Updated: Sep 9, 2020
What is the financial technology industry?
Financial technology (‘FinTech’) describes the intersection of technology and financial services. It conceptualizes the use of technology to transform the way financial services are delivered. The introduction of blockchain, big data, artificial intelligence (AI), machine learning (ML) and other technological innovations have made financial services cheaper and more accessible. The sector has been expanding rapidly over the last few years. New technology-focused start-ups are finding innovative ways to reshape the way financial products and services are delivered. PwC reported that the global investment in the sector almost doubled to US$38.9bn between 2014 and 2017.
‘Fintech’ sector and the ‘Tech for Growth’ Programme
In July 2020, the UK Department for International Trade introduced a one year pilot ‘Tech for Growth’ programme in underserved regions of Africa. The programme seeks to fulfil two purposes.
The first purpose of the programme is to increase access to financial services across Africa. It is estimated that around 60% in Sub-Saharan Africa still do not have access to basic financial services like insurance and banking, and the mobile penetration rates are only at around 40%. It is believed that technology has the potential to expand and improve access, quality and relevance of financial services for underserved populations around the world.
The second purpose of the programme is to build and support trade between the UK and emerging economies, which will help “address one of the most prominent global challenges in today’s world, financial inclusion”.
The UK Department for International Trade aims to achieve these 2 purposes in 3 ways:
1. Create a FinTech community between the UK and Africa: the UK seeks to create a UK-Africa FinTech community. This will be achieved by promoting partnerships between the UK and Africa’s technological and financial services companies.
2. Establish a FinTech Trade between the UK and Africa: the UK looks to establish a FinTech trade between the UK and Africa. Through the programme, the UK will leverage research, highlight commercial opportunities and address barriers that currently inhibit successful scaling of the FinTech sector.
3. Facilitate Growth of future FinTech markets: the UK intends to facilitate the growth of future FinTech markets in Africa through cooperating and establishing close relationships with governments and regulators in these emerging economies.
‘Inclusive Tech: Overcoming barriers to scale in emerging markets’
Alongside the ‘Tech for Growth’ Programme, the Department for International Trade, in partnership with BFA Global’s Catalyst Fund, launched a ‘Tech for Growth’s’ research programme. The Catalyst Fund is a FinTech accelerator which is supported by UK aid. It was created to support entrepreneurs “who are building affordable, accessible and appropriate solutions that improve the financial health of underserved communities in emerging markets”. They are aiming to accelerate innovative FinTech solutions for the world’s 3 billion underserved.
The aim of the ‘Tech for Growth’s’ research programme is to “help to overcome the underlying market barriers and frictions to trade, faced by tech companies looking to scale into emerging markets.” The report highlighted that these inclusive start-ups play an important role in innovation. They will be the ones designing “more affordable, accessible and appropriate products that meet the unique needs of underserved customers.”
The first report outlined seven core barriers that hinder the growth of these dynamic tech startups in emerging economies. These include strategic partnerships, finding talent, regulation, understanding newer markets, customer acquisition and delivery channels, product design for the underserved as well as fundraising. The report also noted that governments and market facilitators are well-positioned to help solve these barriers to scale. The report outlined the opportunities that could be taken by governments and market enablers to “help startups overcome these barriers and enable inclusive growth”. In this way, they will “expand access to financial services and support future trading opportunities between the UK and emerging economies”, supporting the two aims of the ‘Tech for Growth’ Programme.
The anticipated impact of the ‘Tech for Growth’ Programme
The ‘Tech for Growth’ Programme is expected to have a positive impact on emerging economies in Africa but also on the UK and the rest of the world.
As Richard Anning, head of ICAEW’s Tech Faculty stated, the ‘Tech for Growth’ Programme will enable the UK to collaborate with the underserved regions of Africa, such as Nigeria, Kenya, South Africa and Egypt. Gerry Grimstone, UK Minister for Investment noted that the programme will help further deepen UK’s trade relations with emerging markets across the world and in this way help improve financial inclusion.
Gerry Grimstone, UK Minister for Investment said the ‘Tech for Growth’ Programme will enable the UK to diversify and increase trade and investment in sectors such as technology.
There are 3 main reasons why the decision to launch the ‘Tech for Growth’ Programme was seen by Richard Anning, head of ICAEW’s Tech Faculty as the “UK playing to its strengths”:
1. The UK is considered to be a top choice for technology companies that are “seeking a base to launch internationally into new markets”.
2. The UK is seen as one of “the deepest and most globally connected financial centres” in the world.
3. The UK is thought to be an excellent geographical location (or a ‘hub’) for FinTech investments since a number of global innovative technology companies are located in the UK.
Moreover, Gerry Grimstone, UK Minister for Investment has also stated the programme will benefit the UK’s economic recovery following the Coronavirus crisis.
Future of the ‘Tech for Growth’ Programme
The ‘Tech for Growth’ Programme started in Africa. However, it is expected to expand globally, specifically to South East Asia and Latin America following the one-year pilot period.
Through this ‘Tech for Growth’ Programme, the UK aims to enhance the role of technology in emerging countries across the world to achieve financial inclusion, help tech start-ups in underserved regions to overcome barriers to growth, therefore stimulating the expansion of the financial technology sector and build collaborative relationships with African countries, which will facilitate trade between the UK and Africa.