Chancellor Philip Hammond drives UK fintech boom

The UK's dominance of fintech looks likely to continue thanks to Chancellor Philip Hammond's pledge of £2bn for R&D and innovation to keep the UK "leading the world in disruptive technology".

The Chancellor announced the boost to innovation and technology, as well a focus on 5G testing and rollout, as part of a £23bn National Productivity Investment Fund. He added that planned infrastructure between Oxford and Cambridge would extend to a "tech corridor".

He also said a start-up VC fund of £400m via the British Business Bank would ensure UK start-ups wouldn't wither on the vine.

Kerim Derhalli, CEO and founder of invstr, said: "Much has been made of the recent dip in venture funding within fintech, but we're simply observing the typical cycle of an innovative environment. The fintech boom has seen rise to many impressive products, but also a large quantity of lower level pretenders who will, naturally, fall by the wayside. Venture capitalists have now reached a point where only the best ideas with real longevity will find funding.

"The key for foreign investors looking to invest in the booming UK fintech scene is consistency. By essentially maintaining the status quo in today's statement, Mr Hammond has gone a way to restoring calmer waters following the tidal wave of concern following Brexit and Donald Trump's election. The reality is that, despite various forecasts, no one really knows what Brexit means so businesses will look to reduce their own volatility until details emerge."

The Chancellor has been un-fazed by the Brexit threat of a new financial hub relocation somewhere like Frankfurt, for instance, which he has said "doesn't make a lot of sense".

Derhalli added: "The City is going to remain the hub of finance and fintech, irrespective of Brexit. The likes of Barclays and HSBC have already said as much. If a fintech start-up wants to succeed it needs to be where it's at – which is the UK. For now, the outlook doesn't look too bad."

Mark Boleat, policy chairman, City of London Corporation said: "While a commitment to roll out 5G is admirable, far too many people find broadband and digital infrastructure poor in comparison to other countries. At the moment London ranks 26th out of 33 European capitals when measured by download speed. Nearly every business relies on reliable and quick broadband but too many find what they are promised is not actually what they get delivered. While the Digital Infrastructure Fund will open up the market for operators, all that consumers and businesses really want is a safe, reliable and secure broadband offer."

Duncan Tait, corporate executive officer, SEVP and head of Americas and EMEIA, Fujitsu EMEIA, said: "The Digital Infrastructure Investment Fund is a vital step in enabling UK businesses to remain competitive in the digitally disrupted world. Businesses are facing a greater threat than ever before from digital disruptors in every sector, spanning Airbnb in tourism to Uber in transport. In fact Fujitsu's Fit for Digital research showed that the majority of global business leaders believe that their organisation won't exist in its current form by 2021 in the wake of digital disruption.

"To survive, businesses must be able to innovate using the latest technologies, such as the Internet of Things and artificial intelligence. Collaborating closely with technology experts will be crucial – at Fujitsu for example we're collaborating on more than 200 co-creation projects to help businesses flourish amidst digital disruption. For this companies need reliable, fast broadband speeds. The Government's move to improve the UK's infrastructure will therefore help businesses to compete and thrive against newer digital disruptors, both at home and globally."

Specifically, the government will support investment in UK FinTech, with an agreement with the Joint Money Laundering Steering Group (JMLSG) that they will modernise their guidance on electronic ID verification to support the use of technology to access financial services.

Luke Scanlon, head of fintech propositions at law firm Pinsent Masons, said: "The modernisation of the JMLSG guidance will be a major step forward in helping people and businesses make their financial lives completely digital. SMEs and consumers are aware of how difficult it can be to open up a bank account and verify and authenticate that they are who they say they are.

"Digital only banks and new payment service providers promise a future in which all financial aspects of a person or business' life can take place online, but this can only occur if it becomes easier to establish relationships with financial providers in the first instance in a wholly digital context. Digital IDs are fundamental to this transition.

"The government is likely to further the FCA's public statements which suggest that the JMLSG guidance will need to be updated in a way that enables bank accounts to be opened without relying on cumbersome offline paper-based processes. Fintech businesses are highly active in this area and there is increasing scope for biometric solutions to play a pivotal role here."