UK cities to host fintech hubs to help drive innovation

Financial innovation hubs will be established in cities across the UK and placements at leading fintech firms will be offered to students at leading universities as part of government-backed schemes.

The plans are part of a push to encourage financial innovation which will be co-ordinated through a new Center for Finance, Innovation and Technology (CFIT). One of its other roles will be to work with the government, regulators and the Bank of England to improve regulation in the sector.

Cities Minister Andrew Griffith said the initiative would advance the Government’s ambitions to improve productivity by improving skills, and make the UK “a technology and science superpower”. It would fit within the “framework of pursuing growth in [financial services] sector, a really important sector for growth in the UK economy,” he added.

Charlotte Crosswell, the new chair of CFIT and former chair of the Open Banking Implementation Entity, said the center will also work on plans for a fintech growth fund, pointing to the “huge opportunity for [UK] pension funds must invest small amounts in some of these growth areas’.

The centerpiece was a proposal from the Khalifa Review into fintech in 2021, which warned that a “digital big bang” was needed for the UK to remain competitive in the sector.

The Government will provide £5 million in seed funding, with a further £500,000 from the City of London Corporation, the governing authority for the capital’s financial centre.

CFIT’s roles will include creating cross-sector “coalitions” including from finance, technology and academia to try to address the barriers to growth.

The center will on Tuesday announce plans to establish “financial innovation hubs” in cities across the UK, including Leeds, Manchester and Bristol in England, and others in Wales, Northern Ireland and Scotland, and coordinate their work.

It will also offer student placements at some of the UK’s top companies in the financial sector, in partnership with leading universities including members of the Russell Group.

“We are in a global race for talent,” Crosswell said. “We want to encourage the next generation of entrepreneurs and we want to make sure that is done across the UK.”

Despite a number of successful UK fintech start-ups, the lure of more liquid capital markets around the world and post-Brexit regulatory uncertainty have limited the number of public listings in London.

– We often go abroad [for investment]which is a testament to the strength of the sector,” Crosswell said. “That means there was always a risk of IPOs moving away.”

The UK attracted $12.5 billion in fintech investment by 2022 through 545 fundraising deals. But late-stage fintech companies have struggled over the past year, as rising inflation has caused investors to focus on a path to near-term profitability.

Checkout.com, a UK-based company valued at $40 billion by investors at the start of 2022, cut its internal valuation in December to $11 billion.

Ezechi Britton, CEO of CFIT and fintech entrepreneur, said: “As a founder myself, I know that the UK is the best place to scale up for a fintech company. But we cannot rest on our laurels. Given the wealth of talent and innovative ideas in the sector, it is absolutely crucial that we provide the right environment for our fintech sector to thrive and reach its full potential.”