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How Are Governments Supporting Fintechs?
The following article is an edited extract from The Financial Services Guide to Fintech.
With fintechs and fintech hubs cropping up all over the world, the support of governments has become increasingly important. While creating an appropriate legislative environment has undoubtedly been hugely challenging, it is encouraging to witness governments beginning to assist fintechs, instead of getting in their way.
For example, the UK Government’s first Fintech Sector Strategy was published recently, and the highlights of this programme included a Cryptoassets Taskforce, advances in RegTech and a UK–Australia start-ups support programme. Then-Chancellor Philip Hammond suggested that the programme will make a major contribution to the British economy in the foreseeable future.
The Cryptoassets Taskforce consists of HM Treasury, the Bank of England, and the Financial Conduct Authority, and this trifecta of powerful influences will continually scrutinize issues related to digital currencies while seeking to harness the benefit of the underlying blockchain technology.
While the United States has arguably been a little slower to get on board with the fintech revolution, the 2018–19 federal budget did set aside $138 million for open banking, digital identity programmes, blockchain and the fintech sector (Yun, 2019).
With the United States containing several financial sector behemoths, support for fintech has been a little slower than in some other comparable economies, and thus the United States government has been a little reticent to reveal details around legislative support, at least in open documents. But it does seem that there is now at least the will to help fintechs and enable innovators in this arena to reach their potential.
Elsewhere, in the Middle East, the government of Bahrain has become one of the major innovators in the fintech sphere. The Bahraini government has already implemented a number of initiatives intended to help the country become a major fintech hub. With this in mind, the central bank of the kingdom has launched a dedicated fintech and innovation unit, which includes a regulatory sandbox.
Supporting this initiative has been the announcement of a national cloud-first policy in Bahrain, which provides the foundation for an ambitious national digital strategy. The Bahraini government has also established the Bahrain Fintech Bay, which bills itself as a one-stop-shop for fintech companies. Other countries in the Middle East are now following this lead, but Bahrain has undoubtedly been something of a pioneer.
I previously mentioned Singapore as being one of the most significant territories in the fintech revolution, and it is perhaps not surprising then that the Singaporean government has made every effort to support fintech development, including in immigration policy. In particular, a private–public partnership between the EDB and the Singapore-based FinTech Consortium has helped provide a physical co-working space for local fintech companies, aided and abetted by corporate incubation and other initiatives.
And the continent of Oceania has also seen fintech hubs emerge, as all geographical regions embrace this coming technology. The two major cities in Australia, Sydney and Melbourne have both made significant efforts to become active in the area of fintech. The State Government of Victoria has called for ‘experienced innovation hub operators’ to help the administration establish a fintech hub in Melbourne, with talks ongoing with operators to initiate this as soon as possible (Business Insider, 2018). This hub will aim to connect businesses with investors to strengthen the fintech ecosystem in Melbourne.
Eastern Europe has also seen its fair share of fintech players and hubs sprout up, and the Estonian government has been one of the early supporters of these initiatives. The government in Estonia has supported the fintech ecosystem, enabling it to gain momentum, via such efforts as the e-Estonia Initiative. This is a public-sector movement to help citizens to interact with the state through the use of automated solutions. E-services created under the initiative include i-Voting, e-Tax Board, e-Business, e-Banking, e-Ticket, e-School, and University via the internet.
However, perhaps the best-known example of fintech innovation in Estonia is the e-Residency programme, which helped Estonia become the first country in the world to offer electronic residency for non-natives in 2014. This programme enables non-residents to apply for smart ID cards, providing access to the various electronic services that have been established in Estonia.
Finnish online-only business bank Holvi has already announced a partnership with this programme, helping provide digital business banking for e-residents. The Estonian government has also created Start-ups Estonia, which is intended to support the local start-up ecosystem. It provides training programmes for start-ups, concentrates on educating local investors, helps to attract overseas investment, and delivers a raft of other benefits. This programme has been financed with €7 million of funding from the European Regional Development Fund.