Matthew Field, Policy Advisor, Digital, UK Finance
As I wrote some time ago, there has been a notable shift from competition to collaboration in the FinTech market. Disruption is still happening at pace, generating new ideas, new market players and better results for consumers. In the medium to long term, that trend will benefit the financial services industry, making it more innovative, more competitive and, most importantly, better for consumers.
But when it comes to talking about the UK’s FinTech ecosystem, a different story emerges, one in which thousands of firms have sprung up to offer innovative technology products not just to consumers, but to the firms that already serve consumers by the millions. This collaboration is vital to any FinTech ecosystem. At its simplest, it encourages research and development of technologies that might not otherwise find investment while allowing technology start-ups to connect with partners who can help them deliver their innovations at a faster pace.
Policy makers have come to recognise the benefits of this side of the FinTech ecosystem and are now taking action. Santander and The City UK have today published a report which is part of the Financial Services Trade and Investment Board FinTech programme. The report, ‘Transformation and innovation: a guide to partnerships between financial services institutions and FinTechs’ explains how greater collaboration between financial services institutions and FinTechs can smooth the path to developing innovative new digital products and services, and sets out seven possible models for collaboration.
Feedback from start-ups is that partnering with a big financial institution can be a slow and bureaucratic process so one of the recommendations in the report for financial services firms is to produce guidelines to make it easier for FinTech start-ups to work with them.
Given regulatory risk and the sheer volume of regulations currently being put forward for IT by regulators around the globe, it isn’t hard to imagine why this is the case. But nonetheless, this an area in which financial institutions know they need to improve and are working hard to do so.
To help move that agenda forward, UK Finance is currently supporting Tech City UK through its FinTech Delivery Panel to help start-ups thinking of partnering with established financial institutions. Like the guidelines recommended in this report, the goal is to make it easier for start-ups to understand what a financial institution like a bank will need to know from them in order to kick-start their partnership. For example, what are you likely to be asked by the bank and what answers might the bank expect from you? This might include such things as do you have an articulated data security policy? Are you cloud native (and who isn’t these days)? Is your data encrypted at rest as well as in transit? Having your answers ready to these questions will help speed up the process and remove some of the frustrations for start-ups and established financial services firms alike.
Guidelines might be just one small step, but it is a step in the right direction and, as this report lays out, there are a few more steps that can and should be taken, like streamlining internal processes or creating a collaborative culture, both of which could be aided by a more harmonised regulatory environment. However, what is most encouraging is seeing the financial institutions featured in this report along with policy makers, start-ups and trade bodies, all coming together to support the growth of the UK’s FinTech ecosystem. With this kind of support and momentum, the UK will continue to compete with the world’s other great FinTech hubs to be the best place to launch and scale a FinTech business.