Fintech manager Janine Hirt on how London can stay ahead of its EU rivals

Fintech is an increasingly important part of the UK’s financial ecosystem – so it’s high time to chat to Janine Hirt, CEO of industry body Innovate Finance, about the challenges of keeping the UK out of Europe

While the UK has historically been a global leader in FinTech – receiving more investment than anywhere else in the world after the US – it is now at a critical juncture. What will it take to ensure the UK stays on top?

In the UK, we boast a world-leading FinTech sector that is often seen as the global benchmark for innovation in financial services.

In 2023, industry, authorities and regulators must continue to work together to build on this leadership. This will be key to ensuring the UK remains the best place in the world to start, build and scale a FinTech business.

The package of financial services regulatory reforms that the Chancellor announced in Edinburgh a few weeks ago will support the UK to remain a top global destination for FinTech, by helping to increase growth capital for FinTechs and promoting a regulatory regime that supports innovation.

Going forward, we need to see faster and further reforms of financial regulation to support the continued growth of the innovators and challengers that have flourished over the past decade.

Crypto companies have dominated the headlines this year. What regulation is required to future-proof the sector?

If the crypto sector is to thrive in the UK going forward, it needs to be properly regulated.

As part of the recent package of financial services regulatory reforms, the Chancellor’s letter to the FCA included a specific reference to actively embracing the use of new technologies in financial services, including crypto-technologies.

We have worked with our partner Shearman & Sterling to submit a comprehensive evidence document to the House of Commons Treasury Committee inquiry into cryptoassets. The analysis shows that in recent years the UK has been the leading destination after the US for investments in distributed ledger technology (DLT) and crypto asset-based businesses.

This paper also explains how wider digital assets provide an opportunity for the UK to be the leading global financial centre, building on our track record in innovation, financial services and our legal system. This requires flexible regulation, which provides consumer and investor confidence, reduces risks, supports competition and new entrants, and promotes innovation.

We look forward to further consultations with the government to work on a regulatory framework for crypto asset services. This will provide the basis for successful innovation through important consumer and market protection and enable a level playing field for responsible firms.

You released data earlier this year revealing how the gender investment gap for UK FinTech entrepreneurs is widening. What does the UK need to do to facilitate the growth of women’s businesses?

Our 2022 Summer Investment Report highlighted that investment in UK female FinTechs represented just 4% of total investment in UK FinTechs – down from 15% in the first half of 2021. The FinTech industry needs to work further with investors to provide more support for female founders and address gender biases that occur during investment processes with the goal of providing equal opportunities for women and all underrepresented FinTech leaders.

To maintain our global leadership, we must facilitate the growth of women-based businesses and promote broader diversity and inclusion in FinTech.

The cost of living crisis concerns people across the country. As we look ahead to 2023, what role do you see for fintech in supporting people and SMEs through the challenging economic times ahead?

In 2023, FinTechs will continue to play the important role of providing consumers and businesses with solutions to better save, manage and grow their money in challenging economic times.

FinTechs can help consumers gain a deeper understanding of their income and expenses, while preparing for possible scenarios, such as price increases, energy costs and interest rate fluctuations; and facilitate the process of accessing finance more democratically.

The future of green finance depends on technology, and fintech will play an important role

We would also like to see solutions such as financial passports increasingly implemented, which will help reduce financial exclusion and make payments more secure.

What role can FinTech play in creating more sustainable and greener financial services?

The future of green finance depends on technology and FinTechs will play an important role in rewiring our financial systems to direct more capital to Net Zero solutions.

FinTechs are suited to this challenge, given their strong track record of using data to offer new and better products and services for consumers and businesses. Using the vast datasets FinTechs have, it is possible to measure real-world results and fill data gaps to optimize climate change impacts and guide decision-making.

FinTech leaders and policymakers need to work together to implement reporting frameworks and common definitions to enable interoperable, consistent and reliable data to ensure the future of financial services is more sustainable.

What are your predictions for 2023? Where are the opportunities and which FinTech verticals are “the ones to watch”?

We hope to see the Financial Services and Markets Bill and the Data Protection and Digital Information Bill progress in 2023. The bills will generate additional opportunities for growth in verticals including digital ID, open banking and alternative lending.

For smaller businesses, regulation that allows for smart data supplies will help the expansion of alternative financing – crucial to the growth of SMEs in the current economic climate. Currently challenger banks provide more than 65% of all SME lending in the UK and with the rise of smart data in 2023 we expect this to increase.

In addition, businesses across all sectors are beginning to explore their strategies with respect to the two distinct technologies of Web3 and the metaverse, and in 2023 we expect the FinTech community to further embrace the opportunities both provide for increased value and increased engagement with their consumers and partners.

As told to Michiel Willems