As the Labour Party assumes control of the UK government, any financial services policy may have slipped under the radar amongst flagship policies such as Great British Energy and the NHS. However, back in January, Rachel Reeves provided ‘Financing Growth: Labour’s plans for financial services’ and with the Labour Government now in number 10, Future Finance Senior Project Manager, Jack Stanbury, has picked out some key new government policies that might impact the sector that align with Future Finance research and activity.
1. Embracing Fintech, innovation and AI
Innovation remains a central theme under the new government, particularly in areas like AI. Labour has expressed support for the development of AI and the removal of barriers to innovation, while also emphasising the need for safe and ethical practices through appropriate regulation. This is central to Future Finance’s purpose, and through much of our work we look to understand how social science drivers within organisations can affect the implementation of innovation and technology.
Whilst there isn’t significant meat on the bones about the ‘how’ in the plan, we hope that Future Finance will be able determine some of this, and hopefully contribute to further development and emphasis on this area of financial service growth. Areas of particular interest to the Future Finance team include:
The integration of new technologies, taking us to the next stage of open banking, that will drive personalisation, growth and competitiveness
The use of open baking & open finance to support financial wellbeing, including assessing finance applications across a greater range of non-standard metrics
Advancement of digital currency
Recognition of the strength of the UK payments and fintech sector and how we can not only compete on the international stage but also become one of the UK’s best exports – we intend to support these sectors with insights into consumer requirements and help identify future pipeline opportunities
2. Financial inclusion and supporting personal financial resilience
There are wide-ranging definitions for those underserved or excluded and within the plan. Labour talk about inclusive growth, relating to financial service hubs outside of London, SMEs unable to access lending, those needing to do physical banking, those in need of financial guidance or debt advice and those most in need of consumer protection.
Much aligned with the core values of Future Finance, they believe that financial inclusion can be enhanced through effective deployment of technology, appropriate regulatory frameworks and enhanced consumer protection, whilst maintaining the UK’s position as a global financial leader. The below pledges will be followed by Future Finance researchers to see how we may be able to contribute to effective advancement in these areas:
Focusing on the cooperative and mutuals sector and strengthening SME bank referrals to community banks, building societies, credit unions and alternative lenders
The development of 350 banking hubs to provide access to physical banking services
Reforming further the advice guidance boundary to empower individuals to confidently make decisions regarding their own finances
Improving financial resilience through longer-term lending such as mortgages
Developing a national financial inclusion strategy
3. Strengthening Regulatory Frameworks
Labour has proposed the establishment of a new Regulatory Innovation Office designed to streamline and modernise regulations across the financial sector. We hear regularly that regulation is a barrier to adoption and to innovation for traditional financial service providers.
However, colleagues such as those at the Bristol Digital Futures Institute note that the relationship is much more nuanced than this, with regulation occasionally an excuse for lack of innovation, or an area that drives to much fear and risk-aversion leading to stasis. But correctly applied regulation can be a driver of innovation, and it will be interesting to see if this proposed regulatory office will continue with initiatives like the FCA regulatory sandboxes and techsprints, or go in a different direction completely.
4. Supporting Sustainable Finance
The Labour government has also highlighted the importance of positioning the UK as a leader in sustainable finance. This includes promoting green finance initiatives and integrating sustainability within the financial services sector. For fintech companies focused on ESG (Environmental, Social, and Governance) criteria, these developments could present opportunities to innovate and grow within a supportive regulatory environment.
We are very keen to work with partners such as Fintech West, whose strategy focused on sustainability, to build a stronger base of knowledge and development in this area as it becomes evermore pressing. We have engaged with organisations such as Switchfoot Wealth who are pioneering in the work that they are doing in flipping the delivery of established financial services to consider wider environmental and sustainability impacts. We hope to be able to make a difference to the perception of and integration of sustainability in areas where it is not currently a priority.
Conclusion
In this period of transition, the UK fintech and financial service landscape is also poised for transformation. Traditional financial institutions will face the dual challenge of adapting to new policies while capitalising on emerging opportunities. Embracing the evolving regulatory environment and leveraging innovations such as AI and sustainable finance will be essential for staying competitive.
With the specifics of these policies still unfolding, maintaining a proactive and adaptable approach will be key to thriving in this dynamic sector. For UK-based financial services providers seeking to navigate these changes effectively, the Future Finance Accelerator offers a fully funded support package that can help you stay ahead.
Discover more about Future Finance and register your interest to get involved.