NY FinTech Week – our transatlantic opportunity
Relationship status: special
The “special relationship” between the US and UK is thriving – at least in the arena of fintech. Following the UK FinTech Week in London last month, a delegation of 15 advanced UK fintechs are visiting New York this week for the second annual UK Mission to NY FinTech Week.
As fintech increasingly becomes the UK’s jewel in the financial services crown, British firms are seeking new synergies between the two markets, and opportunities to prosper from the “special relationship”.
UK fintechs are accustomed to benefiting from a unique business environment for startups, particularly in the financial technology sector. Stability and collaboration are at the forefront of the UK’s fintech ethos, with an equally renowned and progressive “right touch” regulatory environment, led by the FCA’s Project Innovate. Other significant features of the UK landscape include the recent introduction of open banking, which will shape the future of banking in the UK and is already causing seismic ripples across adjacent sectors and borders.
For those UK fintechs eyeing global scale, a number of characteristics make the US an attractive destination. The US has always been better at being bigger, and that is no different in this new frontier – the US leads the world in financial technology investment, accounting for over two-thirds of global fintech investment in the final quarter of 2017. The equity investment environment made famous by the venture capital and private equity communities on both the East and West Coasts has contributed greatly to this, including record fundraising levels in 2017.
Maria Deam, British Consulate, New York
Deeper capital pools are a luring attraction, and combined with the depth of distribution amongst a tech-literate audience of over 320 million people, with a larger gross domestic product than the entire European Union, you can start to see why the US is the king of scale. And its bread and butter platforms – the West Coast’s technology platforms – are increasingly participating in financial services. Whether it’s payments via e-commerce, peer-to-peer (P2P) opportunities, or helping incumbents deploy developments in cloud computing, artificial intelligence and machine learning, the collaboration opportunity for fintechs doesn’t end with banks.
However, with scale also comes disadvantages. The biggest obstacle to date has been the fragmented regulatory frameworks of the US, creating significant barriers to entry both domestically and for firms expanding internationally. Fortunately, progress is being made.
For example, the US Commodity Futures Trading Commission (CFTC) launched the LabCFTC in May 2017, and the Financial Industry Regulatory Authority (Finra) announced its Innovation Outreach Initiative in June 2017. The main goals of each program is to promote responsible fintech innovation in the markets subject to regulation. Finra’s Office of Emerging Regulatory Issues (ERI) is also charged with analysing new and emerging trends in the securities industry, while Finra’s internal fintech advisory committee is keeping an eye on other markets’ best practices around the globe.
Most recently, the CFTC and FCA in February signed a cooperation agreement to foster regtech advancements, enhance the sharing of information, and facilitate referrals concerning UK and US fintechs entering each other’s market. These are all steps in the right direction, and further innovation and collaboration between regulators will benefit the market as a whole.
Sam Tidswell-Norrish, Motive Partners
For companies wanting to review the market opportunity in the US, there are bodies to support a firm’s growth and development by guiding them through the process. For example, the Department for International Trade (DIT), the UK’s economic department designed to secure UK and global prosperity by promoting and financing international trade and investment, was created to support UK companies in exporting goods and services all around the world.
The delegation of UK firms in New York this week is benefitting from DIT’s networks of mentors and teams dedicated to helping businesses succeed overseas, and it could well be that these FinTechs don’t just disrupt financial services in the UK, but the US fintech market as well.
In any case, the US-UK trading dynamic will become increasingly important as the UK’s fintech jewels look beyond Europe for scale and international successes. Perhaps HM Treasury’s FinTech Bridge initiative will look to build on the Transatlantic opportunity, ensuring the relationship between our governments, regulators, investors and businesses becomes ever more special.
By Sam Tidswell-Norrish, principal at Motive Partners, and Maria Deam, vice-consul for financial services at the British Consulate in New York
