A Coronation Of A Different Kind: How The UK Can Retain Its Crown As A Global Fintech Superpower

David Harvey our consultant managing the role
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After 15 years working in the UK Financial Services sector - from relationship based British merchant banking group Close Brothers to technology driven Swedish payments disruptor Klarna - I've seen firsthand how the UK has evolved to firmly establish itself as a global FinTech superpower - securing a 10% global market share and 8 out of 10 of us using at least one FinTech tool on a regular basis. With a thriving ecosystem that includes established financial institutions, innovative startups, and supportive government policies - the UK has become an established hub for creativity and innovation, attracting both domestic and international talent and investment.

But 2023 has the potential to represent an important inflexion point - as we crown our new King in the midst of a cost of living crisis, we cannot be complacent when it comes to the FinTech sector with many other contenders seeking to grasp our FinTech crown.

As goliaths like the United States and China or more surprising innovators like Singapore, India and Brazil, rapidly catching up (and in some cases accelerating ahead), we need to take action now to ensure that the UK remains at the forefront of the industry and delivers better value to our consumers.

INVESTMENT AND RISK APPETITE

The subject of investment and risk appetite regularly comes up as a barrier for scaling the UK FinTech sector - characterised as our natural British preference for steady profitable growth as opposed to conscious investment (and the associated upfront losses) for hypergrowth. A positive step here is the Government’s drive to unlock DC pension fund investment, but for this work it must go hand in hand with more funding for the all important scale-up phase where too often our best start-ups-ups are lost to foreign shores for that next growth phase. Shifting our mentality to be less afraid to take risks and experiment with new ideas will be critical to maintaining the UK's competitive edge and attracting the best talent and companies from around the world

REGULATORY CHANGE

In addition, the UK is also taking steps to create a more forward looking regulatory environment that fosters innovation while protecting consumers. Whether it's the secondary objective for the PRA and FCA to advance the international competitiveness of the UK economy, the transition towards more principle based regulation through the FCA’s Consumer Duty, or the introduction of sandbox and scalebox support - the direction of travel is positive. Key now is to accelerate the pace of delivery so our regulatory frameworks can evolve to accommodate new technologies and business models. From personal experience, regulation of the Buy Now Pay Later sector over the past 3 years has been a microcosm of some of the opportunities and challenges we face - a possible stepping to more proportionate regulation rather than simply applying long outdated prescriptive consumer credit rules dating back to the 1970s...

TALENT AND DIVERSITY

Alongside these, the bedrock of any thriving tech industry is the talent pool. The UK's FinTech sector has benefited greatly from the availability of skilled professionals - of many different nationalities - who have made the UK home and driven innovations that ensure this country remains at the forefront of the industry. To ensure a steady stream of skilled professionals entering the FinTech sector, the UK government, employers and educational institutions must collaborate on creating tailored courses and programs that address the specific needs of the industry. This includes investing in university level courses, apprenticeships, vocational training programs, internships and placements.

Importantly we will also need to be much more creative in accessing the untapped skills available up and down the country. At the heart of achieving this is addressing the diversity and equality imbalance which has plagued UK Financial Services and has unfortunately transferred to FinTech. A stark fact from recent EY research is that women currently only hold around 10% of FinTech board seats. And this is just one lens - the potential is huge if we can move the needle on representation across all forms of diversity - be that racial, ethnic, LGBTQIA+, generational, socioeconomic and neurodiversity.

EMERGING TECHNOLOGIES

But addressing investment, regulation and skills will not be enough. We need to go further, embracing the emerging technologies that are so rapidly becoming mainstream such as AI and machine learning, blockchain, open finance and smart data. A day doesn’t pass right now without discussion of the transformative effect of generative AI capabilities - with never ending use cases to accelerate product development, improve customer service or significantly increase operational efficiency - or much to my relief at the end of a busy day produce a personalised bedtime story for my son Henry within a matter of seconds!

As finance professionals, it is critical for the future success of the UK that we are not daunted by the reality that both our jobs and the careers of future generations will change beyond recognition as these new technologies become embedded into our everyday lives. To learn the lessons from the Luddites who destroyed machines in textile factories back in the early 1800s, our role now is to stay relevant by leveraging the complementary strengths of humans and AI - as ChatGPT says itself: 

AI is better suited for tasks that are repetitive, data-driven, or require precision, while humans excel in creative, empathetic, adaptive, and complex problem-solving roles. Ultimately, the best approach may be to harness the strengths of AI and humans through collaboration, creating a more efficient and effective workforce."

And it's very apt to finish on this subject of problem solving and collaboration. With the fanfare of King Charles coronation in 2023, all the eyes of the world will once again turn to our group of small islands on the edge of Europe. From this footing with a relatively modest population of around 65 million (less than 1% of the global population), for many the UK is considered to be punching well above its weight when it comes to Financial Services and FinTech - a possible pretender to the throne. What has made us special and succeed has always been our willingness to collaborate to solve the bigger problems. In the face of rising global polarisation, geopolitical unrest and economic volatility, fostering collaboration and courageous leadership will undoubtedly continue to be our superpower and the key to retaining our crown as a global FinTech leader.

About Klarna

Klarna was founded in 2005 in Stockholm, Sweden with the aim of making it easier for people to shop online. In the last 18 years, technology has evolved, excited and transformed the world around us, yet our mission remains as relevant as ever, to make paying as simple, safe and above all, smooth as possible.

Klarna is the leading global payments and shopping service, providing smarter and more flexible shopping and purchase experiences to 150 million active consumers across more than 500,000 merchants in 45 countries. Klarna offers direct payments, pay after delivery options and instalment plans in a smooth one-click purchase experience that lets consumers pay when and how they prefer to.

When the company acquired SOFORT in 2014 the Klarna Group was formed. Klarna is backed by investors such as Sequoia Capital, Silver Lake, Bestseller Group, Dragoneer, Permira, Visa, Ant Group and Atomico.


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13/07/23
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