Fintech firms call for more government-backed finance
UK fintech business leaders believe that they’re unfairly excluded from government investment schemes and need a stronger voice in regulatory policymaking, according to a survey by the Digital Finance Forum (DFF).
The survey of more than 100 company heads,‘Fintech Founders Summer Survey 2020’, found that 67% believe their sector isn’t properly represented in the development of regulations, while 46% said they’ve been disadvantaged by the government’s approach to providing loans and finance for fintech businesses. The survey sought to measure how fintechs have been adapting to the ongoing Covid-19 pandemic; to identify the most pressing issues facing them; and to gather their views on how the UK government can best respond.
Nine out of 10 founders believe that the pandemic will make it harder to raise finance next year. But they were optimistic about the sector’s trajectory, with four out of five confident about the outlook for their business over the next 12 months.
Financial exclusion?
Of those surveyed, 37% said they’d been unable to access government-backed investment funds, and the report says that many believe the government should do more to provide early-stage capital investment for fintech startups.
Numerous founders noted that the rules for the government’s Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) explicitly exclude investment in many types of financial services businesses. The British Business Bank, which provides government-backed loans, requires that its clients among venture capital firms do not invest in fintech businesses. “Fintech is not on a level playing field with other stage companies, when it comes to access to capital,” the report argues. Some founders complained that venture capital firms have “too much clout” with government, it adds, and have done little to help raise funding for fintechs during the current crisis.
Respondents argued for Treasury funding lines to be expanded to cover fintech firms, offering them the same kind of support for lending enjoyed by banks. “There was a distinct feeling that the system is rigged towards the big banks; and in many respects, against non-bank fintech lenders,” says the survey.
The need for review
Survey respondents also called for stronger alignment between the government’s fintech strategy and the policies of its regulator, and for the appointment of a dedicated minister for fintech – a role recently created by the Australian government.
Economic secretary to the Treasury John Glen MP said that the Digital Finance Forum’s findings reinforce his commitment to ensuring the UK’s pre-eminence as a place for fintechs to do business. “We have recently launched a major independent fintech review which will consider how the UK can continue to foster innovation, maintain an ecosystem that supports growing firms, and promote the integration of new technologies across financial services,” Glen said.
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