UK’s fresh fintech focus comes from noughties crash lessons

12 Apr 2017

London. Image: S.Borisov/Shutterstock

Mark Carney, governor of the Bank of England, says investing in fintech comes from the harsh lessons learned during the financial crisis.

Worth £7bn to the UK economy and employing around 60,000 people, fintech’s true value to the finances of England, Scotland, Wales and Northern Ireland is its opportunity.

More pointedly, it can help us to potentially avoid (or at least negotiate somewhat through) another financial crisis.

That’s according to Mark Carney, governor of the Bank of England, who has highlighted the endless possibilities of new entrants into the financial industry in comparison to, say, a dozen years ago.

Keep up

Carney today (12 April) said that the “hard and soft infrastructure of the financial system failed to keep pace” with innovation in the build-up to the 2008 crash.

“Light-touch regulation, outmoded codes of market conduct, inadequate settlement and clearing infrastructure all contributed” to the crisis, he said.

“We can draw on these experiences to help ensure that fintech boosts growth and promotes financial stability.”

Carney maintains that new approaches see contemporary fintech firms – usually absent from traditional forms of banking – changing tack. And for that, we should be happy.

However, the surge in popularity for digital banks with little footprint in the past is something that should still be planned for, given the inherent risk of any undermining of traditional financial institutions.

Any overwhelming support for new modes of financial management could reduce loyalty “and the stability of funding of incumbent banks”, which would force Carney’s organisation to step in.

“If this happens, the Bank of England would need to ensure [that] prudential standards and resolution regimes for the affected banks are sufficiently robust to these risks,” he said.

Changing times

Interestingly, though, traditional financial institutions are, in general, busy with their responses to such a disruptive movement.

For example, UK Chancellor Philip Hammond announced that Barclays is to open a new accelerator in this region, with the London project to house more than 500 workspaces for start-ups.

It’s big business, too.

With a London HQ, Meniga’s fintech R&D recently received a boost after a raft of Nordic VCs invested, or reinvested, in the company this week.

A total of €7.5m was raised by Meniga, which has created a digital banking platform that aims to helps banks use personal finance data to enrich their CX. Sales and further development are on the horizon.

Meanwhile, Dublin-headquartered cloud software player ClaimVantage has secured €2m in funding to support its global expansion.

The company secured the funding from the Davy EII Tax Relief Fund 2015, which is managed jointly by Davy and BDO.

Fund fair

Elsewhere, VC firm 83North recently closed a new $250m fund to invest in European and Israeli start-ups.

This is the fourth such fund raised in 11 years, bringing total capital under management to $800m.

London, though, is feeling the pressure, with Hammond calling on greater activity to attract these types of operations to UK shores.

“We can’t remain the number one place for fintech and the other technologies of the fourth industrial revolution by simply relying on our ingenuity, talent and openness – we have to go out and get the business,” he said.

Gordon Hunt was a journalist with Silicon Republic