The road ahead: What the new UK government means for fintech and financial services across Europe

Adam Jackson and his team at Innovate Finance, the UK's Trade Association for Fintech, developed a 'Fintech Plan for Government' which set out priority actions the new government can take to foster innovation in the fintech and financial services sector. The plan focuses on three primary goals: building the UK's first smart data economy, making the UK the safest place to transact online, and leading the world in adopting new financial technologies. As Adam explained, “We wanted to focus on the big, game-changing things that if achieved over the next parliament, would really enable us to maintain and accelerate the UK's global lead in fintech.” 

Positive signals from the government

We asked Adam if the government has made any progress on Innovate Finance's plan. He noted that despite it being early days, there have been several positive signals, including: 

• Commitment to a digital information and smart data bill: This bill aligns with the plan’s goal of creating a smart data economy, facilitating data portability and consumer consent across sectors.
• Support for the Mansion House Compact: This initiative aims to increase investment in UK equities, particularly supporting UK tech firms and fintech. 
• Introduction of "Buy Now, Pay Later" regulations: The government is moving forward with regulations to ensure responsible innovation while protecting consumers.
• Development of an AI opportunities action plan: The focus here is on leveraging AI for economic growth while managing the risks associated with its use.

Balancing AI innovation with regulation 

When discussing AI regulation and innovation, Adam emphasised the need to avoid a blanket high-risk classification for AI in financial services, as seen in the EU's AI Act, as this approach can inhibit innovation. He pointed out that AI in financial services often involves lower-risk applications. Most applications involve taking specific datasets and applying a learning to them to identify how to better manage finances or simply combine datasets. 

“We’ve been successful in talking to the Labour financial services team to help them understand that in Fintech, AI is not used for existential threat-type applications. It’s in the opportunity space.” 

Positive signals on climate action

The government’s ambitious goal to decarbonise energy production by 2030 and its establishment of the National Wealth Fund, focused on investing pensions in clean energy and infrastructure, marks a positive step towards sustainability. The appointment of Chris Stark, former CEO of the UK’s Climate Change Commission, as mission controller for clean power, reinforces the seriousness of their intent.

The new government is also pushing financial services to move from mere carbon disclosure to implementing transition plans that actively reduce emissions and track progress. Adam sees this shift as a major opportunity for fintech to drive change by leveraging data for real-time monitoring and reporting, therefore supporting the financial sector’s transition to net zero. 

“The move from carbon disclosure to actionable plans is where fintech can leverage data to really drive change.” 

Adam also highlighted the government’s commitment to working with banks and building societies on home improvement and retrofitting. He believes fintech will play an important role here, especially in leveraging data and more innovative solutions and customer reach through challenger banks and alternative finance providers. Data can help banks assess the carbon footprint of homes and businesses, enabling targeted financing for the net zero transition. 

Optimism for the future

Adam is optimistic about the new government, noting that Labour's Financial Services review strongly supports fintech innovation. However, he cautions that the government must remain focused on innovation rather than reverting to traditional mindsets and reliance on incumbent players to deliver solutions. Fast and effective action is needed to keep pace with global developments and fully realise the benefits of fintech advancements.

“The Financial Services review by Labour had fintech innovation at its core, and we’ve seen some early progress toward these recommended actions.”

One ask from the government 

Adam’s primary request is simple but powerful: “Think fintech.” He urges the government to consider how fintech can address societal and economic challenges, leveraging data, AI, tokenised assets, and innovative financing solutions to drive progress. 

Thanks Adam!