London can lead the financial world thanks to its command of artificial intelligence
Despite some ringing alarm bells, London is still the leading financial centre. And much credit goes to its ability to harness new technologies like it has done with artificial intelligence, writes Gerald Chappell
London often showcasts an unshakable penchant for pessimism about its prospects, coveting greener grass overseas. Recent weeks have witnessed prominent figures sounding the alarm.
Sir Nigel Wilson, of Legal & General, has warned that London is falling behind rival financial centres due to over-regulation. Tom Bloomfield, the founder of Monzo, has raised concerns about the lack of depth in London’s IPO-stage capital markets. Nik Storonsky, the outspoken CEO of Revolut, labels the UK as a bastion of bureaucracy, with regulation making it a hard place to do business.
And yet, London remains one of the world’s preeminent financial centres, with a thriving fintech scene driving innovation exported worldwide. The City’s wealth of talent, availability of capital, and (mostly) effective regulatory landscape create an attractive environment to build and scale new financial businesses.
A great example of effective regulation driving innovation is Open Banking. The UK was the first place in the world to embrace a regulatory-led approach to Open Banking, allowing customers to easily share their financial data with service providers of their choice. Breaking the stranglehold of legacy banks on transaction data opened-up competition and enabled superior products. And now, five years on, UK consumers are reaping the benefits.
Smart regulation, fit for the age of big data, is an enabler London should continue to leverage.
Many growing, challenger fintechs could not have existed before the regulatory architecture which enabled Open Banking was put in place. And we have chosen to grow our businesses – an AI-powered credit technology company – here in London precisely because of its regulatory environment.
Many of the concerns raised are of course well founded. There are deep flaws in the pension sector, and many high-growth companies are shunning London as a listing venue. But this is only part of the story.
The other side of the coin is how many innovations – notably AI – have taken root in the City and mean London still leads the world in such areas.
Artificial intelligence is already transforming finance and has the potential to transform many other sectors. Indeed, one of the biggest changes I have seen in recent years has been how these two aspects of London’s economy have come together – with the line between the City and Silicon Roundabout blurring. The most exciting financial companies are now, at their core, technology and data firms and this technological progress has huge benefits, for businesses and customers.
We use AI to truly understand customer’s financial lives, rather than using crude metrics like credit scores. This translates into better outcomes and lower costs for consumers. Other AI-driven firms here in London are improving asset management, transactions, analytics, onboarding, risk management, fraud prevention, customer verification, and much, much more.
I wasn’t surprised to read, therefore, that The Smart Centres Index (SCI) has ranked London’s power to develop and deploy new technologies top in the world, ahead of New York, Los Angeles, Tel Aviv and Hong Kong.
Regulation has an important role to play in accelerating the adoption of standards and setting the ground rules for consumer protection. This includes clear expectations around firms’ consumer duty, obligations to protect privacy, and to ensure data is only used for the purposes that consumers consent to. With these guardrails in place, innovation can operate safely. This is the hallmark of smart regulation that will support the UK in continuing to flourish as a tech and AI leader.
The final reason to remain optimistic about London’s position as a financial and fintech centre is the investment community and depth of capital markets. London tech firms attracted £16bn in venture capital funding in 2022, despite the economic downturn. London still comes top of the European investment tables and ranks fourth globally.
Clearly, London cannot be complacent. But I wouldn’t bet against it. My confidence in this city is strong, and so should be yours.