View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Policy
  2. Digital economy
April 17, 2024

Next UK government urged to invest in regulators to safeguard fintech growth

Both the Startup Coalition and the Tony Blair Institute for Global Change urge the victors of the forthcoming UK’s general election to fund regulators to protect its burgeoning fintech scene.

By Greg Noone

Two think tanks have urged future UK governments to protect the country’s expanding fintech sector by boosting funding levels for its financial regulators. In a joint paper, the Startup Coalition and the Tony Blair Institute for Global Change said that the British fintech scene could help the UK become one of the fastest-growing economies in the G7. However, this was only possible if stability could be assured in the sector by a well-funded regulatory ecosystem.

“From mobile banking apps that make the managing of personal finances more accessible to AI-powered lending platforms that expand access to credit for entrepreneurs, fintech has the potential to be a major driver of economic progress,” wrote Jeegar Kakkad, the Tony Blair Institute for Global Change’s director for government innovation in a blog post promoting the paper. “However, to fully realise this potential, the UK needs a policy environment that empowers people to launch and scale fintech startups, and ultimately see them thrive.”

The FCA logo under a magnifying glass, a photo used to illustrate a story about the UK fintech scene.
Funding for the Financial Conduct Authority has been put under a magnifying glass by two think tanks, both of which recommend increased investment in financial watchdogs to shore up confidence in the integrity of the UK’s burgeoning fintech scene. (Photo by Shutterstock)

Fintech growth essential for UK economy, say think tanks

Adequate funding for the UK’s Financial Conduct Authority (FCA) was one method by which the next government – predicted in the paper to be headed by the opposition Labour Party – could help protect the fintech sector. “From the failure of the Crypto Register, to a perception that the enforcement of existing regulations is sporadic and inconsistent, we’ve heard frequent concerns about financial regulator capacity” from fintechs, said the paper. What’s more, the authors argued, if UK regulators “cannot effectively enforce existing regulations, [fintechs] have little chance of being able to strategically innovate to compete with the EU and other jurisdictions.”

This may prove especially apt when it comes to regulating financial AI applications, the paper continued. Though the current government advocates a “light touch” to AI regulation that gives individual regulators the autonomy to decide how to arbitrate challenges arising from the technology’s use in their respective sectors, the Startup Coalition and the Tony Blair Institute said that financial watchdogs currently lack the “resources, responses, flexible processes and consistent engagement” required to perform this role. 

FCA funding already rising

The paper also contained other policy prescriptions, including allowing pension funds to invest in fintechs, creating a new ‘Financial Inclusion Sandbox’ and expanding the principle of open banking to include individual access to data on mortgages, investments, savings and pensions. This ‘Open Finance’ environment would, said Kakkad, spur greater innovation among fintechs and ultimately reduce costs, expand access to capital for business and improve their cashflow. 

Last month the FCA announced that its annual funding requirement would increase by 10.7% to £755m. That rise, it said, would partly be covered by financial penalties the watchdog anticipated collecting throughout 2024-25, which it predicted would amount to £35.1m. The FCA has previously been criticised for having been slow in levying such fines against crypto asset firms not complying with anti-money laundering regulations, with the National Audit Office saying that it noted “significant delays” in enforcement actions by the financial watchdog. 

Read more: FCA confirms Digital Sandbox for UK financial services as it continues AI work

Content from our partners
Rethinking cloud: challenging assumptions, learning lessons
DTX Manchester welcomes leading tech talent from across the region and beyond
The hidden complexities of deploying AI in your business

Websites in our network
Select and enter your corporate email address Tech Monitor's research, insight and analysis examines the frontiers of digital transformation to help tech leaders navigate the future. Our Changelog newsletter delivers our best work to your inbox every week.
  • CIO
  • CTO
  • CISO
  • CSO
  • CFO
  • CDO
  • CEO
  • Architect Founder
  • MD
  • Director
  • Manager
  • Other
Visit our privacy policy for more information about our services, how Progressive Media Investments may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.