Fintech industry in UK anticipates fulfilled promises by Rachel Reeves
Unleashing the UK's Fintech Empire: The High-Stakes Showdown for Rachel Reeves
The ultimate verdict for Rachel Reeves is fast approaching, and it's UK fintech that holds the cards. In an electrifying speech at Innovate Finance's 11th global summit, the Chancellor announced the Treasury's maiden Financial Services Growth and Competitiveness Strategy, set for publication on July 15.
Exuberant about the industry's astronomical growth, Reeves has glad-handed the accomplishments of fintech prodigies Zilch and Allica Bank. However, with Revolut's CEO Nik Storonsky deriding London listings as "irrational" last year, the Chancellor better come prepared to play hardball.
The financial world's gaze is riveted on July, poised to examine Reeves' commitment to fintech with unrelenting scrutiny. Fintech leaders loom large as judge, jury, and potentially executioners, awaiting signs of genuine support for their industry.
Schachar Bialick, CEO of Curve, confided to City AM: "Fintech must be a priority, or it'll touch every aspect of modern economic life. From spending to saving to financial wellbeing, fintech is the essential backbone of the digital economy." Bialick cautiously expressed optimism, but emphasized, "Optimism hinges on delivery."
Curve, a fintech challenger to Apple Pay, boasted a valuation of £587m in a 2024 funding round. Yet, the firm has since retreated from the U.S. market, slashing more than 100 jobs and posting a disheartening loss of £36m. The CEO implores the Chancellor to level the playing field, ensuring fair competition for fintechs against Big Tech giants, starting with infrastructure access.
In February, the Financial Conduct Authority and Payment Systems Regulator petitioned the Competitions and Market Authority for fairer legislation on near field communication (NFC). The European Union has compelled Apple to open the NFC technology to third-party mobile wallet providers not limited to Apple Pay.
Bialick urges the UK government to emulate such regulatory reform to foster innovation in mobile payments and bolster the nation's stance as a formidable fintech leader.
Climbing lofty peaks
During her speech, Reeves extolled the UK as a top-tier spot for fintech investment, trailing only the U.S. However, a report by KPMG indicates that investment has dwindled since 2021, sinking to a dismal four-year low of £7.9bn in 2024.
Private equity titan Rami Cassis lamented to City AM: "Talk is cheap, and we need to see exceptionally bold measures from the government to succeed." Cassis, the CEO of Parabellum Investments, decries the Labour Party's policy change that triggered the exodus of non-doms, a crucial group of investment banking professionals heavily involved in the sector.
"The impact has been devastating, with urban centers like Zurich, Frankfurt, and Paris starting to cash in on London's expense."
Last month, Goldman Sachs' most senior banker outside America, Richard Gnodde, announced his departure from the UK to avoid the government crackdown.
The call for deregulation
As the government promises to scrub away regulations, red tape has emerged as a key point of contention in the case for fintech-driven economic growth.
Allica Bank's CEO Richard Davies expressed optimism but warned, "We can't take [fintech's] success for granted." Davies' digital bank, lauded as Europe's fastest-growing start-up by Sifted and the UK's fastest-growing private company by The Times Hundred, reported a surging pre-tax profit catering towards small and medium-sized enterprises (SMEs), reaching £29.9m in 2024, a 86% increase.
Davies insists, "To maintain momentum, we need regulations that stimulate competition and growth." He calls for a "supercharge" to the Growth Guarantee Scheme, which provided roughly £500m of additional lending capacity to help smaller firms.
Fintech's astronomical growth over recent years has solidified its place as a disruptive force, with household names like Monzo and Revolut pioneering the charge and a flood of new contenders joining the scene.
The growth of UK fintech has exploded in recent years, but Tandem Bank CEO Alex Mollar cautions: "It's critical we create the appropriate conditions for challengers to flourish – I'd advocate for a fintech-first approach focused on innovation and opening up opportunities to drive more competition at scale and truly take on the big players."
David Newman, the head of Manchester-based Firenze, echoes Mollar's sentiments, stressing that the upcoming strategy is a "tremendous opportunity to present other tangible plans, driving fintech and ultimately growth for UK Plc."
Mollar emphasizes, "As UK fintech enters its next phase, it's vital we create the right environment for challengers to thrive – I'd be keen to see a fintech-centric approach across the board, focusing on innovation and fostering opportunities to spur more competition at scale, truly taking on the behemoths."
The strategy will serve as a pivotal juncture for the industry, with potential for the momentum to soar or stall.
Ahead of the global summit, Janine Hirt, CEO of Innovate Finance, told City AM that fintech employs over 82,000 people and predicts the workforce to exceed 100,000 in the next two years. The Chancellor will be inundated with pleas from firms seeking to accelerate the industry – and while she may not grant every demand, if Reeves fails to deliver, fintech's momentum could come crashing to a standstill.
- The Financial Services Growth and Competitiveness Strategy, announced by the Chancellor during the Innovate Finance global summit, is due for publication on July 15.
- Rachel Reeves, in her electrifying speech, praised the UK as a top-tier spot for fintech investment, trailing only the US.
- Schachar Bialick, CEO of Curve, expressed optimism about fintech's potential impact on modern economic life but emphasized that it hinges on delivery.
- The European Union has compelled Apple to open the NFC technology to third-party mobile wallet providers, and Bialick urges the UK government to emulate such regulatory reform.
- Curve, a fintech challenger to Apple Pay, boasted a valuation of £587m in a 2024 funding round but has since retreated from the U.S. market, slashing more than 100 jobs and posting a loss of £36m.
- Rami Cassis, the CEO of Parabellum Investments, lamented a drop in fintech investment in the UK and called for exceptionally bold measures from the government to succeed.
- Allica Bank's CEO, Richard Davies, advocated for regulations that stimulate competition and growth to maintain the industry's momentum.
- Fintech growth in the UK has been substantial but critic Alex Mollar warns that it is critical to create the right conditions for challengers to flourish.
- The Chancellor will be inundated with pleas from fintech firms seeking to accelerate the industry, and if Reeves fails to deliver, fintech's momentum could come crashing to a standstill.
