Events like last week's Fintech Week show the government's commitment to be more than just words. But there is plenty more the government can – and must – do to ensure London cements its place as the global leader in fintech.
There are several short-term pragmatic steps they could take, like setting up centres of excellence in specific fintech streams, such as payments or credit underwriting.
But there is something they could do which would have long-lasting impact. That is, to find a way of making a clear signal that this adoption of of fintech is a long-term, unwavering commitment that will ride out good times and bad. The government recognises that fintech will ultimately benefit the UK consumer, and it's in all our interests to wean the economy off a dependence on a few big banks.
But remaking the financial services industry is a long-term challenge. It’s not going to happen in just five years, and not without a few mistakes, blow-ups and even scandals along the way.
As fintech has exploded in popularity over the last five years, the industry has gathered more cheerleaders than it has scrutiny. That’s now changing. We should welcome scrutiny, and it will improve the industry. But it’s vital that as the occasional error emerges, the government holds its nerve and stands by its commitment to make the UK a global leader in fintech.
One of the problems in scaling fintech companies is that it is likely to take longer than five years to become an industry defining financial services business.
And yet the typical VC capital being invested into fintech companies right now likely has only a five-year life cycle. This is going to make it hard for companies to focus on what really matters in scaling. The early adopter honeymoon has come to an end, and it’s time to scale into the mainstream.
This forces a business to ask the difficult questions: is customer acquisition sustainable? Do our unit economics make sense? Can the business be profitable? Some VC funds might naturally focus more on exit plans than waiting to see if their investment can provide the answers.
What the UK’s fintech scene really needs, is ‘patient capital’. Investors that are willing to play the long game. This is where the government’s long-term commitment to UK fintech is crucial.
The government should signal that it understands there will be problems in fintech, but will back the industry anyway. Business models will fail and investors will lose money, but the government must stay the course. Only this level of commitment can build the confidence required for investors to think more long-term about re-making financial services.
People often ask why London hasn't produced a Facebook or an Uber. While the answer is as complex it is unclear, a possible explanation lies in this idea of extended commitment.
There is political appetite for London to produce industry-defining companies in the fintech space. Now is the time to take advantage of this opportunity. The government is keen to lend a helping hand, but keeping that hand steady as problems emerge is the real key to fintech’s prolonged success.