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Saturday, March 24, 2018

Opinion > SynerGIS

US tie-ups can help drive the UK fintech sector forward

John Gunn, executive chairman of SynerGIS Capital | 7:29 Wednesday 28th February 2018

The FCA’s collaboration agreement with the US Commodity Futures Trading Commission (CFTC) announced last week is a good signal for the UK’s fintech sector.

While it has been reported that the focus is on the regulation of the crypto-market (a market which regulators on both sides of the Atlantic have recently been vocal on), such tie-ups can help drive the whole UK fintech sector forward. Brexit has been touted as both an opportunity and a challenge, but while close links to the eurozone should remain, the UK fintech’s sector must broaden its horizon to both the US and China to market its expertise.

The FCA’s regulatory sandbox has been a great success. It has been replicated in other countries across the world and the UK government now seems to recognise fintech as a unique R&D business sector, rather than just tagging it on to the broader banking service industry. The success of the sandbox is shown in the number of fintech enterprises choosing to locate in the UK, but these cross-border initiatives are vital in allowing firms to offer their services to the key markets. For example, Citigroup recently chose to locate its fintech hub in Moorgate, just around the corner from SynerGIS’ offices.

Due to regulatory hurdles, any companies looking to offer their services directly in the US will either need to be fully authorised by American authorities (which could be expensive) or partner with a US financial institution. SynerGIS’ parent company Global Investment Strategy UK Ltd is already a qualified intermediary in the U.S.

There are hurdles to overcome. US banks are behind the curve in relation to API adoption and Open Banking is mostly ad hoc at present and there has been little in the way of direct US legislation on US banks embracing Open Banking.

Given the complexity of the US banking system, such legislation could be difficult to establish. Many banks are running on legacy operating systems incompatible with the latest API. In the UK, Open Banking has been driven by unified specification of APIs and the sheer number of banks across the whole of the US could make this difficult.

Lastly, traditional banks may be wary of the threat the ‘big tech’ players on their doorstep (ie Google, Amazon, Apple and Facebook) could have on their domestic USP.

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