FinTech’s potential to transform how finance and business operates has gained attention around the world in recent years. In 2022, banking giant JP Morgan increased its level of tech investment to $12 billion, while the STOXX Global Fintech Index recorded a swift recovery after the Covid-19 pandemic.
However, the sector also faces challenges. The cryptocurrency market was rocked by the collapse of FTX and arrest of Sam Bankman-Fried late last year, and Goldman Sachs has recently revealed the large scale losses incurred in some of its fintech investments, which have led it to refocus on more traditional functions.
This is food for thought for FinTech businesses, however, it should be seen as an opportunity for evolution as much as a cause for concern.
Ambitious players in FinTech should see this as a moment to recalibrate and shift their priorities towards building practical, everyday products that help provide the sector with sustainable foundations for the future.
Current conditions may encourage FinTechs to iron out their relationships to regulation and further develop the range of services they provide to established businesses and financial institutions, from compliance software to subscription billing solutions.
FinTech products with more everyday business functions are becoming increasingly vital, with InsurTech and RegTech two key categories which are driving growth in the sector.
Increasingly, FinTechs will need to successfully navigate growing government interest and involvement in the sector, and to take advantage of opportunities for collaboration with both public sector actors and businesses.
Recognising these developments, the Isle of Man is taking a bold approach to growing its FinTech sector, putting collaboration and legitimacy first.
The island, which has a population of just 85,000, has a record of innovation disproportionate to its size, from pioneering the adoption of 3G mobile services, to supporting the British Isles’ first regulated GBP-pegged stablecoin.
Now the Isle of Man is on a mission to attract cutting edge FinTech businesses as part of an effort to build on the existing strengths of the Island’s economy, with its well established, thriving financial services and digital technology landscape.
Key to the Island’s FinTech strategy is the flagship FinTech Innovation Challenge, launched by Isle of Man Government executive agency Digital Isle of Man in partnership with Finance Isle of Man and supported by the Island’s regulator, the IOMFSA, and Deloitte.
The Challenge’s soon-to-be announced cohort of participants will have the opportunity to develop new products or to further refine and strengthen existing ones.
It has attracted ambitious businesses who are looking to scale up their operations, develop new products and expand into new markets to tackle a number of selected problems which face businesses on the Island and around the world every day.
Businesses will develop solutions to address foundational issues like Digital ID Management, e-KYC (Electronic Know Your Customer) and compliance and transaction monitoring.
Those participating, will develop their products with the support of the Island’s authorities, and will be able to access the expertise of its thriving digital, technology and financial business communities, some of whom are involved in the Challenge themselves as mentors and judges.
It follows the recent success of the Island’s InsurTech Accelerator Program in partnership with F10, the global innovation ecosystem, which has provided a brilliant platform for InsurTech start-ups looking to scale up, access the expertise of the Isle of Man’s highly developed insurance sector, and take their businesses and products to a global market.
The Isle of Man is an ideal environment for young, innovative FinTech businesses to grow with the help of a strong local business community and supportive government, and from the robust foundations they have built on the Isle of Man, participating businesses will be well-placed to take their products to global markets.
For FinTechs navigating a complex environment, the Isle of Man also provides the opportunity to build close, collaborative relationships with government and regulators.
As a self-governing jurisdiction, it is able to apply pragmatism to its well regarded and conformant regulation, thereby seeking to adapt to the development of the dynamic FinTech sector and supporting businesses to thrive because of, and not in spite of an increasingly regulated global environment.
Regulation, Island authorities believe, does not have to curtail the growth of innovative sectors such as FinTech – it can be a supportive, legitimising force which can offer businesses both stability and prestige.
The Isle of Man’s greatest strength is its sense of community, its openness to collaboration between local and global businesses, government and the private sector, regulators and the businesses they regulate, all of which is crucial to allow innovation to thrive.