It’s great news that London has retained its position as the world’s leading financial centre, despite fears of a banking exodus post Brexit.
In fact, our closest rival, New York, which was expected to benefit from a predicted ‘Brexit effect’, actually lost ground in the latest Z/Yen Global Financial Centres Index – thanks to Donald Trump’s attitude to free trade.
However, with rival European financial centres - such as Frankfurt, Dublin and Paris - gaining ground in the poll, ferociously competing to steal a slice of London’s market share, innovation will play an increasingly important role in ensuring the UK remains an attractive place to do business.
London’s deputy mayor for business and enterprise, Rajesh Agrawal, recently pointed out that London remains both the world’s leading financial centre, and home to one of the world’s biggest tech hubs. These two factors benefit each other and cannot currently be reproduced in Paris or anywhere else in Europe.
All change needs a catalyst, and Brexit provides the UK with a compelling reason to embrace innovation like never before, especially in the fintech market space. Just when Brexit threatens to remove The City’s financial passporting rights, and erode its competitive edge, innovation could help financial organisations claw back lost ground from less progressive competitors.
Developments in the fields of blockchain, big data analytics, Artificial Intelligence (AI) and cyber security promise to bring unprecedented disruption to the sector, clearing the way for a leaner, faster and more secure, customer-focused future.
And disruption does not mean root and branch replacement. New technology can strengthen traditional companies and institutions, as they buy services from compelling start-ups and adopt new, more effective and profitable ways of working.
The biggest benefits of fintech investment are widely accepted to be cost reduction, business process streamlining and security/data protection. Blockchain, for example, promises to strip substantial levels of cost out of the banking system, because it enables peer-to-peer transactions without the need for a third party.
The same technology provides a previously unimagined step-change in cyber security, thanks to the way transactional data can be shared and verified across multiple computers potentially spread out across the globe.
Two other widely recognised benefits of fintech, namely improved client retention and monetisation of data, will also prove to be invaluable to the UK as we enter an increasingly competitive post-Brexit world.
From legacy to leadership
The biggest obstacle to innovation among UK finance companies continues to be the existence of legacy systems, and the perceived risks associated with adopting new technology. There is always risk linked to change, but this needs to be weighed against the risk of not changing, and the benefits that change can bring.
For all the talk of banks becoming technology companies, they are still far behind the new generators of innovation – tech start-up businesses.
This fact wasn’t lost on either PricewaterhouseCoopers or the lobby group TheCityUK, which recently called on the UK government to amend its visa system to allow “the best and most-needed tech talent to work in the UK and ensure there is adequate funding for fintech”.
Our financial centre, one of the great drivers of the UK economy, finds itself at a critical crossroads. The greatest risk in a post-Brexit world would be to ignore the benefits of innovation and the wealth of fintech expertise on our doorstep and continue with business as usual.
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