The collaboration between financial services and tech is incredibly important to drive further innovation in the UK. This translates into many positive and impactful outcomes:
- Tech companies can help financial services providers deliver a better customer experience by leveraging their expertise in user interface design, data analysis, and machine learning. By combining technology and financial services, companies can create personalised
experiences that meet the unique needs of their customers, such as more efficient onboarding processes, real-time financial advice, and customised investment portfolios.
- With the rise of digital transactions, cybersecurity is a critical issue for financial services providers. Collaboration with tech companies can help them stay ahead of threats by incorporating advanced security features, such as biometric authentication,
encryption, and fraud detection algorithms.
- Working with tech companies can also help financial services providers expand their reach into new markets. For example, mobile banking apps and online lending platforms can reach underserved populations, such as the unbanked and underbanked.
- Furthermore, operations can be streamlined and transaction times can be reduced. For example, blockchain technology can be used to facilitate faster and more secure transactions, while also reducing costs and increasing transparency.
- Last but not least, such collaboration can provide greater efficiency across the board. For example, automated trading systems can help financial institutions make better investment decisions, while AI-powered chatbots can assist with customer service inquiries,
reducing wait times and improving customer satisfaction.
Partnership between tech and financial services can benefit consumers with improved convenience, better security, increased access to financial products and services, faster transaction times, and more personalised experiences. By working together, tech
and financial services providers can create innovative solutions that meet the evolving needs of consumers in an increasingly digital world.
Many of today’s most well-known fintechs emerged from the global financial crisis as innovators introduced new products and services to meet customers’ financial needs. These new entrants helped to rebuild resilience and trust in the financial services sector
at a time of deep economic crisis, by putting the consumer first. A decade later fintechs once again rose to the challenge of helping people and small businesses manage yet another crisis, this time in the form of creating digital solutions to help them better
navigate the COVID-19 pandemic. So it comes as no surprise that today, as we face the cost of living crisis, fintechs are once again playing a critical role in helping customers better manage through this period of economic uncertainty.
In the latest Innovate Finance report
‘Fintech: Helping with the Cost of Living‘ in partnership with EY, we wanted to capture how fintechs are positively supporting broader society through their technologies by ensuring that as many people as possible are aware of the fintech services that
exist to support them. We also wanted to assess whether there is more that the industry, government, and regulators can do to unlock further solutions and make an even greater difference to a larger number of consumers and businesses.
The report highlights how fintechs and their driving technology are delivering products and services that are making a tangible difference to people’s lives. From budgeting tools powered by open banking to real-time payment technology that is helping unbanked
individuals receive their government payouts, fintechs are building solutions for stronger financial resilience and wellness across the UK.
This is just one of many examples of how impactful fintechs and their technologies can be for consumers, businesses and society at large. You can already see what kind of power the collaboration between tech and financial services can have.
There are however a few challenges and ethical considerations that we must bear in mind. Issues around privacy, data security, and a potential negative impact on jobs and society are still very relevant. When we think of innovations such as artificial intelligence
or machine learning we must also be aware of the unconscious biases and prejudices that can be built into the algorithms that fintechs and tech companies are adopting. The machine is only fair and unbiased if the humans behind it are also fair and unbiased.
The fintech sector shows signs of strength and resilience and many opportunities ahead for both financial services and tech. This does not mean that we can rest on our laurels, but it is an inspiration to do more, do better.
According to Innovate
Finance Investment Landscape 2022, the UK and London in particular attracted more fintech investment than the next 13 European countries combined. And despite the fears around the impact of Brexit, illiquidity, and global exchange rate fluctuations, UK
fintechs attracted record breaking venture capital and private equity investment in 2021.
London and the entire UK are well positioned to maintain their leadership as the best city and country to start and grow a fintech and tech business, key sectors for our economy to grow and prosper. UK fintechs are major success stories, offering investors
a wealth of opportunities for their portfolio diversification.
The UK was also the first financial centre to pioneer a regulatory Digital Sandbox, a virtual testing environment, and open banking that has created an ecosystem where businesses can collaborate and develop proofs of concept in a safe, trusted, and industry-wide
environment.
In late 2022, the Financial Services and Markets Bill mandated competitiveness and growth as secondary objectives for UK regulators. This will integrate economic impact as part of decision making, alongside consumer protection and market stability. The Bill
demonstrates a commitment to innovation in financial services from policy makers. It also provides an opportunity to ensure the regulatory framework in the UK stays agile, coherent and competitive.
There is however more that we can do together as industry, regulators and government as we thrive to create a regulatory environment to support innovation and clear consumer benefits.
Innovate Finance is contributing to proposals across key areas including digital assets, artificial intelligence, consumer credit, financial crime, open finance and on fintech’s role in the cost of living crisis. Our team has recently responded to a consultation
from the Bank of England, Prudential Regulation Authority and the FCA on artificial intelligence and Machine Learning highlighting that safe and responsible adoption of AI can positively transform financial services for the benefit of UK consumers and businesses.
In order to realise the societal and economic benefits, we are calling for the regulators and government to take a thoughtful, joined-up approach to the legal and regulatory framework for AI - including the development of a common taxonomy or guiding principles
for artificial intelligence.
Open data also featured in our response to the FCA’s consultation on potential competition impacts of Big Tech
entry and expansion in retail financial services, where we emphasised that strengthening competition in the UK market should include an ‘Open Data’ framework for data portability across the economy, supported by re-usable Digital ID. This would give consumers
the right to access their data held by businesses and require those businesses to share the consumers’ data with other trusted third parties.
We will continue these conversations on policy and innovation in the months to come and will discuss the partnership between Tech and Fintech at the
Innovate Finance Global Summit on the 17th and 18th of April in London.
We will convene industry leaders, innovators, institutions, regulators, policy-makers, startups and investors for our two-days Summit during the UK Fintech Week ensuring that fintech and financial services pave the way for economic growth, sustainability,
and a financial system that caters for all.