UK Fintech Week 2021, hosted by Innovate Finance, brought together the worlds of fintech, banking, and government to discuss the future of the finance sector. The shift to digital, accelerated by the pandemic and Brexit, made this year’s event arguably the most important yet. To counter the dominance of industry voices, and a focus on growth and competitiveness, the Lab ran a fringe event to explore why and how fintech could be developed in a way that includes civil society, and addresses financial inclusion and the climate crisis.
A running theme was the outcome of the government-commissioned Kalifa Review, which published policy recommendations in late February to support the growth and widespread adoption of UK fintech. In his opening speech, the Chancellor endorsed many of the review’s recommendations, including fintech visa reformation, a fintech ‘scalebox’, and the creation of a new Centre for Finance, Innovation and Technology.
We agree that the government needs to lead on a comprehensive strategy that brings together the work of all relevant regulators and departments responsible for finance, data, inclusion – and more – to ensure that the fintech sector delivers the essential services that UK citizens and businesses rely on to thrive. But the Kalifa Review did not do enough; much more needs to be done to ensure that the future of finance works for everyone and that data-driven financial services of the future do not repeat mistakes of the past, or exacerbate existing inequalities.
As noted in the Lab’s recent report Lifting the Lid on Fintech, the sector has the potential to be unjust. For example, benefiting from fintech requires a level of digital skill, which is a concern for the 11.7 million people (22%) who aren’t currently able to participate in the digital economy. Fintech is also undemocratic; firms enjoy unprecedented power as they combine market-wide insights and powerful computing to tailor prices, target adverts, and even influence our behaviour – while individuals have little say in how data about their daily lives is used (and who uses it). It is also unsustainable, relying upon a very resource-intensive infrastructure; global computing and internet-connected devices now account for about five per cent of the world’s electricity production – and this could rise to 20% by 2025.
In addition, a nationally representative survey, commissioned by the Lab in March 2020, showed that 69% said they would not be comfortable sharing more data about their daily life and activities with banks and big tech companies in order to easily access financial services (e.g. online banking, loans, credit, payment services). This suggests that the dominance of fintech is not as legitimate as many assume. Interestingly, the response was highest in London, where 74% said they would not be comfortable.
An acknowledgement of the risks and unintended consequences of fintech, as well as its ultimate social impacts was missing from the agenda at UK Fintech Week. This is why the Lab hosted a ‘fringe event’ that brought together Lord Holmes, Vice-Chair APPG FinTech, and Dr Kay Swinburne, Vice Chair of Financial Services, KPMG (policy lead for the Kalifa Review), to discuss if the Kalifa Review went far enough to address financial inclusion, sustainability and truly transform fintech.
The Lab’s position, formed in consultation with civil society organisations in the Transforming Data Network, and put forward by Marloes Nicholls, Head of Policy and Advocacy, argues for the government to commit to the following in response to the Kalifa Review:
- Involve civil society and consumer groups on an equal footing with industry when developing fintech policy and regulation.
- Prioritise financial and digital inclusion.
- Develop a regulatory framework that protects people and communities, and puts giving people agency over data about them before the speculative potential for innovation.
- Take action to shift the playing field in favour of purpose-driven firms, like credit unions and regional mutual banks, to use new tech instead of Big Finance and Big Tech.
- Advance fintech as part of a wider finance strategy that includes a plan for how physical infrastructure, such as bank branches and cash, will continue to be supported.
Responding first, Lord Holmes reminded the audience about the first principles of financial services: inclusion, unleashing potential, and empowering people. He asked the pertinent question, ‘If financial services don’t work for everyone, do they truly work for anyone?’ and agreed that a more holistic approach to financial inclusion is needed across government.
From Kay Swinburne, we heard that while the review was limited by its remit to support market growth and competitiveness, a focus on financial and digital inclusion was intended. She encouraged civil society organisations to organise and engage with industry and policymakers to ensure their views were heard. We also learnt that some members of the Kalifa Review were undertaking further work to develop additional policy recommendations to ensure that the future of finance works for everyone.
The interest in the event, and activity in the chat room, demonstrated that civil society organisations have a lot to say and want to be heard. But their lack of involvement in the Kalifa Review questions how seriously their views are sought and point to the dominance of industry in policymaking. With the creation of new bodies such as the Centre for Finance, Innovation and Technology, as well as the new policy work on financial inclusion we heard about at the event, there is a golden opportunity to bring the third sector into the policy and decision making process. We hope the government listens and will be engaging with the Lab community to see how we can make sure this happens.
Watch a recording of the event here.
If you’d like to find out more about this work and get involved, then please contact the Lab’s Advocacy Associate David Fagleman: firstname.lastname@example.org.