Fintech Sector Awaits Significant Action from Rachel Reeves Following Promising Statements
Rewritten Article:
Title: Fintech's Row with Rachael Reeves: The Struggle for UK's Fintech Dominance
Prepare for the throwing of digital gauntlets, as Rachael Reeves and the UK fintech sector square off for the impending reckoning. This highly anticipated showdown takes place as the UK unveils its groundbreaking Financial Services Growth and Competitiveness Strategy on July 15.
At the heart of this drama, Rachael Reeves, Chancellor of the Exchequer, lauded the burgeoning success of fintech luminaries such as Zilch and Allica Bank, promising to make the UK a magnet for fintech startups, scale-ups, and IPOs. But Nik Storonsky's disparaging comments on London listings last year set the tone - Reeves must pull out all the stops to keep fintech heavyweights on board.
Everyone's eyes are glued to July, when Rachael Reeves' commitment to the fintech community will be put to the test, and fintech leaders will serve as judge, jury, and executioners if disappointed.
Sentiment Mixes Hope and Skepticism
Schachar Bialick, CEO of London-based Curve, voiced his convictions to City A.M., stating "Fintech must be a top priority because it impacts every facet of modern economic life, from spending to saving to personal finance, and it's the infrastructure of the digital economy." He continued, "Hopes are high, but they're tempered by a 'wait-and-see' attitude. The industry is keeping a keen eye on whether the government will translate policy into meaningful reform."
Curve, an Apple Pay challenger, garnered a staggering valuation of £587m in a 2024 funding round. However, the fintech has since retreated from the US market, slashing over 100 jobs, and posting a loss of £36m. The fintech's CEO insisted, "The most significant move the Chancellor could make is to level the playing field - ensuring fintech firms can compete fairly with Big Tech. This begins with infrastructure access."
The Financial Conduct Authority and Payment Systems Regulator petitioned the Competitions and Market Authority in February to advocate for fairer legislation on near field communication (NFC). The European Union has already mandated Apple to open access to NFC technology for third-party mobile wallet providers.
"If the government is truly dedicated to supporting British fintech, it must act decisively and mimic Europe's approach. Granting access to NFC technology would spark a mobile payments revolution, strengthening the UK's standing as a fintech powerhouse," Bialick asserted.
A Familiar Mountainous Challenge
During her speech, Reeves boasted the UK as the world's second-best spot for fintech investment, behind only the United States. However, a report by KPMG revealed investment has been waning since 2021, hitting a four-year low in 2024 at £7.9bn.
Private equity head Rami Cassis told City A.M., "We'll need to witness bold actions from the government for it to succeed. So far, it's all talk, and we're in dire need of more tangible action." He added his concerns, "The UK's fintech industry still confronts formidable hurdles - and they've only grown taller due to the government's actions."
Cassis, CEO of Parabellum Investments, points to the government-instigated non-dom exodus which drove out a significant group of investment banking professionals closely associated with the fintech sector.
"Investment bankers are essential for any UK fintech company aiming for an IPO. Non-doms comprised a substantial portion of the UK's bankers, and the Labour Party's policy shift has left a vast void to fill. The repercussions have been dire, as Zurich, Frankfurt, and Paris begin to usurp London's fintech territory."
Last month, Goldman Sachs' most senior banker outside the U.S., Richard Gnodde, announced his departure from the UK to dodge the government's clampdown.
Pleas for Deregulation
Government ambitions to slash red tape have been met with apprehension from the fintech community, as regulation is a key complaint in the sector's call for economic growth. Allica Bank CEO Richard Davies told City A.M., "We've heard great things from the Chancellor, but we can't afford to take fintech's success for granted."
Allica Bank, hailed as Europe's fastest-growing startup by Sifted and the UK's fastest-growing private company by The Times Hundred, reported a pre-tax profit for small and medium-sized enterprises (SMEs) soaring £29.9m to 86% in 2024. Davies emphasized, "To sustain progress, we require regulations that promote competition and growth."
He advocated for strengthening the Growth Guarantee Scheme, which offers approximately £500m of additional funding to aid smaller firms.
Thanks to recent advancements, the UK fintech sector has exploded, with household names like Monzo and Revolut emerging alongside a barrage of newcomers. Alex Mollary, head of Tandem Bank, a Blackpool-based fintech, expressed optimism regarding efforts to develop fintech clusters beyond London.
Manchester-based Firenze chief David Newman said, "The upcoming strategy presents an exciting opportunity to unveil additional proposals aimed at fostering fintech and, ultimately, boosting the growth of the UK as a whole."
Mollar added, "As the UK fintech sector enters its next chapter, it's essential we foster the necessary conditions for challengers to thrive - I'd welcome a fintech-first approach focused on fostering innovation, opening up opportunities to drive more competition at scale and genuinely take on the big players."
Rory O'Neil, Checkout.com's CMO, concurred with regulation concerns, and added a strong fintech talent pipeline should form a cornerstone of the Treasury's strategy. "Failure to deliver on either front risks slowing down fintech's growth and, worse, makes the UK less appealing to future startups and scale-ups."
The strategy promises a pivotal turning point for the industry, with momentum poised to surge forward or falter. In anticipation of the summit, Janine Hirt, CEO of Innovate Finance, voiced her beliefs to City A.M., "Fintech employs over 82,000 people and is projected to surpass 100,000 in the next two years."
With a lengthy list of demands from fintech powerhouses, Reeves faces a daunting gauntlet of pleas and expectations. The success or failure of her campaign will predominantly rest on her ability to cater to the sector's core needs while ensuring UK fintech remains a formidable force on the global stage.
- Rachael Reeves, as Chancellor of the Exchequer, aims to transform the UK into a magnet for fintech startups and IPOs, hoping to strengthen the UK's position as a fintech powerhouse.
- Schachar Bialick, CEO of Curve, believes fintech is crucial for economic growth, impacting various aspects such as spending, saving, personal finance, and the infrastructure of the digital economy.
- Bialick supports fairer legislation on near field communication (NFC) and advocates for the UK government to emulate the European Union's approach by granting access to NFC technology.
- Investment bankers are essential for fintech companies aiming for IPOs, and a government-instigated exodus of non-doms has left a void in the UK's banker pool, potentially threatening London's fintech dominance.
- Allica Bank CEO Richard Davies urges regulations that promote competition and growth for fintechs, particularly for smaller firms, to sustain progress and maintain momentum in the sector.
- Alex Mollary, head of Tandem Bank, supports efforts to develop fintech clusters beyond London, hoping to foster conditions for challengers to thrive and compete with established players.
- Fintechs like Monzo and Revolut, alongside newcomers, continue to emerge in the UK, diversifying the fintech landscape and driving growth in various sectors, including general news, education and self-development, and sports.
- Innovate Finance CEO, Janine Hirt, emphasizes the significant impact of fintech on employment, projecting that the sector will surpass 100,000 jobs in the next two years.
- The success or failure of Rachael Reeves' campaign to support the fintech industry will heavily rely on her ability to address the sector's core needs, ensuring it remains competitive on the global stage while meeting regulatory expectations.
