The Labour Party‘s Financial Services Review highlights fintech as the future of financial services (FS) in the UK while warning of the ‘danger of slipping behind’
when it comes to innovation in FS.
The 28-page Financing Growth Review, launched by Labour this week, outlines the party’s measures to boost the UK financial sector under a possible future Labour administration.
Its six policies prioritise fostering growth in regional financial centres, enhancing international competitiveness through innovative regulation and EU collaboration, strengthening consumer protection , financial inclusion and tackling fraud, promoting green investments and regulation, embracing fintech innovation, AI, open banking and digital currencies, as well as revitalising capital markets through pension reforms and supporting venture capital.
So what does the fintech industry think? Let’s share reaction to policies outlined in the Review.
Pensions
The Review pledges to reinvigorate capital markets by reviewing the pensions and retirement savings landscape, enabling greater consolidation of all types of schemes.
In response, Becky O’Connor, director of public affairs at PensionBee, an online pension provider, said: “Labour appears to be pinning its sail to the mast of the Conservative’s Mansion House reforms for pensions. This gives some clarity to the industry, suggesting that should a Labour government come to power, many of the initiatives already in motion, to unlock capital and to bring about consolidation, would continue.
“A pensions review has the potential to give impetus to new initiatives too, such as the Lifetime provider model. It’s also encouraging to note Labour’s support of streamlining regulation in line with the FCA’s Consumer Duty and its focus on outcomes.”
Open banking
Labour supports the efforts of the Joint Regulatory Oversight Committee (JROC) to lay out the roadmap for the next phase of open banking. A Labour government will work with regulators and industry to develop the roadmap for open finance.
Ben Ruffels, VP of public policy at Volt, the real-time payments platform, comments: “Labour’s clear commitment to delivering the next phase of open banking, and championing UK financial services more broadly, is welcome.”
“As Labour’s plan rightly recognises, open banking is already driving competition in payments. Unlocking new open banking payment capabilities for merchants and consumers, like variable recurring payments, will deliver important new benefits to both.
“It’s essential that the work of JROC – in defining the next phase of open banking and establishing an economically sustainable ecosystem for the long-term – progresses without delay. We’re greatly reassured that this mission has strong cross-party support.”
Fintech unicorn GoCardless’s director of external affairs and public policy Tom Burton commented: “It’s great to see cross-party support for open banking. Although open banking has made great strides so far in the UK, our collective focus now needs to be on execution, with an emphasis on the fundamentals that are essential to driving mass adoption.
“These include the ability to collect recurring real-time payments across every use case, full coverage across banks and a great user experience.”
Richard Newman, director of corporate affairs at Open Banking Ltd, also added: “Open banking transcends party politics and there is a commitment across the political divide to unlock its full potential.
“Open banking is of huge value to consumers, businesses and has contributed to the UK economy – it’s important that we leverage what we have built to help deliver other smart data schemes in other sectors, such as energy and telecoms.”
Tokenisation
A future Labour government will look to make the UK a global leader in tokenisation by advancing work to clarify the law around tokenisation, and working with regulators to establish a proportionate, outcomes-based regulatory regime to oversee the technology.
In response, a spokesperson for CryptoUK, the self-regulatory trade association for the UK crypto asset industry, said: “We’re pleased to see that Labour has committed to helping turn the UK into a global hub for digital tokenisation as part of the party’s policies for the financial services sector. Blockchain technology is essential to the tokenisation of financial assets and, as Labour and others within the financial services industry have noted, the adoption of tokenisation could boost the economy by providing more asset classes, whilst strengthening risk management practices.
“Clarifying the law and regulations around these innovations will be key to promoting more jobs and growth within the British economy. We also welcome Labour’s sentiments around central bank digital currencies, following on from the consultation replies from the Bank of England and HM Treasury and recognising that any threats to privacy and financial inclusion must be addressed.”
Regulation
Labour says it will be ‘pursuing a more joined up and innovation-centred approach to regulation and supervision’ and will ‘work to identify overlaps and gaps in regulatory mandates across bodies including
the PRA, FCA, Competition and Markets Authority, The Pensions Regulator, and Payment Systems
Regulator (PSR).
Riccardo Tordera, head of policy and government relations at The Payments Association, said: “It’s refreshing to hear Labour promise to champion financial services and cut through the red tape in the UK. The Payments Association has been saying for years that if we don’t strike a balance between regulation and innovation then the financial powerhouses that the UK is famous for will go elsewhere, taking their revenue with them.
“This stance marks a positive step towards a more dynamic and inclusive financial ecosystem for the UK. This would allow us to embrace innovations such as CBDCs, security tokenisation, improve fraud prevention and enable the UK to become the standard-setter for the use of AI in delivering the next phase of Open Banking.”
“They also appreciate that the 10,000-page regulatory thicket created by the Financial Conduct Authority is long overdue a pruning. It’s also good to know that there is no specific mention of mandatory reimbursement, which is an unpopular measure in the industry and doesn’t help to prevent crime.”
While, Mark Bailey, partner at city law firm Charles Russell Speechlys, commented: “A critical aspect highlighted in the paper is the importance of regulatory consistency, which is essential for both fintech companies and suppliers of technology to regulated firms.”
Mortgages
Labour will partner with the sector to encourage increased offering of longer-term fixed rate mortgages.
Arjan Verbeek, founder and CEO of UK bank Perenna, said: “We fully support Labour’s measures to promote ‘securonomics’— a concept that places consumer’s financial security at the forefront of economic policy. Recognising that long-term fixed rate mortgages will play a critical role in providing homeowners with the peace of mind they deserve is a huge step forward.
“These mortgage products not only offer stability to families but also unlock other initiatives that can lead to a more sustainable future. For too long, the industry has leaned on short-term fixed-rate mortgages which have left consumers exposed to financial market volatility. As we’ve seen over the past year or so, this dependence causes huge uncertainty and emotional stress whilst detrimental to household finances.”
