Payments, Banking & FinTech Roundup: April 2021

In a month that included UK FinTech week, there’s been a lot of positive news within the industry recently: investment is up 331% on this time last year, as well as a focus on FinTech’s role in rebuilding the wider economy following the pandemic.

Taking a look back at the last financial crisis of 2008, and how financial institutions increasingly turned to ‘de-risking’ as a way to reduce their exposure, Banking Circle held a webinar on ‘Everything you wanted to know about de-risking but were afraid to ask’, featuring Mitch Trehan, our Head of Compliance and MLRO. Watch it on demand here.

We also published a new white paper, ‘Better by design? Re-thinking AML for a digital age’, in response to the growth of money laundering, as regulators and banks struggle to keep up with increasingly sophisticated criminal innovation. We commissioned research of 300 senior decision-makers in European banks and held interviews with industry experts.

Here are some other important stories from the industry you may have missed this month:

Over 100 FinTech investment deals secured in Q1

In contrast to a difficult first quarter in 2020, 117 FinTech investment deals were arranged during the first three months of this year, equating to $2.9 billion, according to figures from Innovate Finance and compiled by PitchBook.

In fact, funding in Q1 2021 already makes up 69% of total FinTech investment from last year, when fears over the pandemic and subsequent lockdowns put new funding rounds on hold.

This number is up considerably compared to the end of 2020, with investment levels increasing by 153% in Q4 2020.

Read more on that here.

Exporting boost given to UK FinTech sector to help rebuild the economy

The government has outlined export support measures for the FinTech sector to help boost trade and create new jobs.

The UK FinTech sector is worth over £11 billion to the economy and employs around 76,500 people. Keen to promote the UK as a world leader in the sector, the Department for International Trade (DIT) has announced a series of measures to boost its presence in overseas markets.

This support includes a bespoke FinTech Export Academy, designed to provide businesses with free advice on issues including legal, tax, regulatory, accounting and market entry, to help make their exporting journey shorter and smoother, in turn ensuring that these UK firms are in a position to become world leaders in FinTech and industries of the future.

Find out more about the new measures here.

Lord Mayor of London claims FinTech innovation will be at the heart of London’s recovery

Ahead of UK FinTech week, London’s Lord Mayor wrote for City AM about why he feels the sector will play an important role in kickstarting a “strong, sustainable recovery post-pandemic”, hailing the importance of building on the UK’s leadership in technological innovation.

Following the Government’s Kalifa Review, he highlights how the industry has held up extremely well despite the adverse conditions of the past year, retaining its role as the top-ranking investment destination in Europe.

Lord Russell also draws attention to the part played by RegTech companies in helping firms to navigate the challenges that the pandemic brought, as well as exploring the value added not only to financial services but to the wider economy too.

Bank of England publishes ISO 20022 market guidance for the property market sector

The Bank of England has introduced new legislation to optimise the CHAPS payments process in property purchasing, ultimately making it easier and faster to buy a home.

The migration to the ISO 20022 messaging standard for CHAPS payments forms one part of the Bank of England’s Real-Time Gross Settlement (RTGS) Renewal Programme.

Better data in payments is expected to deliver long-term benefits for the economy. By including additional, structural information, payments can be integrated with wider business processes, simplifying end-to-end processes and enabling further automation, which reduces costs.

The Bank of England has called on cooperation from all players involved, from CHAPS Direct Participants and financial market players, to corporate treasury functions and the various legal service providers in the property market. In order to enable this, a series of market guidance publications will be issued.

Chancellor announces implementations from the Kalifa Review

The Chancellor of the Exchequer, Rishi Sunak has announced he will be implementing some of the suggestions laid out in the Kalifa Review.

Several new measures are being put in place, including:

  • The FCA is set to create a regulatory scale box, to help FinTechs to scale and grow in a more sheltered environment. The regulatory body will also enter into the second phase of its digital sandbox, which helps firms to test concepts of sustainability and help tackle climate change-related issues. In addition, the government has said it will support the creation of a distributed ledger (DLT) sandbox for firms exploring how to improve current financial infrastructure.
  • A new Taskforce is being created by the Bank of England and HM Treasury to explore the possibility of a central bank digital currency (more on this below).
  • The Chancellor is also creating an industry-led Centre for Finance, Innovation and Technology (CFIT), which will be committed to helping regional FinTech hubs prosper.
  • A new ‘omnibus’ account is being introduced by the Bank of England to offer 24-hour wholesale payment and settlement for financial infrastructure providers, making payments faster and cheaper.

Bank of England announces creation of a Central Bank Digital Currency Taskforce

The Bank of England and HM Treasury have together announced the creation of a joint CBDC Taskforce to coordinate the exploration of a potential UK CBDC.

Whilst a decision hasn’t yet been reached on whether to introduce a CBDC in the UK, it would be a new form of digital money issued by the Bank of England and for use by households and businesses, existing alongside cash and bank deposits, as opposed to replacing them.

The Taskforce has been set up to make sure a strategic approach is followed and to promote coordination between UK authorities. It will be co-chaired by Deputy Governor for Financial Stability at the Bank of England, Jon Cunliffe, and HM Treasury’s Director General of Financial Services, Katharine Braddick.

Read more about the key duties of the new Taskforce here.

Eurosystem publishes new report

Following Eurosystem’s ‘Report on a digital euro’, it released its ‘Public consultation on a digital euro’, featuring 18 questions to collect views of both citizens and professionals with specific knowledge of the economics, regulation and technology of retail payments.

Its new report sets out the results of the analyses of the 8,221 responses submitted by participants in the public consultation.

The report will form a key input into the ECB’s Governing Council when it decides whether or not to launch a formal investigation phase in view of a possible launch of a digital euro.

View the report here.

Council of the European Union publishes new document on the movement of capital

The Council of the European Union has published a report, titled ‘Commission staff working document on the movement of capital and the freedom of payments.’ The council describes the free movement of capital as an “essential feature of the integrated, open and efficient financial markets that businesses and people in the EU enjoy.”

The aim of this document is to report on capital movements and policy initiatives on the free movement of capital in 2019-2020. It will feed into the Economic and Financial Committee’s annual discussions on capital movements and the freedom of payments under Article 134 of the Treaty on the Functioning of the European Union (TFEU).

The report begins by reviewing global and EU capital flows and related economic developments, whilst the second half sets out the legal framework, details recent policy initiatives and important challenges, and reviews global initiatives on the free movement of capital and the freedom of payments.