What are the business models of new fintech firms in the UK?

The purpose of Bank Overground is to share our internal analysis. Each bite-sized post summarises a piece of analysis that supported a policy or operational decision.
Published on 29 March 2019
The Bank is embracing fintech, ensuring it develops in ways that maximise the opportunities while minimising risks for society.

There is no bespoke authorisation regime for ‘fintech’ banks in the UK, and the regulatory standards which apply are the same as apply to any other form of banking. However, through the New Bank Start Up Unit, the PRA and FCA provide proportionate and transparent authorisation processes to help firms, including those with technology innovative business models, engage with and understand regulatory requirements while ensuring standards remain rigorous.

We have been receiving interest from a range of technology-innovative firms seeking authorisation in the UK as a bank (Chart A).

Chart A

Fintech firms are seeking authorisation as banks in the UK(a)

Fintech firms are seeking authorisation as banks in the UK OUTLINE
  • (a) Shown by main area of innovation identified for each firm. Some firms may be pursuing business models across multiple technologies. The number of authorisations is since 2015.

Six firms with business models focused on providing banking services to customers digitally have already been authorised as banks since 2015.

A further 16 fintech firms are at pre-application or live application stage, compared with 26 non-fintech firms. These range from firms proposing digital/app-based banking services, firms using Open Banking legislation to provide customers with aggregated information across accounts, to firms looking to use distributed ledger technology or work in crypto-assets.

Many of the emerging risks identified and assessed for fintech firms are similar to other new start-up banks, in areas such as governance and technology-risk.

Through authorisation mechanisms such as ‘mobilisation’ (where a firm is authorised at an earlier stage of its developments but with restrictions) new banks are able to build systems and infrastructure while being held to appropriate standards.

There has been less interest from fintech firms seeking authorisation as insurers. The PRA and FCA are developing a more streamlined process for firms looking to become insurers and have launched the New Insurer Start-Up Unit. It is hoped this will lead to more firms coming forward in future.

This post has been prepared with the help of Neelu Agarwal, Himali Hettihewa, Najir Hussain, Stephen Senior, Michael Stanton and Alex Wickens.

Share your thoughts with us at BankOverground@bankofengland.co.uk

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