The EU is on a fintech and crypto regulation tear. Will Rishi Sunak help the UK play catch up?
The UK government has been waylaid by political instability throughout most of 2022. Now, with the fintech-friendly Prime Minister, the financial startup industry may be set for a boost.
With all the talk of technological innovation, venture capital volumes, first principles thinking and access to top tech talent, the subject of supportive regulation can often be left behind when it comes to unpicking the causal determinants of fintech success.
Open banking is a great example. While it is many things to many different people from account aggregation, and payments, to a route to better lending and account switching. At its core though, open banking is regulation.
The UK has historically benefited in the past decade from a forward-thinking regulator and civil service when it comes to fintech regulation. Open banking in the UK is probably the best example of this.
This week, though, it was in the European Union that an exciting new requirement for banks was unveiled. The EU is currently preparing fresh rules forcing banks in the eurozone to offer instant payments in euros.
The draft EU law will mean that “instant payment services will be prices with a fee equal to or lower than for traditional credit transfers.
“The Adoption of ‘SEPA ICT’ by banks has been a real challenge from the perspective of payments companies looking to build on top of it: it’s extremely painful to build products that cope equally well with both instant credit transfers and credit transfers without sacrificing customer experience."
Tom Pope, Head of Payments and Platforms at Tik meanwhile says the new rules will mean coupling open banking with instant settlement and thereby allowing open banking payments to power far more eCommerce use cases.
In a time of increasingly recessionary pressure for the global economy, this is hugely valuable for consumers and, in particular, businesses, who will now see an instant settlement of funds and thereby speedier cash flows.
While the EU is not normally associated with speed when it comes to new financial regulation, the measure comes hot on the heels of another landmark regulation the Markets in Crypto Asset regulation (MiCA) rules.
“Mr Bond, they have a saying in Chicago: 'Once is happenstance. Twice is coincidence. The third time it's enemy action,” from the book ‘Goldfinger’ by Ian Fleming.
The UK’s government, headed by Prime Minister Rishi Sunak, as of this week, is beavering ahead with a suite of new regulations in the form of the Financial Services and Markets Bill.
This includes a fresh clarity on the rules governing stable coins unveiled this week. However, having four chancellors and three PMs in six months has proved something of a distraction to getting new regulation over the line.
McKinsey recently fintech performance across five key KPIs for each European - taken broadly - country, although left out regulation for some reason.
These were the number of fintechs founded per million per capita in 2021, fintech funding per capita in 2021 in euros, the number of deals per million per capita in 2021, the number of fintech unicorns per capita in 2021 and the size of the fintech workforce as a proportion of the total workforce in 2021.
The UK and Sweden came top.
The UK remains Europe’s fintech capital by pretty much any definition when it comes to size. But, it feels more than fair to say that the EU’s commitment to push through new fintech and crypto-friendly rules is only upping the ante.