Innovate Finance is the independent industry body that represents and advances the global FinTech community in the UK.
Innovate Finance’s mission is to accelerate the UK's leading role in the financial services sector by directly supporting the next generation of technology-led innovators to create a more inclusive, more democratic, and more effective financial services sector that works better for everyone.
The UK FinTech sector encompasses businesses from seed-stage start-ups to global financial institutions, illustrating the change that is occurring across the financial services industry. Since its inception in the era following the Global Financial Crisis of 2008, FinTech has been synonymous with delivering transparency, innovation and inclusivity to financial services. As well as creating new businesses and new jobs, it has fundamentally changed how consumers and businesses access finance.
Despite challenging geopolitical headwinds, the sector remains the fastest-growing in the UK economy. With $2.9bn across 199 deals in investment for the first half of 20231 and FinTechs constituting half of all UK unicorns within the technology industry2, the market remains the biggest in Europe.
The sector also brings a wider positive impact on society, the economy and the environment.
97% of UK FinTech is demonstrating medium or high positive impact when assessed under the UN’s Sustainable Development Goals, 98% is significantly boosting economic productivity, growth and jobs, and 27% is reducing corruption and improving compliance across society3.
Summary
This submission focuses on three areas:
Maintain and strengthen the UK’s global leading position in payments and open banking
Open Banking, the year of delivery: The Government and regulators should provide clarity on the Long-Term Regulatory Framework (LTRF) for open banking, including the future entity, and act on the work of the Joint Regulatory Oversight Committee’s (JROC) industry working groups to maintain pace on development of the next phase of Open Banking.
Payments innovation: Open banking decisions should include a clear direction from Government and regulators on non-sweeping Variable Recurring Payments (VRP), to advance innovation and competition in the UK. Alongside this, the Government and regulators should set out detailed plans for the regulation of stablecoin and commercial bank digital money.
Exporting know-how and international cooperation to advance cross-border standards: The Government should support and enable industry and regulators to lead the development of international standards, including open banking payments to open up further international opportunities for UK FinTech.
UK investment in FinTech
The UK continues to be a global leader in securing FinTech investment, second in the world only to the US, and far ahead of all of Europe. This success has been aided by supportive Government policy. However, Innovate Finance is calling for a number of further measures to ensure this investment continues in order to maintain the UK’s position as a leading FinTech centre:
Seed Enterprise Investment Scheme (SEIS): Increasing the company limit of investment into a single company to £300k per company.
Enterprise Investment Scheme (EIS): Removing the exclusion of lending and insurance risk as permitted activities.
Enterprise Management Incentives (EMI): Amending rules limiting total company grants outstanding to £3m and individual employee shares granted to £250k, to reflect the needs of scale-ups as well as start-ups.
R&D tax credits scheme: Restored to previous levels of relief, and HM Revenue and Customs (HMRC) to streamline the processing of claims.
A holistic approach to digital payments fraud
Fraud has a harmful effect on society and the economy. The Economic and Social Costs of Crime 2022 report stated that the total cost of fraud to society in England and Wales in 2019-20 was at least £6.8bn, covering preventative spending, financial loss, emotional harm, and law enforcement response.4 In addition to the moral and legal fight against fraud, it negatively impacts potential economic growth and productivity. We welcome the publication of the Fraud Strategy earlier this year and call on the Government to make swift progress with its implementation, in addition to:
Cross-sector approach: The Government should organise in 2024 a major conference on tackling digital fraud, with the aim of creating additional shared responsibilities and liabilities for tackling digital fraud, in particular for large tech platforms where the majority of online fraud originates5.
Build a world-class anti-fraud tech sector: The UK is the centre of the fight against digital financial crime. The Government and regulators should seek to use this fact to support the development of new technologies and businesses specialised in this area which could then be exported around the world by convening relevant stakeholders to discuss what support is needed.
Download report here
H1 2023 FinTech Investment Landscape
Tech unicorns UK - complete guide to the billion-dollar club
The FinTech Impact Report: Working through the world’s to-do list
This point was drawn from The Economic and Social Costs of Crime 2022 which was quoted in HM Government’s Fraud Strategy: Stopping Scams and Protecting the Public publication.
Annual Fraud Report 2022