the everyday consumer. On a macro level, we see investors taking more resources into emerging markets, illustrating the truly global nature of the Fintech industry.

For many businesses, this globalization is a huge opportunity to disrupt the market and bring new, innovative technologies to the forefront. For other more established players in the financial area, Fintech poses a significant threat to their business model. You only have to look as far as JP Morgan’s recent $12 billion investment in fintech to show that the rapid growth of the sector has caused businesses to rethink their operations.

In many ways, this explosion in the sector is exciting for fintechs worldwide. But it also creates an increasingly complex environment that will become more difficult for businesses to navigate. We are currently witnessing a rapid decentralization in financial services as more and more fintech innovations enter the market; we can expect that authorities and regulators will take a higher stake in the sector, therefore influencing the uncertainty fintechs will feel when they go to market with their products. Now more than ever, it is important that the fintech industry, governments and regulators work together to address these challenges, and continue to support the flourishing of the fintech sector.

At the Isle of Man, we believe that the cornerstone of a successful fintech is collaboration and legitimacy, and that you cannot have one without the other.

Before joining Digital Isle of Man as Head of Innovation, I worked for over 30 years in global banking and finance, with 20 of those years based in the Isle of Man. The island has a truly unique offer and one that is well positioned to meet tomorrow’s challenges. Our self-governing status enables a pragmatic regulatory approach, meaning we can quickly adapt to new developments in the fintech landscape, while balancing this against regulatory risk to create a supportive environment for well-positioned businesses to thrive in the global market .

However, our greatest asset is our strong sense of community – a value that is often overlooked in business. As a hub for digital innovation on a small island, businesses and governments can work together to inspire creativity, as well as support each other to get our ideas off the ground. In the context of the rapidly growing fintech sector, this is invaluable. A separate and siled approach to digital and finance is no longer possible, and both sectors must embrace each other and work together to promote smarter fintech solutions.

Authorities and regulators can act as a catalyst for this; they have the resources to promote innovation through increased investment, sector expertise and by providing a space for businesses to learn and grow. In recognition of this, we are currently looking at our fintech footprint to support businesses through this collaborative approach.

The Government and the Isle of Man Financial Services Authority aim to provide collaborative regulatory sandbox and observatory functions that allow businesses to explore opportunities and thoroughly test their products before entering the market.

We have already seen the benefits of this collaborative approach, with Isle of Man-based Blackfridge using the sandbox to establish the first fully supported GBP stablecoin regulated in the British Isles. We are now looking forward to launching our Fintech Innovation Challenge in the coming months, which will give fintechs the chance to bring their ideas to life in a competitive environment assisted by government support, both financially and also by a positive relationship with the regulator .

It is important that the authorities recognize their role in this. We can’t always predict what the next challenge will be, which is why this open collaboration between government and industry is so crucial for the future of fintech, encouraging them to foster innovation in a supportive environment that can prepare them for and project them on global market.

There is also a strong link between this collaboration and the legitimacy it creates for businesses that want to scale up to other markets. From my experience, the community-minded nature of the Isle of Man means that business here is personal. We want companies to come here to do well and be part of our community, which is why we have high standards for the companies we bring in.

In fintech, this is no bad thing: in such an important industry that will undoubtedly affect each of us for years to come, we want to encourage smart companies to do things smartly. This transparency of ethics allows us to do this and in return we offer a proactive dialogue to support fintechs in their initial journey.

This approach to a high regulatory standard is not common, and fintechs understandably worry about how an increasingly regulated sector might affect their ability to sell their product. However, I strongly believe that for the fintech sector it is not about limiting regulation, it is about creating the supportive and legitimate regulation that can give prestige to businesses operating in their jurisdiction.

When governments and regulators work with industry to invest in fintech, whether with start-ups or international businesses, they show that they understand the power of fintech to empower consumers and that they are committed to delivering good regulation to make this happen happen .

We are well placed to do this on the Isle of Man, partnership and collaboration are at the heart of what we do. Our partnership with F10, the global innovation ecosystem, on the recently launched Insurtech Accelerator Program perfectly exemplifies where our maturity and scale of the existing insurance sector offers a gateway to a global market for insurtech start-ups looking to scale their business. We are excited to see where this partnership will take us in the coming months as we develop our insurtech offering and how we can continue to support innovative businesses to scale up their operations and deliver positive solutions around the world.

In many ways, the Isle of Man’s Fintech journey is only in its infancy, but one thing is clear: this sector is not slowing down and we can expect many more twists and turns in the future of fintech.

Authorities and regulators must be prepared to work with developers to generate smart solutions that improve consumer finance and make financial transactions more accessible and secure. By working together, we can raise the standards for fintech products and the regulations that govern them, so that the sector can flourish and generate solutions to tomorrow’s challenges.