Will London remain the global FinTech capital?
When we were setting up TransferWise six years ago, London was the obvious choice for us
We even turned down Silicon Valley’s biggest investors at our Series A round because they had one condition: they would invest if we moved from London to Silicon Valley.
We said no. Fortunately they liked the company enough to invest in Series C.
So why did London become such a great place for FinTech?
There are three main reasons:
- When we started, the then Government embraced innovation and entrepreneurship.
Among other things, they introduced new visas for entrepreneurs and tax breaks for early stage investors, making it easier and better to start up here. They listened to start-ups and supported the natural growth of the ecosystem without getting in the way.
2. The regulatory landscape here is FinTech friendly and, in the FCA , we have the most innovative regulator in the world: promoting competition by encouraging innovation for the benefit of the consumer.
The FCA doesn’t just limit itself to the UK but also supports UK companies as we expand overseas. Thanks to the Access to Payments programme, last year TransferWise was the first tech company to be allowed access to the Faster Payments Service. It means we’re able to make customers’ payments to the UK instant. We had to get access as a technology partner to a direct member but the Bank of England has announced that non-banks will be able to hold their own settlement accounts and we’re looking forward to that becoming reality.
And there’s the potential of Open Banking. In theory, a dream prospect; in reality, something that the banks are thinking up every excuse possible to avoid, but i hope it will happen.
3. And it was in Europe with benefits such as passporting — compare that to the US where it’s state by state regulation and a long and painful process.
We’re now regulated in many countries around the world but when you’re just starting out, passporting means quicker growth. Add to that an international market and a talent pool of 500m on our doorstep — like me and my co-founder, immigrants from Estonia — and setting up here is a no-brainer.
The world’s changed a lot since then.
While we’re happily headquartered here in London, if I were setting up TransferWise today I probably would not choose London. We have no idea what Brexit will mean for the city or for the country and that uncertainty is damaging.
Over the last couple of years, we’ve seen other governments and other regulators look to the UK for inspiration when it comes to FinTech. Imitation is the sincerest form of flattery and we can see it for example in Australia with its New Payments Platform — the equivalent of FPS and with regulatory sandboxes in Abu Dhabi, Australia, Singapore, Malaysia and HK to name but a few.
All this competition is healthy and will mean continued innovation in the sector and so that things will get better and better for the consumer.
Every city from Paris, Berlin and Madrid to New York, Singapore, Seoul and Sydney has started to talk about how they can take the title of ‘FinTech capital of the world’ away from London
Post Brexit, maybe London’s giving the title away. We shall see.
What will it take to be the next FinTech capital?
There are certain conditions that mean FinTech companies will flourish.
- Support for hi-growth companies. An ecosystem is a fragile thing and lots of different elements need to come together in order for it to flourish: start-ups need support but so do scale-ups because the playing field is far from level; we’re operating in a world that has been designed for the incumbents by the incumbents
- ‘Right touch’ Regulation. People need the financial sector to be safe; people also need the financial sector to go through a massive phase of innovation. That means delivering on the positive rhetoric like around settlement accounts, not allowing Open Banking to be diluted and leading the way on AML
- The best talent. To be a global business, you need access to the best talent from around the world — fix this, everything else falls into place. Whether it’s homegrown or imported, we don’t mind where it comes from — we just want the best. When it comes to homegrown: we need to instil the entrepreneurial attitude as well as the dev and engineering skills. For us immigrants: we need it to be easy to import talent and we need those people to be happy and welcome
If London wants to cement its position as the FinTech capital of the world, the UK needs to take some pretty decisive proactive steps.
Today, I spoke at the UK Government’s FinTech conference. I don’t know of any other country in the world where the Chancellor and the Head of the Central Bank have shared the stage with two start-ups.
That’s a pretty clear sign of commitment but in the tech world, it’s about actions not words.
Follow me on Twitter @taavet.
