The Fintech Files: A pledge worth making?

There is no end to the pledges, reviews and bridges that criss-cross the fintech sector, and they are often more show than substance.

But the latest initiative from the membership group Tech Nation, which is supported by HM Treasury, looks promising.

Its new Fintech Pledge aims to set standards that will guide how partnerships are formed between big banks and fintech startups.

The pledge establishes key principles for how banks should behave while integrating a new fintech partner. Barclays, HSBC, Lloyds Banking Group, NatWest Group and Santander have already committed to upholding these principles.

These five banks have agreed to provide clear guidance to firms on how their onboarding process works; provide clarity throughout that process; give a named contact, guidance and feedback; uphold good practice; and ensure all of the above happen within the next six months.

While voluntary, the banks that have signed up have agreed to provide bi-annual feedback on their progress in the first year of the commitment. They will also have to pick a senior individual to take responsibility for keeping the Fintech Delivery Panel’s onboarding working group up to speed.

The FDP was established in 2017 by Tech Nation, at the Treasury’s request, and is comprised of a few dozen fintech experts — from startups and larger financial institutions.

Emma Bunnell, chief operating officer of HSBC UK, said the bank recognises the potential of fintech and is “committed to building on our efforts to make it simpler, faster and more transparent for them to partner with us”. 

Santander UK’s director of innovation Stephen Dury said that working collaboratively with fintechs would allow the bank “to open up new services and bring greater choice to our customers”.

Having launched with the backing of the UK’s five largest banks, the scheme will open to additional banks in due course.

Standardising the way fintech firms work out partnerships with big banks is a welcome intervention, because the power dynamic in such situations is often noticeably skewed in favour of the larger institutions.

This imbalance has led to horror stories where startups end up caught in a kind of limbo between agreeing to work with a bank and actually getting paid. Should that limbo last too long, startups face the risk of running out of cash before ever generating a penny from the partnership. 

The success of the pledge scheme ultimately comes down to how willing the banks are to play ball — that much is obvious in the various transparency-related stipulations that Tech Nation has produced.

One person who is familiar with the Fintech Delivery Panel, who insisted on anonymity, agreed that while the pledge is a positive step, its success “will come down to how the banks come to actually implementing it”.

That same person added that the scheme had been put together “at the last minute”, implying that government pressure had led to it being rushed through.

A spokesperson for Tech Nation said the fintech pledge was a long-term objective of the FDP, “evolved out of the onboarding guidelines published in November 2018”. They added that the “plans and collaboration” for the project have been in the works since the end of last year.

Minutes from the FDP’s meeting on 23 March 2020 show that the “onboarding pledge” was under discussion at that time. Matt James, innovation consultant at RBS, told the FDP that the pledge was “being discussed with banks to get to a good place in terms of the wording of the pledge and how it can be positioned to ease the implementation”, according to the minutes. The minutes for the 23 March meeting are the latest available.

The crucial question here is whether Tech Nation and the FDP have indeed secured the buy-in of the big banks. They have their signatures, but whether those signatures come with a meaningful commitment remains to be seen.

Further reading:

City minister John Glen, writing for the Independent, is the latest political figure to lend his voice to the argument that fintech will be a driver of a post-coronavirus economic recovery.

Here’s an interesting Wired piece on how Monzo is leading the charge to tackle something that bigger banks are ignoring: financial abuse.

Savings app Chip has closed one of the largest equity crowdfunding rounds on record, with the assistance of the taxpayer-funded Future Fund, according to EU-Startups.

TechCrunch reports that Santander has spun out its $400m fintech-focused venture capital unit, rebranding as Mouro Capital.

Sifted reports on how the next wave of digital banks is putting profit before growth.

Finally, Bloomberg brings us the story of a crypto exchange that took in millions after copy and pasting a rival’s code.

To contact the author of this story with feedback or news, email Ryan Weeks

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