Stephen Barclay, MP, on UK fintech, Brexit and how fintech can help governments
Jason Bates interviewed Stephen Barclay, MP – the Economic Secretary to the Treasury, for Fintech Insider Interviews to gauge his views on the UK fintech scene, and the government’s role in facilitating the rise of fintech, how fintech can help the government, what the impact of Brexit will be and the Treasury’s message to the rest of the world.
Today, I have the pleasure of speaking with Stephen Barclay, MP, Economic Secretary to the Treasury. First off, what does the Treasury do?
Well, the Treasury is responsible for the government, its response to the economy, and ensuring that we get the quality of life and the services and the support of the economy that we need. So, it’s setting our economic policy, taxes, spending, whether that’s in the public sector or more widely. So, it’s really at the heart of government policy.
That’s a phenomenally broad remit, and there are just so many directions you could possibly take that. How did you arrive here?
Firstly, by becoming a Member of Parliament, because as a minister, most of the ministers in government are in the House of Commons, but through the Treasury, perhaps, because I have a financial services background. I used to work in the financial services industry, and so there’s a natural fit with a ministerial brief within the Treasury.
You were in insurance, banking, a lawyer. It seems like you’ve been looking at the same kind of market from a lot of different angles. Does that bring something special to your position now?
It helps, but also there’s limitations to it, because the industry’s always changing and moving on. I’ve been in parliament seven years, the industry’s changed in the last seven years. It does help to have an industry background, and understanding and empathy within the industry. I know how important financial services is, it contributes £71 billion in tax to the UK economy, it employs directly more than a million people. Two thirds of those, importantly, are outside of London, because often the debate on financial services can be a bit London-centric, but there’s big regional centres within financial services. So I think having an industry background helps, but one shouldn’t get too carried away, that the industry is always changing and evolving, and fintech is a big part of that.
What’s your view of fintech?
I’m really excited by it. In the UK, specifically, we’ve got the highest adoption rate of fintech. This is a market that’s hungry for product.
If I look at the way tap and go is used by my constituents, the way people are paying for their coffee with their phone, I think it’s a hugely exciting agenda, but it’s much wider than that. I think the potential on financial inclusion, the way it can help people with affordability with their bills. We all know it’s quite easy, with how busy life is, people might think they need to shop around, or they may think they’re slightly overpaying for a product, but it’s easy for the weeks to go by, and I think the way fintech will, particularly with its connection with open banking, offer the opportunity for people to get a better product, a better price, a better service. I think it’s really exciting, and for the millennials, many of whom don’t always have a positive view of banking, I think there’s huge opportunities there, as well.
Fintech will, particularly with its connection with open banking, offer the opportunity for people to get a better product, a better price, a better service.
What role is there for government in creating the environment around that?
There’s a huge role for facilitation, saying, “How do we work with the industry, to get product to market? How do we create a way of testing things, so we actually get to the right outcome, in a quicker way?” and I think government has a role in that, as well. I’ve chaired a number of roundtables with the industry, with fintech. In July, we had one looking at talent with the Immigration Minister, and how the brightest and best can be attracted to London in the future, so we retain the talent that we have within the fintech sector, within the UK, and I think government has a big role in terms of facilitating that, and working with industry players.
That leads us on to Brexit. There obviously seems to be a lot of uncertainty at the moment, as to what Brexit will mean, and how that will work for the fintech industry. What’s your view?
Well, firstly, we shouldn’t misstate the current position. It’s interesting, looking at the Ernst & Young and Innovate Finance survey, census, that’s just come out, which shows that for half of the companies in this space, in the fintech space, they anticipate 100% growth over the next 12 months. So there’s a lot of positivity and optimism out there. But you’re right, there are also some concerns, and talent is particularly one of them. I think, when I speak to colleagues in parliament, what’s very clear to me is no one in politics that I speak to wants to stop the brightest and best coming to the UK to work in the fintech sector. Politicians across the spectrum of parties, and also those who supported the Brexit vote, and those who opposed it, all agree that we need to have the brightest and best. But I agree, the government needs to keep repeating that message, because we want to ensure that Britain remains the destination of choice for fintech.
The government needs to keep repeating that message ....to ensure that Britain remains the destination of choice for fintech.
That’s amazing. So, with fintechs considering the UK as a base, we have, all kinds of people opening everything, from wealth managers, or asset management plays, blockchain, payments, you name it. Why should they come to the UK, as opposed to any of the other European capitals?
Partly, it’s the talent that we have in the UK, in this area. Partly, it’s the cluster that has developed around tech city, and other areas. Part of it, as we’ve referred to, is the regulatory environment. Having a regulator that gets fintech, that is constructive, that is engaged, in the way that the FCA has been. Partly, it’s the capital that London has, partly it’s the language, the legal certainty, that a lot of businesses, not just fintech, but legal certainty and confidence in the law is valued. I’m also very keen to build on the bridges that we’ve already developed with other countries such as Singapore, in fintech, so we build these relationships around the world with fintech specialists, who see London as their destination of choice.
We spoke about the London-centricity, are there hotspots across the UK that you would point to, as doing some interesting things in fintech at the moment?
There are, and there’s a number regionally, and it’s one of the things I’m very keen to get out and see more of. I am from the north of England, I’m a Lancashire lad. I represent a constituency outside of London. So, I have a natural desire to see fintech blossom around the UK, not just in London. But it’s about the proposition as a whole. One of the things I’ve already been discussing with the regulator, is how we make it easier for those businesses outside of London to get access to those conversations with the regulator. It shouldn’t always be about those businesses coming to London, it should be about how we go to them, whether that’s regulators, whether that’s ministers and others. We’re very keen to build the UK’s offer in fintech as a whole.
It shouldn’t always be about those businesses coming to London, it should be about how we go to them. We’re very keen to build the UK’s offer in fintech as a whole.
Fintech firms, by and large, are very much go getters, they’re not looking for handouts, they’re looking to make things happen. How do fintechs, and people in fintech and banks, help government?
I think there’s a huge number of areas, if you look how technology is an enabler. For example, I had a discussion just this week in terms of looking at credit ratings, and how, if people are renting, how might a fintech solution to help with their creditworthiness? There’s all sorts of areas where fintech could, potentially, add value.
I had a further meeting on social impact investment, if people want to invest in a more socially responsible way, is there a way that fintech can facilitate that? If you look at other products, we’re all familiar with Fairtrade, and people decide that it’s not just about the price of their coffee. Sometimes, they want to make a conscious decision in terms of how they spend their money, with a Fairtrade product. How might fintech feed into that within the investment community?
The debate in the public sector is often about inputs. How much have you spent? When actually, really, it should be about outputs. What have you got for the money? What’s the value for money? What’s been delivered? I think fintech can help government with those challenges: it can help with people accessing services, their creditworthiness. It can help reduce compliance costs. For example, the old way of doing Know Your Customer is to photocopy your passport, whereas actually, you could have the electronic footprint, will be probably a much more accurate way of identifying someone. Cheaper, but better. I think fintech can help in a whole spectrum of areas. That’s why it’s such an exciting agenda, and I think having London, and the UK, leading the way on this, makes it very much at the heart of government policy.
Fintech can help government with those challenges: it can help with people accessing services
We’ve got a broad range of listeners, everyone from people in the US to people in the UK, big banks, small fintechs. Is there any way that they can help?
Communication. Where there are impediments, it’s letting us know. If there are things that are blocking up the system, we’re very keen to respond constructively. I The key message, is we’re very open for business, we want this sector to grow. I think we’re leading the way, not just on some of the things to date, such as the Sandbox, the regulatory approach, but also in our willingness to adopt open banking. The discussions I have with bank Chief Execs are on how I see this as a key priority. The message to the fintech world is, we’re really keen to have you, we see ourselves as a centre of excellence. We’re not, in any way, complacent about our position. We need to move forward, and we’re very much looking forward to doing so, and we really want to work with the fintech industry, to ensure the brightest and best come to the UK, and we continue to grow fintech as a centre of excellence.
We need to move forward, and we’re very much looking forward to doing so, a we really want to work with the fintech industry, to continue to grow fintech as a centre of excellence.Click here to listen to the interview in full, or subscribe to Fintech Insider so you never miss an episode!