If the UK is to retain its leadership position in fintech it must facilitate greater cross-sector collaboration and engagement between the industry and regulators, a sector trade body has argued.
Innovate Finance, the UK fintech trade association, has published a report asserting that Britain’s extensive network of fintechs are making a positive contribution to the country’s economy and business landscape – but adding that there are gaps that need filling.
A fintech force for good?
According to the association, 90% of UK fintechs are a ‘force for good’ across the categories of productivity, places, people, the planet and peace. On a spectrum of -100 to +100, fintech ranks at 24, higher than capital markets, construction and retail.
A breakdown sees 98% have a positive impact on productivity, encompassing economic growth, job creation, innovation and infrastructure. A further 26% are contributing to protecting data privacy and access to information, sitting within the peace category, though there has been an observed decline in addressing money laundering and illicit money flows.
Innovate Finance argues that multi-sector collaboration will be needed to tackle this challenge, though it is confident in the UK’s status as ‘European market leader’ in RegTech investment as a remedy for this.
Janine Hirt, CEO of Innovate Finance, said: “We’re delighted to release the second Impact Report in partnership with Accenture and Vested Impact, highlighting the key role the FinTech sector has in boosting the economy and tackling important societal issues.
“Thanks to the inherent innovation in our industry and the remarkable efforts of our FinTech leaders, we are well equipped to face our biggest societal challenges.
“It’s essential for industry, government, and regulators to collaborate in supporting our leading FinTech community, driving even more positive impact and paving the way for the next wave of productivity and growth in the sector.”
Falling short on green businesses
UK fintech has not swept the board across all areas, however. Further details from Innovate Finance’s report sees just 10% of UK fintechs driving positivity relating to environmentalism, with the number of firms negatively impacting the planet standing at 73% – admittedly down from 86% the year prior.
On the other hand, fintech is apparently making a positive impact on reducing financial inequality, with 39% having a positive impact on people. Innovate FInance stresses that this impact was more pronounced than among traditional financial institutions, with 25% of fintechs making a good impact on people, against 18% of financial institutions. Lastly, 14% of fintechs had a positive impact on local communities, with only 3% having a negative one.
This myriad of figures has a lot of significance for fintech in the context of the contemporary investment landscape. Making a positive impact on communities, the economy and environment – in short, meeting Environmental, Social and Governance (ESG) standards – can sometimes be key to securing investment, both for new startups and well established companies.
Additionally, the figures are also of significance to the government. Various UK administrations have been vocal in recognising the role finance and fintech plays in the country’s modern economy, with London an international capital of finance.
The contributions fintech is making to the UK economy, which finally began to grow again this year after years of stagnation and decline, will come as good news to the Labour government, which had emphasised finance’s crucial economic role in its July 2024 election manifesto.
Looking ahead, Innovate Finance wants to see UK fintech work collaboratively with the government to address challenges and unlock opportunities. Key objectives include harnessing Smart Data and Artificial Intelligence (AI), addressing environmental and gender equality shortcomings, and encouraging a multi-sector approach to counter fraud.
Economic Secretary to the Treasury, Tulip Siddiq, said: “The UK FinTech sector is a powerful engine for economic growth. I want to work with the sector to unleash its potential – driving innovation, boosting investment and supporting financial inclusion.”
