What will the election of Liz Truss mean for UK FinTech?

After a grueling two-month election period, the Conservative and Unionist Party has elected Liz Truss to be its new leader and Prime Minister.

Alongside a litany of other policy promises, Truss took a hard line on the financial sector – recently pledging to help the City of London maintain its competitive edge and “supercharge growth and investment”, as well as calling for the merger of the Financial Conduct Authority Authority, the Prudential Regulatory Authority and the Payments Systems Regulator.

What could Truss’ election mean for the burgeoning UK FinTech sector? According to Janine Hirt – CEO of Innovate Finance – the coronation provides an opportunity for the new Prime Minister to hit the ground running.

Hirt said: “The new Prime Minister and her Chancellor have the opportunity to build on our FinTech success story of the past ten years to establish the UK as the world’s leading financial centre, led by innovation in digital assets and digital finance.

“Previous government plans to make the UK the best place to start and grow a crypto company should be expanded to form a more comprehensive and coherent strategy, and accelerated to make faster progress, with an action plan and timetable. This requires urgent action on the immediate market litmus test of workable financial promotion rules for crypto-assets through to a roadmap for the digitization of capital markets and payments. This should also include further commitment to open finance, building on the work on smart data that Kwasi Kwarteng has led as business secretary, and digital ID.”

In terms of regulation, the CEO of Innovate Finance also sees a clear opportunity for the current Financial Services and Markets Act to promote the competitiveness of UK fintech and financial services.

Hirt also stated that unlocking more applications for open banking is a key way in which the government and FinTechs can work together to reduce rising costs for SMEs and enterprises.

Open banking itself is an area with huge growth prospects – with a report from the Challenger Banking All Party Parliamentary Group calling for more to be done to allow open banking to provide a view of each person’s financial situation.

IBOS Association CEO Manoj Mistry echoed this push, saying: “The continued rollout of open banking technology is critical to the future of FinTech in the UK and the wider development of smart data in financial services.

“The election of Liz Truss as the new Prime Minister will hopefully see the acceleration of smart data sharing, driven by the government’s Smart Data Council which aims to develop an ecosystem that builds collaboration with industry across sectors. New regulation is also needed as a matter of urgency. A new regulatory framework for open banking and smart data will provide security for industry players and protection for end users.”

Market support

While the UK is one of the largest FinTech markets in the world, there is still a strong belief among market players that more can be done.

Adnan Choudary – policy manager at Wise – believes three key areas can be handled. Firstly, internal communication across Whitehall needs to improve, “There are currently FinTech teams spread across the Treasury, the Department for Culture, Media and Sport, the Department for Business, Energy and Industrial Strategy and the Department for International Trade to drive policy development in the sector.

“The Government should ensure there is a Whitehall-wide strategic approach to support the sector, and proactively engage with industry, using our expertise to guide forward-looking policy. This will ensure that new rules continue to promote innovation, growth and attract investment for the industry.

Global support from UK FinTechs also needs to be increased. He noted: “The UK’s financial services system is second to none – there are many things it does incredibly well and it should seek to share these best practices to support international export of its FinTechs. The UK’s pioneering approach to modernizing and democratizing its payments infrastructure is testament to this.”

The last step the government needs to take in Choudary’s view is to increase talent across the sector, “The industry needs more engineers, more analysts and more technical leads to drive product design and development forward. Whether it’s through expedited visa routes or additional funding for science education across all age groups here in the UK, this talent pipeline must thrive.”

Founder of the Corporate Finance Network Kirsty McGregor believes Truss’ election could be the key to supporting investment and small businesses. She said: “The new Prime Minister must focus on expanding investment opportunities, which will be critical to economic recovery as well as sustained growth in the SME sector.

“Additionally, while a number of policy measures were previously introduced to stimulate investment, including consideration of capital allowances reforms, the Government now needs to build consistency to support small businesses.”

The war against technocrats

Truss’s recent call for the merger of the FCA, PSR and PRA was seen by some in her party as part of her “war on technocrats”. The call for the merger has divided opinion in the financial industry, with many seeing advantages and disadvantages.

Martin Hartley – managing director of emagine – gave a warm response to Truss’ plans. “A designated merger of the FCA, PRA and PSR is certainly big news. Is this the truce ‘governing like a conservative’ by cutting back on regulators and their costs? Anyone who has dealt with these organizations will want every opportunity to do them more effective welcome.

The FCA in particular does not appear to have done a good job due to its perceived lack of oversight of the London Capital Finance scandal and the Blackmore Bond collapse, which have left UK savers with heavy losses. One could argue that merged organizations can share information more easily and potentially help fintech firms compete directly with banks in payments and retail accounts.

Hartley added that Truss will need to see the city step up to boost economic activity if her promise to cut taxes can be realized. He concluded: “So, in other words, streamlining regulatory bodies to make London a more attractive place to do business could well support her aims.”

On the other hand, Seb Wallace, investment director at Triple Point Ventures gave the merger a much colder reaction, saying: “The proposed merger of FCA, PSR and PRA is a distraction and should not be pursued. Instead, the government should ensure that regulators address competition and simplicity by doing new business with the same fervor that they approach consumer protection.

“Put simply, the FCA’s current approach makes it a significant barrier to financial innovation in the UK and only the Government can correct the regulators in this regard.”

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