Economic Secretary to the Treasury speech
Delivered at the Innovate Finance Global Summit
Good morning, everyone.
Let me start by thanking Innovate Finance for inviting me and for organising such a fantastic conference.
As ever, you really are kicking off UK Fintech Week in style.
And it’s wonderful to be in this beautiful space – Guildhall – a venue constructed in the fifteenth century. It is a reminder of the proud and storied history of the financial services industry in this country.
As Economic Secretary, my objective is to ensure that the UK is the most innovative, most international and most business-friendly economy anywhere in the world.
I want the UK to prioritise growth, risk taking and wealth creation and to celebrate it for the moral good that it is.
And as we chart our way forward with the ability of being able to make our own rules for the first time in decades, it has never been more important that financial services are at the heart of those efforts.
That is certainly the objective that the Chancellor, the Prime Minister and I all share for the sector.
Innovation – all of you in the dynamic fintech community – has a huge role to play.
Bank accounts, payment services, the ability to borrow, save into a pension or other investments, buying insurance, or the provision of tools to understand finances better or to shop around offer enormous benefits to their users.
They create ladders of opportunity, the ability to transfer wealth over a lifetime, the chance to provide for our old age or they can shield us from some of the adverse events that life can throw at us.
Whilst I am proud to have many large and longstanding firms in the sector, it is rare that legacy firms have the ability to innovate at the pace required to make the most of changing technologies and keep us internationally competitive.
Our Fin Tech community is vital for the economy in improving productivity, creating choice, and reaching into new under-served segments of the market.
Which is why I am glad that as a location for Fin Techs to base themselves, on many fronts the UK is leading the way.
Indeed, the sector continues to go from strength to strength.
Data from Fintech Labs shows that almost half of Europe’s fintech unicorns are based here in the UK.
And Innovate Finance found that last year, the sector attracted more investment than the next thirteen European countries combined.
Our own commitment to supporting UK fintech is reflected in the actions we took, working with the Bank of England, to facilitate the private sector sale of the UK arm of Silicon Valley Bank to HSBC last month.
I know many of you in this room were directly affected by the collapse of SVB and I am glad that we were able to act decisively to secure an outcome which protected your capital and ensured continuity of banking services.
Throughout that intense period, I and other Ministers were accessible and constantly communicating with the sector.
Government isn’t perfect but I hope that when the chips were down we demonstrated the benefits of being a sovereign nation with the agility to make its own decisions fast.
But that is just the start.
Our belief in this sector is also evident in the proactive steps we are taking to ensure that you continue to thrive in the years ahead.
Importantly, the Government will reflect on the submissions to the Payment Services Call for Evidence and introduce an agile regulatory framework for payments and e-money that promotes growth and supports an internationally competitive payments sector.
We’re also fostering innovation by making the UK a safe jurisdiction for cryptoasset activity.
We set out plans in our wide-ranging consultation published in February, and we want to pro-actively support the use of distributed leger technology and tokenisation where it makes sense.
At the same time, I was pleased to launch the Treasury’s joint consultation with the Bank of England, on how to move forwards with a sovereign or central bank digital pound.
Private wholesale digital currencies are likely to come to market first and we are already creating the legislation to enable those which are fiat backed and used for settlement in the current Financial Services Bill going through Parliament right now.
And we have the upcoming Financial Market Infrastructure Sandbox, which will help industry adopt and scale digital solutions that could radically change the way markets operate. That will be up and running this year.
One of the most important steps we have taken to support financial innovation over the past two years has been implementing Ron Kalifa’s fintech review.
Since being appointed, I have upped the pace of delivery and a few weeks ago we launched the new Centre for Finance, Innovation, and Technology – CFIT – in Leeds, a city where fintech adds £710 million to the local economy.
CFIT is backed by £5 million of Treasury seed funding, along with an additional £500,000 from our partners at the City of London Corporation.
It’s central task is to bring together industry players – entrepreneurs, policymakers, investors, and academics – into coalitions to address some of the trickiest challenges facing the sector.
I am delighted to announce today that CFIT’s first coalition will look at Open Finance and how unlocking financial data can benefit SMEs and consumers.
Everyone in this room understands how data can radically empower individuals and businesses alike.
McKinsey estimate that opening up financial data could boost UK GDP by a useful 1.5% by 2030 so CFIT has my full support as they go after that opportunity.
Open finance would obviously be the next development beyond the existing Open Banking ecosystem, which is one of the most dynamic and exciting anywhere in the world.
There are over 7 million regular active users of Open Banking in the UK and over a billion successful API calls every month. It’s spawned thousands of new businesses and products.
Those who are close to it, know that this is a key moment for the Open Banking regulatory regime.
We’ve done a lot of work over the last year through the Joint Regulatory Oversight Committee to set out the next steps to ensure Open Banking continues to go from strength to strength.
This morning, the Committee set out its recommendations, with a vision of a data sharing market which is competitive and scalable for the long term.
To achieve this, we will move Open Banking on to a sustainable regulatory framework, which the Government intends to develop through the Data Protection and Digital Identity Bill which has its second reading in Parliament today.
Open Banking will also transition to a new entity, with a broad-based, equitable funding model and high standards of corporate governance. Today we set out how we plan to get this transition started this year.
But we can’t spend all our time and energy on governance models.
So we also set out an ambitious roadmap of actions for the next few years, again starting immediately. By Q3 this year, there will be tangible progress across the board, on key themes such as mitigating the risks of financial crime and promoting new services, including variable recurring payments.
Let me be clear as I know some folk have been worried: this will be the year of delivery on the next generation of Open Banking.
Our plan is ambitious but achievable, and I am committed to maintaining our country’s leadership in this field. We won’t rest on our laurels, and I want to encourage all of you to work with me to build on the success that Open Banking has been so far.
If data is one limb that has the potential to transform the financial services sector, the application of artificial intelligence is the other.
Although there are already many deployments and uses in the financial sector, my belief is that we are barely getting started.
AI can help firms to identify and prevent fraudulent transactions, detecting suspicious patterns in real time.
By analysing data on market trends, customer behaviour, and other factors, AI algorithms can identify potential risks and provide recommendations for risk mitigation strategies.
It can help investment managers to make more informed decisions, driving better returns for savers.
And AI can power new customer service features, such as chatbots, which can deliver personalised support quickly and efficiently.
This technology has immense potential to transform the financial services sector.
And that is why the Government recently published its White Paper on AI which details our plans to make the UK the most trusted and pro-innovation system for AI governance in the world.
This builds on our recent £900 million investment to build an exascale supercomputer and to establish a new AI Research Resource. These will provide significant compute capacity that many in this room may wish to take advantage of.
Launch of the UK Fintech Census
But even as we support the fintech community here in the UK, it is vital that we help our firms to expand internationally.
That’s why my final announcement today is the launch of the UK Fintech Census, in collaboration with the City of London Corporation and Innovate Finance.
It is designed to tailor our support for you as we make the most of the UK’s access to international markets.
When you think about it, no other country on earth combines a seat on the Permanent Council of the UN with membership of NATO and AUKUS, a trade deal with the EU, accession to the Comprehensive and Progressive Trans-Pacific Partnership and being a founder member of the Commonwealth.
The Census aims to help you make the most of these opportunities by seeking your feedback on three simple points:
What international markets do you want to break into?
What are the main challenges that you face?; and
What further support and services would you like to see?
The Census opens today and will run for five weeks, aiming to reach all 2,500 fintechs in the UK.
And, in order to make it a useful and actionable data set, we will repeat the Census annually.
In conclusion, ladies and gentlemen I hope you are as excited about the opportunities as I am for you.
UK fintech is in a great place today.
But it’s our job, as a Government, to ensure that that success continues and we reach new heights… a mission to which, I assure you, we are utterly committed.
I am a do-er by nature: I have worked in disruptive businesses for most of my life and I want to deliver concrete actions that help this sector to thrive.
You’re already effective at telling us what you think – and I challenge myself and the team on a daily basis what more we can do to help.
So please let’s keep working well together so that at next year’s Global Summit – and many more to follow - we’ll all be able to look back on many more fantastic years for UK fintech.
Thank you very much.