IFGS roundup: Laying the foundations for sustained innovation

What does the future of financial services hold and how do firms deliver on the promise of ‘better’? That was the question that CEOs from some of the UK’s leading fintech firms set out to answer at the recent Innovate Finance Global Summit 2023 in London.

The event brings together experts in the industry to discuss the UK fintech sector, evaluate emerging trends and explores topics including innovation, sustainability, and regulation that will drive the UK’s financial services ecosystem forward.

Many of the panels focussed on what has made the UK such a hotbed of innovation and how that position can be maintained. The last few years have seen the pace of change accelerate, with a broader shift to digital services enforced by the pandemic.

Jaidev Janardana, CEO of Zopa, captured the consensus of many in the room saying:

“The Covid-19 crisis meant that increasing digital adoption went even further… that then drives competition and better innovation. Also, during a crisis, the incumbents tend to be defensive. They have things to protect, and that might mean that a large part of the societies then will not get the offers that they were looking for, so there is an opportunity for people like us to step in.”

The Fintech CEO Series, titled ‘The Future of Financial Services: Not Just Different, but Better’, featured our CEO, Charles McManus, alongside Louise Hill, Co-Founder and COO of GoHenry, Samantha Seaton, CEO of Moneyhub and Paul Taylor, CEO and Founder of Thought Machine.

Recent headwinds on the financial landscape risk pushing back progress. To overcome this requires the bold ideas, innovation, and leadership that each of the panellists has shown. But to deliver ‘better’ requires continual adaptation and challenging the status quo, with the panellists noting that historically there has been a lack of agility in the sector.

Moneyhub’s Seaton, explained: “Financial services is the ladder of the world we live in. Everyone else is moving forward at speed, but we can’t quite seem to drag our own industry forward in that sense.”

Charles McManus agreed with that sentiment when it came to ensuring efficient decision making on the future direction of regulation: “We’re still seeing too much complexity with the various entities. Everyone has an opinion. We’ve got to try to cut through that in terms of the number of lobbyists and people that need to make the decisions.”

The panel also agreed that without the underlying infrastructure and a supportive regulatory environment, it is hard to deliver the best outcome for customers. On the positive aspects, GoHenry Founder Louise Hill referenced the UK’s regulatory framework that enables the firm to offer services by partnering with regulated entities: “We are not currently going for a full banking licence because this allows us to remain more agile by operating as an e-money business.”

In response to the question of how change can be delivered, Thought Machine’s Paul Taylor stated that there are many people in banks with a disruptor mindset, but the broader issue is often a cultural one. It takes a massive amount of work and collaboration with payments regulators to ensure banks can innovate at an affordable speed.

McManus then noted the issue of inertia and the need to move even faster to scale to “real-time everything”, often requiring a new entrant to push the industry forward rather than innovation coming from the incumbents.

“We have seen various examples where large groups want cultural change, the fintech attitude, the speed. They set up a hub by a subsidiary, start the new digital bank and then attempt to migrate the mothership to that,” he explained.

The digitalisation of everyday life and the ongoing evolution of current payments infrastructure were also raised by the panellists, a sentiment echoed by Sir Jon Cunliffe, the Deputy Governor for the Bank of England (BoE) for Financial Stability.

He referenced how society is gradually moving away from publicly issued, physical money and towards electronic money issued by private sector banks. This is also due to the ongoing evolution of existing payment systems and infrastructure including the implementation of Pay.UK's New Payments Architecture, RTGS (Real Time Gross Settlement), High Value Payment System and the expansion of the UK’s Open Banking framework.

In his keynote address, he noted payments and transactions were now evolving at speed: “And there’s good reason to believe that even more radical change is on the horizon.” That change is likely to come in the form of tokenisation.

Sir Cunliffe discussed four areas where the tokenisation of money is now being explored: stablecoins being used for payments, the tokenisation of commercial bank deposits in the form of wholesale central bank digital currencies (CBDCs), the Bank of England’s work on issuing a Digital Pound and the Bank’s work to ensure these new forms of money are robust and uniform.

“The potential tokenisation of money and the development of new ways of transferring it has major implications for the Bank of England”, he explained.

By the time IFGS 2024 comes around, we may have further clarity around some of the regulatory frameworks for these assets. Until then, the innovators will continue to push forward.

We’re proud to be part of such a vibrant financial services ecosystem and look forward to continuing the debate around how we continue to build ‘better’. Better infrastructure, better services and most importantly, better outcomes for businesses and consumers.