The Chairman’s address – FinTech North Leeds
Jake Fox / 30th April 2018
Our FinTech North conference in Leeds last week was chaired by Dr Chris Sier, who counts being HM Treasury’s FinTech Envoy for England amongst his portfolio of roles. We are delighted to share Chris’ opening address from the conference.
“Good morning everyone and how very nice it is to see you. My name is Christopher Sier and, aside from chairing today’s conference, I have three roles, all of which are relevant. I am Professor of Financial Technology at the University of Leeds, I chair the Financial Conduct Authority’s Board investigating the information asymmetries and costs of the asset management industry (one of the outputs of the Market Study on asset management released last year), and I am the UK Treasury’s FinTech Envoy for England, the first of the envoy’s created two years ago, and with my self-selected base of regional focus being here in Leeds.
To start today’s proceedings, I am going to set the scene by offering a purely selfish and myopic view of the progression and state of FinTech as I have seen it over the past 10 years, for it was in 2008 that I first started looking at it as a subject on behalf of the Government.
Back then it wasn’t called FinTech of course, it was just called innovation and I had been offered a job by the newly-formed Department of Business Innovation and Skills (formerly DIT and now called BEIS) to run a Technology Strategy Board and Research Council co-funded research and knowledge transfer organisation called the Financial Services KTN. This was a brand-new entity formed as a result of the collective realisation by Policy Makers and researchers that, contrary to their belief, Financial Services wasn’t actually very innovative. You see, up until that time, received wisdom was that innovation was proportional to spend on technology, and the sector that spent most on technology was the financial services sector. Ergo it was innovative. So, when the financial crisis occurred, a crisis brought on in no small measure by a failure to control risk or have technology that allowed for the identification and control of risk, gleefully pointed out by me a series of lectures, articles and papers, the logical conclusion of BIS was to form an organisation to introduce innovation to the sector. And then appoint the noisy person who had been shouting about the problem as its Director.
My brief was simple. Use my grant funding to identify funding opportunities and partners, and then structure funding competitions so that the £1-2 billion of innovation funding available annually to the Technology Strategy Board could be appropriately deployed. The trouble was that, despite my initial optimism, I found it impossible to bring any financial services firms to the table. Most denied that there was any problem with innovation – a situation with which we are still struggling today – and those that might have been interested were concerned at the implications of funding coming from Government sources. After all this might allow Government or policy organisations (such as the Bank of England) to see inside the workings of firms and for the first time truly understand the operational and governance chaos that existed within.
Let me explain why we were all shocked by this rejection of funding – this was FREE money. Sure there was a competitive process to win grants which carried an overhead, but once you had the money it wasn’t a loan, so you didn’t to repay it, and it wasn’t equity finance, so you didn’t need to give away equity. You just kept the money AND the IP. All you had to do in exchange was report on your successes to the Technology Strategy Board so they could onward report them, and you had to collaborate with other firms. Pretty much that was it. But the phrase I most often heard from FS firms was “we don’t need grant funding – if we thought it was important, we’d just fund it ourselves”.
So, after a few months of failure, I pivoted to become a pure research and knowledge transfer organisation. I mostly gave up trying to sell Technology Strategy Board products to financial services companies and started identifying large challenges for the sector that I felt could be solved by bringing together people from all walks, but principally industry players, academics, policy makers and entrepreneurs.
In the end I identified and researched four topics: Firstly, market failure in asset management as a result of information asymmetry – largely this means establishing the true cost of investing, a stream of work that now has me chairing the FCA Board on the subject; second was model dependency in insurance markets, an activity that resulted in a non-profit spin-out company called OASIS that is now funded by more than 25 underwriters and brokers and by the United Nations and is run by my former colleague in the KTN, Dickie Whitaker; thirdly we looked at Diversity in financial services; and finally, we looked at how to bring innovation into financial services, a subject that has to be linked, at least in part, to the issue of diversity.
This was back in 2008. But all of these workstreams are still live and relevant now and of course, innovation in financial services is now called FinTech, albeit the KTN ended in 2012 and I have been operating all workstreams independently out of pure interest since then.
One if the quirks of the KTN was that I was asked to spread myself around the UK – it was a national role after all. So I spent quite a lot of my time investigating my own country where before, as a banker and a management consultant, I had only really travelled for work to major global financial hubs. My KTN role involved me speaking to Regional Development Agencies and Universities up and down the country and taught me how rich and deep the research, skills and entrepreneurial base was if you made the effort to travel outside of London, Oxford and Cambridge. This despite the obvious pain the financial crisis was causing in the regions outside the busy, wealthy, expensive, funded party that was London at the time. In fact, the very first workshop I ran was here in Leeds on the subject of Financial Inclusion at the Leeds Club in 2008.
So it was I became involved with innovation, and there are very few initiatives with which I have not been involved. I worked closely from the very outside with Innotribe, SWIFT’s innovation network, I was on the Advisory Board of Innovate Finance from the beginning, and beyond London have worked with hubs in Copenhagen, Oslo, Trondheim, Helsinki, Dublin, Belgrade and, of course, Tallinn in Estonia. I was even at the start of Edinburgh’s journey into the realm of FinTech back in 2010 and if you look carefully at the minutes of what is now the Advisory Group for FinTech in Edinburgh, a collaboration between Scottish Enterprise, Scottish Financial Enterprise, the Scottish Funding Council and the Scottish Government, you will find my name as attendee and member. The first initiative launched by this group was an innovation research programme between asset managers in Scotland and post-graduate students at Edinburgh’s Universities.
I was actually in Edinburgh yesterday and was surprised to see the site of my first ever arrest as a rookie cop in 1994, the Benefits Centre at the corner of Lady Lawson Street, is now a well-known coding academy called Code Clan. I might therefore have cause to return one-day although hopefully not to arrest an aggressive homeless man.
The point for me was I saw London, and I saw a lot of places other than London, and at some point in 2012 I decided that London wasn’t really playing fair, either consciously or unconsciously. Fair enough, it is a massive draw, but by 2013/14 it was becoming too expensive, too competitive and too resource-constrained. I decided that what was needed was an alternative venue for FinTech in the UK, not only to provide a lower-cost, less competitive and more flexible destination than London, but also to redress an inequality that I had felt keenly in my travels as KTN director.
I did my analysis and concluded…the north of England was the place. Huge capability in a relatively concentrated area. A band of opportunity that stretched across the north of England to include cities like Liverpool, Manchester, Leeds, York, Sheffield and, if I was clever, Newcastle…as well as the areas surrounding these cities. And, because I had to pick a start place, I picked Leeds. And I’ve been coming here ever since.
What did I find back then in 2013/14? What attracted me to the North and Leeds in the first instance. Well it wasn’t very complicated: Strength and depth in the research and training basis…good Universities basically; lots of resource; a significantly lower cost base; some strong tech and digital capability; and financial services firms in abundance. Leeds has over 30 banks and building societies headquartered there for example, albeit mostly Tier 2 and 3 firms. But to me this to me is a good thing, having seen the complexity of working with large tier 1 firms with all their layers of governance, innovation inertia and internal development capability. Tier 2 and tier 3 firms should be of interest to the innovator and entrepreneur.
And what DIDN’T I find? Any kind of innovation infrastructure really, at least nothing compared to what I seen in London or other countries. So I made it my goal to build such infrastructure – hubs, networks, knowledge transfer organisations, funding, client awareness. And I also found less self-belief. This has perhaps been my biggest battle. Convincing people that it CAN be done here in Leeds has been hard.
My first move in fact was to ask the Treasury to help me, to give me some gravitas that would help convince people that I was credible. And out of that was borne the FinTech Envoy role I have held for the past 2 years.
Now let’s wind the clock forward to 2018 and see where we are and where we are going. How much have we achieved in the three or four years I have been coming here?
I’ll start with a key piece of the infrastructure of innovation, the Regulator. The FCA, as the most progressive regulator in the world launched Project Innovate to help start-ups and followed up with the Regtech Sandbox, and now the Global Sandbox. I’m very pleased to say that when they first decided to pursue an agenda outside London it was in Leeds, at last year’s FinTech North, and they have been back in the north several times since then.
We have strong regional outreach. We have a new Estonian Honorary Consul in Adam Beaumont and Consulate here at the AQL HQ for example – you may have seen the plaque on the door when you came in. We have had hosted and independent visits from non-UK startups, in several cases from the Baltic and Nordic countries, and of course my favourite county, Estonia
We have a consultancy, Whitecap Consulting, that has taken on the mantle of FinTech community co-ordinator for the North and later today we will hear an announcement from Leeds Council of the funding of a key piece of regional FinTech research in collaboration with Whitecap.
We have the development of traditional infrastructure here in Leeds. You know about Platform and it’s hosting of entrepreneurs and SMEs, both domestic and foreign. There are plans to further develop the area around us here at AQL as part of the station plans for Leeds.
And Leeds University is launching Nexus, the university’s 100,000 sq ft innovation and collaboration hub, later this year, which brings me neatly to academia. In case you hadn’t realised, I like academics. They are thoughtful and tend to do things, contrary to popular misconception, with purpose. Phrases like ‘create the null hypothesis’ are bandied around, often to confuse people like me but, despite a penchant for perhaps the cerebral over the practical, academia is highly respected by both policy makers and industry alike. Engagement with the science base is fundamental and it is often there that the cutting edge of technology and innovation can be found. I am particularly pleased to be working so closely with the Universities here in Leeds and can tell you that the University of Leeds has a range of FinTech-related, fully-fledged as well as proposed plans, that I would like to share in brief.
Later this year, or possibly next, Leeds University will launch an MSc in FinTech, where core modules will not only include understanding and using new technologies like Machine Learning, AI and Distributed Ledger Technology. It will have industry focused modules to help the MSc students understand key issues facing the financial services industry, the consumer, policy makers and the regulator; but also, because the MSc is a collaboration between the business school and the computing department, core modules in coding. Everyone will learn to code. Not that everyone will be a coder, no. But entrepreneurs and intrapreneurs who go through the MSc will have a degree of sensitivity to not only the problems, but also the limits of the technologies that might be used to solve them.
Next, the University is in final discussions with a very large Tier 1 multi-service global bank to host and run a national Universities’ grand challenge investigating fraud prevention and detection.
There are plans to build a dedicated research group for FinTech, based upon the skills in the University on AI, Data Analytics, High Performance Computing, Cryptography, Sociology, Geography, Business….the list goes on and one. And this group will focus on financial and social inclusion and productivity. The group will most likely be based in Nexus and will likely be led by one or more endowed chairs in financial technology
So there’s a lot going on at Leeds University. But there’s also a fair bit happening at Leeds Beckett University with their regional digital hubs, and the project on startups skills that they are collaborating on with a number of other European universities.
The Treasury has recognised the need for more regional support for FinTech and I have been joined by 5 new regional envoys, 2 in Scotland, 1 in Northern Ireland, 1 in Wales and 1 more in England. The good news for the north is that the other English envoy is David Duffy, CEO of Clydesdale Yorkshire Bank Group. With Yorkshire Bank headquartered in Leeds, this means that Leeds and the north will get a good share of attention from the envoys and the Treasury, as both David and I will look here for opportunities to support growth.
And finally, as a topic we have Knowledge Transfer. FinTech North was created in 2016 and, if you have seen the infographic created for the conference, you will see that it has so far organised 17 events. Although FinTech North in Leeds, as part of the digital festival, is the original, there are an increasing number of other events going on across the north. Finally, FinTech North was recently incorporated and is now aiming at not 1, but 3 full-day events this year. Which just goes to show that once the revenue model, direct or indirect, is properly identified and understood, good things will follow. And with the success of FinTech North and the attention that the Treasury, the FCA, the FinTech envoys and companies both domestic and foreign are paying Leeds and the North, comes the welcome attention of some successful infrastructure from outside the region. It gives me great pleasure, therefore, to welcome The Canadian High Commission, the Latvian Ambassador to the United Kingdom, the Tax Incentivised Savings Association and Innovate Finance to the FinTech North speaker line up for the first time.
And it’s on that note that I will end these initial remarks. Please enjoy today. Be curious. Be proud. Leeds and the North is now on the map as far as FinTech goes.”