A new report, Building Better Together, has reviewed the progress and impact of the UK Fintech Pledge, initiated by Tech Nation’s Fintech Delivery Panel. Working with EY and the Pledge signatory institutions, the analysis investigates the driving factors behind the Fintech Pledge commitment, and reasons financial institutions have cited for signing the Fintech Pledge which include speeding up fintech onboarding, improving the onboarding experience for fintechs, and a more consistent procurement process.
The Fintech Pledge was launched in September 2020 to encourage partnerships and collaborations within the fintech sector. It was born out of the Panel which was established to enhance the UK’s position as a global leader in the future of financial services, supported by HM Treasury.
With the UK’s five largest retail banks as its founders – Barclays, HSBC, Lloyds Banking Group, NatWest and Santander, the Pledge now has over twenty signatory institutions.
In a survey of Fintech Pledge signatories, 82% said they expect to increase the number of fintech partnerships in the next five years.
The appetite for fintech collaboration is increasing
Innovation has never been so critical for financial services. The increased demand for digitisation, combined with the continued squeeze on capital, has meant financial institutions are under pressure to deliver better services for customers through more efficient, digital operations.
Key to this will be collaboration with fintechs, which is also vital for the next stage of fintech development in order to continue to scale and deliver growth through the mass of customers that established institutions can provide.
As the appetite for fintech collaboration increases, the UK is well-placed to lead the way in transforming the future of finance through partnerships – combining a leading international financial centre, a global fintech hub supporting and inspiring great talent and innovation, and the Fintech Pledge – demonstrating a strong commitment to working together in an efficient and effective manner.
What is the Fintech Pledge?
The Fintech Pledge is a principles-based commitment, encouraging greater transparency and enhanced communication by a financial institution when a fintech is onboarded as a supplier. It looks to foster stronger, more effective partnerships, particularly through addressing the asymmetry that can arise in a relationship where the institution, but not the fintech, can have a clearer view of the likelihood negotiations will progress to a commercial contract and what it will take to get there. As a minimum, prospective fintech partners can expect clear guidance on the procurement process, clarity on their progress, and a named contact to navigate them through the journey.
“The Fintech Pledge represents a powerful commitment to transparency and partnership between fintechs and more established firms. As well as being good news for fintechs and for the financial services sector as a whole, these partnerships also result in better outcomes and services for business and customers. I welcome the growth in the number of signatories over the past eighteen months and hope to see this trend continue.”John Glen MP, Economic Secretary to the Treasury and City Minister
What has the Fintech Pledge achieved?
“There can be a mismatch between the approach and focus of a large, listed firm and a fintech. The Pledge has meant both sides have common ground to begin their journey and appreciate the need to better understand each other.” Ben Luckett, Chief Innovation Officer, Aviva
“Since the Pledge launched, we have had over 1,500 visits to our Pledge website. It has made it significantly easier for fintechs to fully understand what is required from them.”Matt James, Head of Scouting, UK and Europe, NatWest
The research highlights process changes driven by the Fintech Pledge from reducing the number of steps in the due diligence process to new onboarding assets such as dashboards, info resources and model contracts. It also discovered the Fintech Pledge is more than just helping fintechs to be better prepared for partnerships, it has also led to increasing the profile of innovation across institutions and more dialogue between colleagues in these complex firms too.
“It wasn’t that long ago that every single engagement with HSBC had to go through a full end-to-end onboarding process which could take several months. We have a much shorter process now for low risk engagements.”Rita Martins, Head of Fintech Partnerships, HSBC
“As a scaling RegTech, we can very easily get swallowed up in the procurement process with large financial services organisations. For us the Fintech Pledge has really reduced the barriers to entry.”Pauline Timoney, COO, Hivera
The future is fintech
The report features a survey of Fintech Pledge signatories showing 82% of respondents said they expect to increase the number of fintech partnerships in the next five years. 80% of signatory institutions surveyed said they expect to increase their organisation’s investment into fintechs in the next five years. When asked at what stage of maturity a fintech is considered ready for partnership, signatory institutions replied mostly with a preference for those fintechs who had secured Series A financing (£2m – £10m) or Series B financing (£10m – £50m).
The analysis also shares learnings from real-life partnership experiences to help future collaborations and proof of concepts progress smoothly. A shared mindset, agreed timeframe, and common vocabulary are billed as basics that can be overlooked but are so important to get right, with a flexible approach, sustainable pace, and regular feedback also recommended.
Exploring ways to further support productive partnerships, the research draws on insights and ideas from the recent Fintech Partnerships Summit, hosted in January 2022 by EY and Tech Nation. These range from standard documentation, whereby universal non-disclosure agreements (NDAs) could save time and money for fintechs in the early stage of business development discussions, to greater use of sandboxes, and even an internationalisation of the Fintech Pledge.
To read the report and learn more about these ideas click here.
To re-watch the EY and Tech Nation Fintech Partnerships Summit click here.