Last year Jersey’s FinTech momentum stepped up a gear, providing the impetus for 2016 to become the year that Jersey FinTech really makes its mark. Our Island’s trusted brand and capabilities in specific financial services sectors give us a foundation to build new businesses and jobs with a strong, targeted FinTech focus. Yet it is not just about diversifying our economy, as given its adjacency to our financial services industry, FinTech is a natural way for us to preserve and strengthen our existing position in financial services.
Our work culminated last October in the Island’s first major international FinTech conference, alongside the issuance of Jersey’s cryptocurrency consultation paper, which significantly clarified Jersey’s regulatory position surrounding virtual currencies. All these developments mean that from KYC to blockchain, Jersey is moving forwards in the FinTech space.
While FinTech has become somewhat of a buzzword, the level of interest has been backed up by concrete action. Jersey now has a strategic working group to identify key opportunities for industry in the FinTech sector and we are seeing a growing receptivity from Jersey’s established financial services to the opportunities that FinTech presents.
Jersey has worked hard to establish its reputation as one of the best-regulated jurisdictions in the world for financial services. This process has understandably brought a degree of conservatism with it, which has at times spilled into risk aversion. Nevertheless, as identified in a recent survey by KPMG, FinTech does not need to represent a disruption to our Island’s reputation for robustness in financial services.
FinTech can and should be used to build on our reputation, for example through the use of the most cutting edge digital solutions in KYC and due diligence, to make client on-boarding both more efficient and more thorough. By the same token however, FinTech does present the threat of disruption to other areas of financial services, particularly in the form of automation and machine intelligence. Financial services need to address this reality head on; we cannot hold back the tide, disruption is happening – and we have no choice but to ‘ride the wave’.
Once we understand the scale of the opportunities and challenges, Jersey businesses can really focus on specific areas of opportunity. Our finance industry operates in strong niche areas, namely private client trusts, funds and banking, so our FinTech offering should correspond to this. We are not aiming to be a rival to the major FinTech hubs but we should focus on holding our own alongside them.
Our main area of focus now is to ensure the opportunities are there for innovation to flourish. Large established financial institutions need to find ways to replicate the agility of startups, which benefit from their size and their youth to quickly and effectively implement digital innovation throughout their organisation. This is why a collaborative approach between our financial and digital industry is essential – and it is promising to see developments in this vein, with members of our digital industry actively supporting and investing in FinTech solutions for established financial institutions. Government, alongside Digital Jersey and Jersey Finance, can also support innovative projects, by bringing ‘Fin’ and ‘Tech’ members together to fund collaboration on trials.
The digital sector is making substantial ground in demonstrating how we can bring together innovation and existing expertise to ensure the continued competitiveness of our Island’s core industry, alongside enabling the much needed diversification of our economy to ensure steady growth in our GVA.
Research undertaken by KPMG at the end of last year has underscored areas where Jersey can really capitalise on FinTech innovation. These areas fit in with the idea that we must build on our current expertise and enhance it using technology and they include: bespoke business processes enhancement software to reduce the amount of paperwork in the day-to-day running of trust sector and fund administration businesses; automation of time-intensive activities such as KYC; advanced risk management systems to assist in decision making, alongside automating time intensive risk management functions; wealth management platforms; and Regulation Technology (RegTech).
RegTech in particular is a major priority for Jersey in 2016. Since the financial crisis, regulators are requiring more detailed data from financial institutions. Keeping up with regulatory requirements requires clear and systematic methods to ensure transparency, which digital solutions are ideally suited to assist with. Closely related to FinTech, RegTech has the added bonus that it builds on what is arguably Jersey’s central point of attraction for new businesses. The Jersey Financial Services Commission (JFSC) and the Registrar are keen to explore how we can use RegTech to improve our Island’s competitiveness.
What is crucial now is pace: our competitor jurisdictions are aware of the opportunities of FinTech, so we must act, as an Island, to build on Jersey’s unique value proposition so we can attract new business and grow existing ones. This means putting in place the requirements for accelerators – particularly access to funding – and facilitating further collaboration between relevant industry and governmental areas.
The foundations are very much in place for FinTech to play a profitable role in Jersey’s long-term diversification strategy. Our financial sector is among the best in the world and we need to keep it that way through focusing on what we do well and exploring how this can be enhanced through digital innovation. Crucially, responsible risk management should not stop us from trying new things.
Throughout this year, I look forward to seeing further collaboration between our financial and digital industries and exploring how we can attract talent to the Island to ensure our digital skills are able to meet the demands of FinTech. While the obvious challenges are there, the opportunities are greater; Jersey must seize them. Digital Jersey will work closely with Jersey Finance to combine Jersey’s established strengths with the most innovative ideas, ensuring our vision for an Island with diverse, robust industries can become a reality.
View the article in First for Finance magazine here.