What Labour Government Could Mean for UK Fintech Industry
The UK has long been a leader in the global fintech industry, fostering innovation and seeing healthy growth in the financial services sector.
Following a sweeping majority win for the Labour Party in the UK general election, we ask what this means for the UK’s fintech industry – and what the new Government must do to keep fintech on a stable course.
Lynx: UK Government must focus on three ‘key’ things
We speak to Dan McLoughlin, Fraud and Security Specialist at Lynx Tech, who says the UK’s new incumbent party must focus on three key areas to ensure the continued growth of fintech and a stable financial services economy.
“The new Labour government needs to focus on three key things: maintaining the UK finance industry’s global leadership; ensuring our regulations remain relevant domestically and globally; and fostering growth in our finance and fintech industries,” he says.
“While we cannot say for certain what a new Labour government will deliver, its goals are broadly aligned with industry needs. We know it wants to keep the UK at the forefront of global innovation and prioritise the safe development of AI.
“Now in power, to deliver on these aims it needs to create its proposed Regulatory Innovations Office to speed up and maintain regulatory compliance and the implementation of new, pro-innovation Open Banking and Finance frameworks.”
- Deliver inclusive growth of the UK’s financial services sector
- Enhance the international competitiveness of the UK’s financial services sector
- Reinforce consumer protection and financial inclusion
- Lead the world in sustainable finance
- Embrace innovation and fintech as the future of financial services
- Reinvigorate the UK’s capital markets
Is a better AI approach needed?
For Lynx’s Dan McLoughlin, while much discussion around AI and its applications to the financial services industry has taken place, the strategy for clearly and successfully regulating it is, so far, unclear.
He adds: “Many different topics and technologies are currently being bundled together under a single AI banner. There is a world of difference between generative AI (Gen AI) technologies such as Large Language Models (LLMs), deepfakes and the kind of deep learning used to combat financial fraud. One size cannot fit all here, so policy clarification will be needed in the coming months.
“In Labour’s manifesto, it offered no mention of interfering with existing or proposed regulations, so we can expect that the Payment Systems Regulator (PSR) regulations addressing Authorised Push Payment Fraud (APPF), due in October, will still come into effect.
“This is critical, as this regulation is being followed closely by authorities worldwide. It could be a catalyst for the global convergence of fraud prevention and anti-money laundering, as well as highlight the scale of the problem of money mules, which are funding organised crime all over the world."
Indeed, the industry will be watching the moves of Labour closely as it establishes itself in parliament, particularly its proposal for greater collaboration with the EU.
Dan concludes: “This could well lead to compliance with the EU’s Third Payment Services Directive (PSD3) being mandated in UK regulation. Either way, UK fintechs should ensure compliance with this regulation if they intend to operate within the EU.”
Elsewhere, Tiago Veiga, CEO at Aurum Solutions, argues that there is so much talk around the need to regulate AI, that it is a distraction from taking pragmatic steps to help make AI safer.
He says: “There’s a lot of talk about how the next government needs to prioritise the regulation of AI, but with this technology evolving so rapidly, it's likely any rules will be out of date by the time they’re finalised.
"In the meantime, a smarter short to medium-term strategy would be to focus on educating people and businesses on how to safely use AI, where it should and shouldn’t be deployed, and identifying targeted use-cases where it can boost productivity.
“That said, AI isn’t a silver bullet for everything. Not every process needs to be overhauled by AI and in some cases, a simple automation process is the better option. Labour needs to take a broad and holistic approach to support UK tech as a whole, not just shiny buzzwords like AI."
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