FinTech and the Digital Strategy

Targeting a frictionless future for business

Karen Bradley, the Secretary of State for Culture, Media & Sport, vowed earlier this month to develop a world-leading digital economy that works for everyone, making the UK the best place in the world to start and grow a digital business. But does this pledge go far enough to allow the FinTech industry to thrive?  

The Secretary’s Digital Strategy outlined a commitment to plug the digital skills gap, build better infrastructure systems and encourage long-term investment. This bodes well for the already booming digital sector – a sector that pulled in £118 billion for the UK economy in 2015 alone and continues to grow prolifically.

With these figures in mind, the Government’s support of digital is no surprise. In fact, Tech City UK estimates that digital businesses are creating jobs nearly three times faster than the rest of the economy.

The strategy is also wise. As we prepare to leave the European Union, the UK’s competitive edge will become dependent not only on a vibrant digital sector but on all businesses cross-industry embracing the best digital technology to drive up productivity, innovation and growth.

The UK’s promising FinTech industry can take centre stage here. Far from existing to replace financial institutions and professional services organisations, our real value is to support them with innovative technology and an agile, forward-thinking approach.

In the finance sector, too many processes remain tedious and time consuming without needing to. Take electronic invoicing as an example of the automation of a task that removes huge amounts of friction. The exchange and handling of almost any data, and particularly things like invoices, purchase enquiries, and requests of financing, are not only more efficiently done digitally, they also greatly reduce errors and delays.

Every day, businesses waste time and energy by manually checking invoice documents received from a growing global supply chain. Technology exists that would ensure incorrect invoices are rejected before they even arrive. Additional time is wasted calling and emailing to check on invoices statuses, instead of accessing the information online.

Later in the accounts payable process, procurement data, when captured and monitored digitally, can easily be used to understand procurement trends that can inform spending decisions. For suppliers, potential working capital lies dormant in unpaid invoices, unavailable to fuel business growth through new contracts or equipment.

If businesses aren’t tied up chasing invoices or on the phone with suppliers doing the same, they have more time to explore opportunities for growth with existing customers and go after new ones. When historic data is easily accessible, opportunities to make small changes that will target efficiencies are more easily visible. This is what FinTech is all about: easing friction.

Frictionless business processes will be the key to success as speed and agility become critical in business transactions. While the government can and indeed does turn to the tech industry to roll this out in business, the government itself could do more to ease slow and unnecessary processes, such as lengthy tax returns. For small businesses in particular, they are an unnecessary burden.

And more can also be done to ease access to finance, both for start-ups and the working capital of established firms. The Northern business community will no doubt welcome the Sheffield-based Northern Powerhouse Investment Fund, which was announced by the British Business Bank and will provide £400m of funding to the Northern Powerhouse. It is schemes like these that enable entrepreneurs to start and grow businesses, digital or otherwise. However, cashflow problems caused by late payments are one of the biggest killers of SMEs in the UK, which is an issue we help alleviate via innovative working capital solutions for firms who trade electronically over our network.

Nonetheless, the Digital Strategy is a great example of a business-led collaboration with government to build a launch pad to further economic growth. As outlined in the announcement, several businesses will be supporting with educational schemes and employment opportunities.

From a FinTech point of view, this focus on skills is to be particularly welcomed. Like any industry, we are reliant on a network of able professionals who can provide the expertise we need to thrive and grow. With the promise of new business, a digitally savvy workforce and a vibrant supporting network with the desire to promote widened access to financial services, London remains the natural home for Tungsten Network for the foreseeable future.

The Digital Strategy provides an ambitious road map for the FinTech industry’s continued growth, as well as the wider UK economy. We must ensure that as a nation we stay ahead by continuing to provide a supportive environment for British start-ups and entrepreneurs. The digital skills needed for our sector to thrive are the same as any other, as the digitalisation of business continues to transform and enable growth across all industries.