Q&A: Fintech boss Janine Hirt on how London can stay ahead of EU rivals

Fintech is an increasingly vital part of the UK’s financial ecosystem – so it’s high time to chat with Janine Hirt, the CEO of industry body Innovate Finance, on the challenges that come with keeping the UK out in front of Europe

While the UK has historically been a global leader in FinTech – receiving more investment than anywhere else in the world after the US – it is now at a critical juncture. What needs to happen to ensure the UK remains on top? 

In the UK we boast a world-leading FinTech sector that is often seen as the global benchmark for innovation in financial services. 

In 2023, industry, government and regulators must continue to work together to build on this leadership. This will be key to ensuring the UK remains the best place in the world to start, build and scale a FinTech business. 

The package of financial services regulatory reforms that the Chancellor announced in Edinburgh a few weeks ago will support the UK in remaining a top global destination for FinTech, by helping to increase growth capital for FinTechs and fostering a regulatory regime that supports innovation.

Moving forward, we need to see faster and further reforms to financial regulation to support the continuing growth of the innovators and challengers who have flourished over the last decade. 

Crypto companies have dominated the headlines this year. What regulation is required to futureproof the sector? 

If the crypto sector is going to thrive in the UK moving forward, it must be properly regulated.

As part of the recent package of financial services regulatory reforms, the Chancellor’s letter to the FCA included specific reference to actively embracing the use of new technology in financial services, including crypto technologies. 

We have worked with our partner Shearman & Sterling to submit a comprehensive evidence paper to the House of Commons Treasury Committee inquiry into crypto-assets. The analysis shows that in recent years the UK has been the leading destination after the USA for investment in distributed ledger technology (DLT) and crypto-asset based businesses.

This paper also explains how broader digital assets provide an opportunity for the UK to be the leading global financial centre, building on our track record of innovation, financial services and our legal system. This calls for agile regulation, providing consumer and investor confidence, mitigating risks, supporting competition and new entrants, and promoting innovation.  

We look forward to further consultations with the Government to work on a regulatory framework for crypto asset services. This will provide the basis for successful innovation through essential consumer and market protections and enabling a level playing field for responsible firms.

You released data earlier this year that revealed how the gender investment gap for UK FinTech founders is widening. What does the UK need to do to facilitate growth for female-founded businesses? 

Our summer investment report of 2022 highlighted that investment into UK female-led FinTechs represented only 4% of the total investments in UK FinTechs – down from 15% in the first half of 2021. The FinTech industry must further collaborate with investors to provide more support for female founders and address gender biases that arise during investment processes with the goals to provide equal opportunities for females and all underrepresented FinTech leaders.

To maintain our global leadership, we need to facilitate growth in female-founded businesses and promote broader diversity and inclusion in FinTech.

The cost-of-living crisis is concerning people across the country. As we look to 2023, what role do you see for fintechs in supporting people and SMEs through the challenging economic times ahead? 

In 2023, FinTechs will continue to play the important role of providing consumers and businesses with solutions to better save,manage, and grow their money in challenging economic times.

FinTechs can help consumers gain a deeper understanding of their income and spending, while preparing for possible scenarios, such as price increases, energy costs, and interest rates fluctuations; and facilitate the process of accessing finance more democratically.

The future of green finance depends on technology, and fintechs will play a vital role

We would also like to see solutions such as financial passports increasingly being implemented, which will contribute to reducing financial exclusion and making payments more secure. 

What role can FinTech play in creating a more sustainable and greener financial services?

The future of green finance depends on technology, and FinTechs will play a vital role in rewiring our financial systems to direct more capital to Net Zero solutions.

FinTechs are fit for this challenge, given their strong track record of using data to provide new and better products and services for consumers and businesses. By using the vast datasets FinTechs hold, it is possible to measure real-world outcomes and fill data gaps to optimise climate change impact and guide decision-making.

FinTech leaders and policymakers must collaborate to implement reporting frameworks and common definitions to enable interoperable, consistent and trusted data to ensure that the future of financial services is more sustainable. 

What are your predictions for 2023? Where are the opportunities and what FinTech verticals are ‘the ones to watch’? 

We’re hoping to see theFinancial Services and Markets Bill, and the Data Protection and Digital Information Bill, progress in 2023. The bills will generate further opportunities for growth in verticals including Digital ID, open banking and alternative lending. 

For smaller businesses, regulation allowing smart data provisions will help the expansion of alternative financing – essential to the growth of SMEs in the current economic climate. Currently, challenger banks provide more than 65% of all SME lending in the UK, and with the rise of smart data in 2023 we anticipate this to increase. 

Additionally, businesses across all sectors are starting to explore their strategies with regards to the two different technologies of Web3 and the metaverse, and in 2023 we expect the FinTech community to further embrace the opportunities both of these afford for increased value and enhanced engagement with their consumers and partners.

As told to Michiel Willems