I’m very glad to be here this morning.
And I’d like to start off with three quotes.
Technology is a word that describes something that doesn’t work yet.
That was Douglas Adams.
Technological progress has merely provided us with more efficient means for going backwards.
Computers are useless, they can only give you answers.
So if you were to listen to some of the greatest wits and writers and artists of the last 100 years…
You might be tempted to believe that technology is a terrible phenomenon, driving us into some dark and depressing future.
But then you might read some of the headlines from last week.
New technology helps brain signals move paralysed hand.
How technology is being used to foil cheats.
Technology firm creating 31 jobs in Belfast.
And I think that those three headlines…
Capture three of the real opportunities that – when developed with the right intentions – new technology can present.
First. As with the paralysed hand, technology can help people.
Second. As with stopping cheats, technology can make life fairer.
And third. As in Belfast, technology can create jobs.
And it’s exactly those three things that I want to talk about today.
I want to talk about how the work you’re doing can help people.
I want to talk about how we can use technology to make competition fairer.
And I want to talk about how we can use new technology to create and support jobs.
And within that, I want to talk about the work we in government are doing to help.
So first, how can financial technology help people?
Put simply, we need you to keep using the latest technology…
To ensure that our financial sector works for the people who use it.
And I think that’s an area where we’ve really seen progress over the last few years…
With new systems and ideas continually making life easier for your customers.
We’ve seen the introduction of:
- GoCardless, which makes it easy and cheap for small businesses to take debit payments
- TransferWise, which provides people and businesses with a lower cost alternative for sending money overseas
- Funding Circle, where people can directly lend to small businesses in their community online
And I’m sure there are hundreds more inventive products that are making a real difference to businesses
I think it’s crucial that you keep developing products like that…
That keep making it easier for people to carry out the transactions they want.
We’ll keep doing our bit to help.
Soon we’ll be legislating for cheque imaging,
Which will see customers able to pay in their cheques using their smart phones.
And we’re also doing our bit to support the new Financial Conduct Authority (FCA) project – Project Innovate.
For those of you that don’t know, Project Innovate is a clear signal from the FCA…
That they want to make sure UK financial technology companies – many of which will be run by people here today – are supported by our regulatory environment.
And as part of the project the FCA has said it will open its doors to any firm who are developing new approaches…
Which either aren’t explicitly addressed by current regulation – or where the current guidance may be ambivalent.
They’re also supporting innovation…
First, by providing help to firms who are developing new models or products, so they can navigate the regulatory system.
And second, by looking for areas where the system itself needs to adapt to new technology or broader change – rather than the other way round.
These are all really positive developments that the government strongly welcomes…
And they should go a long way towards creating an environment in which firms – like yours…
Can compete, grow and – most importantly – keep innovating for your customers.
So, second, what can we do with FinTech to make things fairer?
For me, the number one priority of my time in this role is to improve competition between companies that provide banking services.
Because while there has always been competition…
That competition hasn’t always been fair.
And one of the big changes we’ve made here – to help you – has been in legislating for a new Payments Systems Regulator.
Now – as you’ll all know – every time someone:
- gets paid directly into a bank account
- takes money out of a cash machine that isn’t owned by their own bank
- moves money around by some other method
They are relying on payment systems to get their money to the right place, safely, reliably and efficiently.
But the system that’s currently in place, works in favour of the big banks…
Because those are the banks that have always owned the payments systems…
Which has always meant that FinTechs had no alternative but to accept the terms they’ve been offered.
Often those terms have been unfavourable, which has given those big banks a big advantage over both new entrants…
And companies that want to offer people a different customer experience.
But the new regulator will have strong powers…
And they will be able to ensure that smaller banks and alternative providers of finance – including FinTechs - can access these systems in a fair and transparent way.
This piece of work is very nearly there.
The government has switched on the Market Investigation Reference powers of the Regulator a year ahead of schedule…
And this will give them the power to take competition action over payments systems…
When they come into their full set of powers next April.
All of which should result in a fairer – more even – landscape for your companies to operate.
Thirdly, how can we use new technology to create jobs?
Vitally - and as a mum myself, I’m particularly interested for my own son, who is desperate to get into this sector…
There are a growing number of jobs in financial technology itself.
The alternative finance market is expected to be worth over £1.5bn this year, with the potential to grow even further.
And one of the ways I think we can help that growth, is by making it an even stronger export industry.
According to current estimates, over the next 10 to 15 years…
90% of global demand for goods and services will be generated outside of Europe.
So we in government think that you in FinTech have a real opportunity to tap into this growth, and take advantage of new international business.
Again, we’ll be doing our bit to help.
That’s why – for example – we’ve created the Financial Services Trade and Investment Board…
Which is a strategic body that brings together government and industry…
And has been tasked with:
- attracting inward investment
- promoting external trade
- removing restrictions for the UK’s financial services sector
And that board has – you’ll be pleased to hear – identified financial technology as one of its big priorities.
It recognises that the UK is fast becoming a destination of choice for companies that want to establish a global presence in the FinTech sector…
And working with UKTI, they have developed a marketing strategy to attract more overseas investment to support the work you do.
But the growth and the employment opportunities here aren’t only in your sector.
You all have a key role to play in supporting both growth and jobs in other sectors too…
Especially by supporting small and medium businesses.
We really want to open up the field of SME finance to Fintechs.
And this goes back to the importance of competition, because – at present – the largest four banks account for over 80% of UK SMEs’ main banking relationships.
Such high concentration levels are – quite frankly – bad for business.
So we are fully committed to fostering a stronger, more diverse and more competitive SME banking sector, in which FinTech firms play a key role.
And our work is well underway on this:
- we’re legislating to improve access to SME credit data, which will enhance the ability of new providers to conduct accurate risk assessments
- we’re looking at proposals that will match those SMEs that want to secure loans with new market players that want to provide them
- we’ve taken action to speed up the process for waivers or deeds of priority, which have made it easier for FinTechs to offer finance to SMEs
Finally, we want the British Business Bank to keep working with you to unlock further funding for small businesses.
Both the Business Finance Partnership, and its successor – the Investment Programme – have an explicit objective to support lending to smaller businesses through smaller and more innovative finance providers.
They’ve already supported a whole host of providers like
- peer-to-peer lenders
- supply chain lenders
- debt and mezzanine finance funds
And their funding has been matched with at least an equal amount – and usually much more – from private sector investors.
We want companies like yours to keep taking advantage of the opportunities they offer…
And to keep offering new and interesting ways of lending to small businesses.
Because in very simple terms, the more small businesses we can support…
The more jobs we can create…
The more growth we can create…
And ultimately, the more prosperity we can create for millions of families across the UK.
And that’s why I’d like to end this morning by dismissing Douglas Adams!
Dismissing Aldous Huxley!
And dismissing Pablo Picasso!
Because I really do believe that new financial technology:
- will work
- will move us forward
- will provide answers to some of the issues that have held back our sector
So if I have one ask of you, it’s to keep doing what you’re doing.
Keep looking for new and inventive ways to help individuals and businesses.
Keep looking for new and inventive ways to shake up the system, and make competition stronger.
Because the outcome of all of that will be a system that works better for people.
That is fairer.
And that supports jobs.
And that’s something that will be great for your sector, and our country.
Thanks for listening.