The history of British banking is not a steady continuum, but rather a series of re-inventions, where the financiers of the UK have adapted to new circumstances. After King Edward I expelled his Jewish creditors in 1290, English banking took a back seat until Italian merchants from Lombardy brought high finance back to London’s Lombard Street. The Stock Exchange was adapted from a Dutch model in the Seventeenth Century, and in the last century British banking made several comebacks adapted from US finance – most notably in the 1980s when Canary Wharf sprung up and London became a seat of global finance once again.
Today the Chancellor Philip Hammond unveiled a new fintech strategy to help prepare the UK for the next financial re-invention.
Financial technology has already cut the costs of banking and has unleashed the power of data-driven financial analytics. But today’s government announcement recognises that new regulations are needed to keep pace with innovation. A “Cryptoassets Taskforce” will be established between the three key regulators – the Treasury, Bank of England and the Financial Conduct Authority. This is an admission that cryptocurrencies underpinned by blockchain technology are becoming a serious feature of financial services and need proper regulation.
“Robo-regulation” software will be tested in an effort to help fintech firms and traditional banks alike comply with government regulation, and the new strategy includes programmes to help fintech start-ups partner with established banks in order to bring innovation to a wider customer base.
But from a political perspective, perhaps the most interesting aspect of this strategy is the focus on regional and ethnic minority participation. Three regional fintech envoys will be appointed “to ensure the benefits of fintech are felt across the UK”, and a Connect with Work programme will “help fintech firms to take advantage of the UK’s diverse workforce”.
The problem with British banking is that it has been dominated by wealthy white men in and around London. Not only is that unfair, but it has led to resentment of the sector by people excluded by it. When the financial crisis of 2008-9 arose, many people in regional Britain felt little empathy for bankers in London losing their jobs. Even in the capital, many people in poor and minority ethnic communities living within sight of the City and Canary Wharf felt that the world of finance brought no benefit to their lives.
If Britain is going to be the fintech capital of the coming decades, it needs to involve a wider set of people. People across the country need to see tangible benefits – and jobs – from fintech innovation. Only then will the fintech sector enjoy genuine, widespread and cross-party political support.
Finally, the fintech sector itself needs to stay open to ideas, talent and capital from across the world. The strategy announced today includes a “Fintech Bridge” with Australia, and a fintech partnership between the UK and Australian governments. This is perhaps a recognition that Australia is a useful English-speaking gateway to the enormous growing markets in Asia. Staying open to ideas and people from abroad has worked well for UK banking in the past, and the Chancellor is betting on that strategy working once again.