I have worked at EY for 20 years in the UK financial services practice and have been in the fintech space for the past seven years – currently as EY’s UK Head of Fintech Growth. I am also a member of the FCA’s Innovation Advisory Group (IAG) – a forum bringing fintech and regtech sectors together to discuss innovation opportunities and challenges.
At this year’s IFGS there was rich discussion around the opportunities and challenges that come with fintechs entering the scale-up phase. One of the key challenges is that amidst rapid growth and innovation, the focus of fintech firms is often on short-term growth rather than sustainable, long-term expansion.
We conducted research with UK fintech CEOs and found that as firms mature, the board plays an increasingly essential role in driving sustainable, long-term growth, and that there is opportunity for fintechs to put more strategic consideration around the construct and governance of their boards.
Key to an effective fintech board is having a diverse range of skills and experience, and our research found particular gaps in Gen AI and fundraising capabilities currently across firms. Discussion at the summit centred around best practice examples and how fintechs could build effective boards that would be future-fit as they scale and mature.
Investment into UK fintech remains strong by global standards, however, levels are lower than those seen immediately post-pandemic when pent-up demand triggered a spike in investment.
UK fintech remains an attractive proposition to the global markets – particularly with investors from the US and increasingly the Middle East. We are also beginning to see signs of economic recovery in the UK, and provided inflation continues to fall and if interest rates are cut this year as expected, investment levels in UK fintech may rise over the coming months.
The high interest rate environment and cost of capital has meant B2C propositions that have high marketing costs to attract customers have become somewhat less appealing to investors. As a result, some B2C firms have pivoted to a B2B2C model – offering solutions to businesses as well as consumers – to generate more reliable and sustainable revenues.
In doing this, firms are particularly targeting financial institutions, as relationships to help scale solutions are often already established. This trend of shifting to B2B offerings will likely continue as banks look to fintechs to help them enhance their digital offerings to customers.
Open Banking, Open Finance, Generative AI and digital assets have continued to evolve the Fintech landscape over the past year – both in the UK and further abroad. Open Banking allows financial data to be shared between banks and third-party service providers through application programming interfaces (APIs). The adoption of Open Banking has been steadily increasing over a number of years, and it is now truly at a point of inflection. The Open Finance framework – which gives consumers control of all of their financial data – appears poised for development and has the potential to transform the way firms build and offer solutions, helping consumers understand and manage their finances holistically.
Generative AI, which has been rapidly adopted over past 18 months, will continue to underpin digital transformation in the fintech sector over the coming years – revolutionising products, processes and customer support. In particular, we expect to see solutions that automate financial analysis, drive efficiencies in customer engagement, and support process optimisation.
Digital assets continue to spark intellectual curiosity and – in many cases – tangible development across the sector. Some financial institutions are taking inspiration from the crypto asset industry, evolving propositions for institutionalised markets. For example, UK banks are exploring tokenised versions of commercial bank deposits through the Regulated Liability Network (RLN), which will provide opportunities for fintechs who want to build applications on the technology.
The Operational Resilience Framework, which will be implemented in March 2025, will be a key regulatory shift for the UK financial services firms, including fintechs. With the implementation deaadline now less than year away, it is important that fintechs review how they prevent, respond to and recover from operational disruptions. Compliance with the Operational Resilience Framework can also bring efficiencies, and can integrate with other existing frameworks, including business continuity, non-financial risk (NFR) and third-party risk.
Tom has worked at EY for 20 years in the UK financial services practice and have been in the fintech space for the past seven years – currently as EY’s UK Head of Fintech Growth. He is also a member of the FCA’s Innovation Advisory Group (IAG) – a forum bringing fintech and regtech sectors together to discuss innovation opportunities and challenges.
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