City of London Corporation's Policy Chief looks back on a recent India visit to lay out the foundations for close cooperation in the field of financial technology, more specifically RegTech and InsurTech.
As the political leader of the City of London Corporation, the body that represents the UK's historic Square Mile and in a broader sense the country's financial and professional services sector, I recently travelled to India for the first time for a series of meetings with government and business leaders. My visit came at an interesting time for both our countries. In New Delhi, the 17th Lok Sabha elections could affect the course of a country that has had an astounding growth rate which is expected to lead to India overtaking the UK as the 5th largest country by nominal GDP this year.
Meanwhile, back in London the conversation and headlines remain firmly focussed on Brexit, and understandably there remain anxieties in the business community about the lack of a deal being struck with the EU. That's hardly surprising - after all Europe is our biggest trading partner, and many firms based here, including the around 800 Indian businesses employing some 110,000 people, chose the UK as a base partly as a result of our EU connections.
It didn't surprise me therefore that the 'B word' cropped up time and time again during my conversations with Indian government and industry leaders in Delhi and Mumbai. But while there were questions on what will happen next, it was clear to me that what those I met really cared about what the long-term future of the UK-India partnership, and what opportunities, as opposed to challenges, the UK's departure from the EU presents. Fintech is one of these.
The sector now dominates modern finance, and is an area in which the UK has grown to become a world leader. In fact, fintech now contributes £6.6 billion annually to the UK economy, and employs over 76,500 people across some 1,600 companies in the country.
India, the sector is equally buoyant, and has had a dramatic impact on improving financial inclusion. According to KPMG, the Indian fintech industry is currently worth $33 billion and is forecast to reach $73 billion by 2020, fuelled by entrepreneurship, government support and inward investment. But let's remember that when we talk about fintech, we're not just talking about payments. In fact, the industry goes much wider than that, now encompassing areas like InsurTech and RegTech, with companies providing solutions for everything from easy insurance cover to simplified contracts.
Financial innovations like this don't just relate to a single country. Fintech is - by its very nature - cross-border, thriving on international cooperation, and that's exactly the message I delivered during my recent visit to India. Our countries already have a solid relationship, with bilateral trade worth some £18 billion, and financial services accounting for around £350 million of this. UK firms are responsible for some 800,000 jobs in India, while around 800 Indian firms in the UK employee over 100,000. In the City of London alone we're home to all the major Indian banks, including the State Bank of India, now 98 years old and counting.
India is routinely among the top five investors in the UK, and around 1.4 million people in the UK have Indian heritage - a statistic testament to the long, historic ties between our countries and reason for PM Modi's much-quoted line for the UK, ′the living bridge'.
With stats like this it's no surprise that many are now looking to the future of our relationship, including our governments, who last year signed an ambitious UK-India Tech Partnership. The initiative aims to link up businesses, venture capital firms and others with the view of creating greater market access for SMEs and entrepreneurs in both our countries. Fintech is unsurprisingly a major focus of this programme, with the Rocketship Awards giving at least 20 fintech entrepreneurs from each country given the opportunity to experience both ecosystems and pitch for investment. Last December saw the first cohort travel from the UK to India for productive meetings, and later this year we'll see a similar number of Indian firms travel to the UK.
The City Corporation I represent is fully behind this initiative. After all, one of the strengths of our organisation is our great convening power. We engage and work closely with the government, policy-makers, regulators, and business to ensure that the UK's financial and professional services sector continues to thrive and create the jobs this country needs to prosper economically.
Another thing we are good at is kickstarting important conversations. We recently commissioned PwC India to put together a series of reports on the opportunities for fintech in the UK and India, looking at payments, InsurTech and RegTech. The latter of these was launched during my recent visit to Mumbai, and shows how UK RegTech firms can help support Indian government initiatives, providing digital platforms that can connect micro-insurers, insurers, policyholders, and intermediaries, and increase insurance take up.
The rapidly growing RegTech solutions market in India (thanks in part to India Stack) and the corresponding growth of the sector in the UK due to regulations like MiFID 2, PSD2, CASS and CRD IV mean there are opportunities for firms from both countries to actively collaborate to provide required solutions to these issues.
But you can only lead a horse to water if you know where the trough is, and as our reports show, players on both sides need better visibility and understanding of the opportunities and challenges in the sector before they can even consider a market entry.
A great example of this is UK expertise in artificial intelligence, which can provide support in helping Indian firms meet SEBI's requirements on trade surveillance and algorithmic trading. However, at present there is little cooperation in this area. Vice versa, financial services firms in India have much to offer the UK, particularly in terms of data storage and management. However, failure to comply with new regulations like the EU General Data Protection Regulation (GDPR) can lead to penalties, restrictions, legal action, loss of reputation and ultimately being kicked out of the market before you've had a chance to make your name. So, while there are opportunities in both our countries, it is obvious education is a crucial element in making this a reality. Like two pieces of a jigsaw coming together, firms from India and the UK can work together more closely for the benefit of each other. But first they need to know that these opportunities exist, and the potential pitfalls of each market.
That's why the City of London Corporation is assisting fintech firms in both our countries, hosting delegations, roundtable and events here in the UK and in India. We're already working with the Indian High Commission in London on their Access India programme, and thanks to our presence in Mumbai for nearly 12 years, we have unprecedented connections in both markets to bring people together. These links allow us to continue building on our mutually beneficial business relationship, strengthening ties and knowledge sharing in fintech, but also in areas, like green finance, insurance and professional services, all of which offer plenty of opportunities for firms on both sides to cooperate.
I may have just made my first visit to India, but one thing's for certain: it won't be my last, and I look forward to see many more examples of UK and Indian firms entering each other's markets over the next three years of my time in office. Here's to the next stage of the UK-India fintech revolution!
Catherine McGuinness is Policy Chair, City of London Corporation - the body which represents the London's traditional Square Mile financial district.