Financial Technology (FinTech)

FinTech is changing the types of financial services available, who can access them, and how. The Government sees FinTech as an opportunity to create jobs and economic growth. Estimates suggest that in 2015, UK FinTech was worth roughly £6.6bn in annual revenue and employed around 61,000 people.

This briefing focuses on four emerging areas of FinTech:

• Alternative finance – such as peer-to-peer lending, which enables consumers and companies to obtain loans without using a bank.
• Data analytics – which can be applied to an individual’s financial data to give them low-cost automated financial advice.
• New payments methods – such as apps, which allow transactions to be made with a smartphone.
• Distributed ledger technology (e.g. blockchain) – which enables new ways of recording and executing transactions.

FinTech is presenting consumers, businesses and governments with new products and services. It has the potential to be used as a tool to help regulate businesses, and could help to increase access to financial services for some.

However, FinTech also presents challenges. Digital financial services require a secure way for different parties to prove their identity online, which is important for establishing the trust needed to perform transactions and mitigate against identity crime (such as fraud). In addition, FinTech may be difficult to access for the digitally excluded – i.e. people who do not have the skills or technology to use digital services.