The future of FinTech: a balance between consumer demand, media scrutiny and political pressure
FinTech is the posterchild for how a post-Brexit regulatory landscape is being shaped by consumer need, media scrutiny and political pressure. It is a clear example of where industry is innovating faster than regulation can keep pace, and with Government under pressure from all angles to improve consumer protection whilst incentivising innovation there is a real risk neither goal is fully achieved.
With more than 10% of the global FinTech market share now in the UK, the need to balance consumer protection and innovation is clear. And this tension is mirrored amongst consumers, with our recent polling showing that whilst 45% of the public trust that UK regulations keep customers protected from rogue providers, over a third of people (36%) are concerned with the rules in place for the sector.
Today WA set out our findings in a new report – UK FinTech – balancing innovation and consumer protection – and sat down with Former Digital Infrastructure Minister and Telegraph Tech editor Matt Warman MP, and James Daley, MD, Fairer Finance, as well as some of the UK’s leading FinTech brands, to explore how industry can influence the year of regulatory change it faces in 2022.
Here are our key takeaways:
UK regulation has not kept pace with innovation in the sector
Much of the UK FinTech success story to date has been a result of light-touch regulation which has allowed for innovation at an astounding rate – and consumer habits have followed suit. There is a marked trend in consumers taking up new products and services as they emerge, with the average consumer having at least two money-related apps on their phone. At the end of the day, this innovation is bringing real consumer benefit, allowing for greater competition as traditional financial services are forced to keep up or else lose market share.
However, just yesterday FinTech industry bosses called on Government to ramp up efforts to overhaul regulation, and build a world-leading environment for the sector by delivering on the ambitions set out in the Khalifa Review. Some elements of the Consumer Credit Act were last revisited in the 1970’s, and whilst industry is keen to revolutionise the way they communicate and educator consumers, they are still bound by requirements which pre-date the introduction of the app.
Industry wants to see a clear regulatory framework bought forward which doesn’t hinder the growth of the market and reflects the needs of their customers. There is a clear opportunity for vocal market players to help shape the direction of travel, and with a Government keen to collaborate with and support the private sector, the two sides of the fence should be able to align.
Building trust amongst consumers and politicians remains a key issue for market entrants
However, whilst there is clear consumer demand for helpful, innovative products, there remains an issue of trust. 25% of respondents to our poll admitted to looking into digital only products, but have not used these services yet. Similarly in parliament, whilst many MPs advocate the great benefits of digitization and automation in the financial services sector, there are several voices advocating for more stringent consumer protection policies.
Education is a key issue here, with transparency on terms and conditions and ensuring consumers understand the impact products can have being crucial. Our research echoed the importance of these elements, with security, quality of regulation and data protection the three focus areas when it comes to trust-building.
The more FinTechs can do to showcase themselves the better. In this way, the trust-building exercise can be industry-led, particularly if FinTechs are willing and able to work together to establish what good consumer outcomes look like and evidence where there has been success. The onus is therefore, on the industry to work together to shape what good consumer outcomes look like and communicate that to regulators and policy makers.
The key to reaching the Government’s FinTech ambitions will now be the speed of transformation
The Government has a clear ambition to make the UK a global FinTech hub, but with other countries snapping at their heels, ensuring a solid regulatory footing will be key to making this dream a reality. With 55% of respondents feeling that technology and innovation are delivering better services for customers, there’s clear consumer demand for a UK market that continues to allow innovation and growth in this space.
As the FCA looks to revisit the UK’s financial services regulatory framework post-Brexit, this combination of rising consumer demand and increased media scrutiny has left policy makers and regulators in unchartered territory. Industry, the regulator and politicians now a need to reach a consensus on what good consumer outcomes look like, and what an acceptable level of consumer detriment would be – if any – whilst ensuring a vibrant and growing sector is not stifled.
In any eventuality, there is growing demand from consumers and industry alike for the Government to be held to account in its ability to swiftly set out the parameters for the future of the financial services in the UK – and the FinTech sector is a key pillar to this.
 Taking place 18-19th November 2021, the online General Public questionnaire surveyed 1,118 respondents.
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