Interview with Charlotte Crosswell, CEO of Innovate Finance

Founded in 2014, Innovate Finance is an independent membership association, a non-profit that represents the UK’s global FinTech community and advances the country’s position in the financial services sector by supporting the next generation of technology-led financial services innovators. More than 250 organizations are members. They range from seed-stage start-ups to global financial institutions and professional services firms. All benefit from Innovate Finance’s position as a single point of access to promote enabling policy and regulation, talent development, business opportunities, and investment capital.

Innovate Finance celebrates the best of British FinTech firms, innovation, and talent. It also offers programs that help startup members scale and larger members innovate. These ongoing programs are funded by membership fees paid by financial services and financial technology firms, and other members drawn from the UK FinTech ecosystem, including the City of London and Broadgate.

The UK has been at the heart of the FinTech revolution, changing the face of financial services across the globe and is the undisputed FinTech hub of Europe. That is, until now. Post-Brexit, will the UK be able to attract the right talent and skills, or will the highly qualified be stopped at the border only to be welcomed by Paris or Frankfurt?

That question will be on everyone’s mind as Innovate Finance convenes the global FinTech community for the fifth annual Global Summit (IFGS), 2019 edition, on Monday, April 29th and Tuesday, April 30th at the Guildhall in London. The IFGS is kicking off UK FinTech Week. More than 2,000 attendees are expected. You can register here.

Charlotte Crosswell is CEO of Innovate Finance, a position she began in 2017. She is also on the board of UK Finance. She graciously shares her views on FinTech in the UK below.

Charlotte Crosswell

Q.     Charlotte, what drew you to Innovate Finance?

A.     I had actually moved to a portfolio career to go on boards as a non-exec director. I left NASDAQ and decided I wanted to spend more time with FinTech companies. So I started doing that, and then I realized the problems some companies had in raising capital. Bear in mind, this is post Brexit referendum. I was concerned generally that the sector would need more support.

Certainly, it was quite surprising to me, despite having been in tech back in the 1990s, that there wasn’t a lot of support for companies raising capital. That led me to start to talk to Innovate Finance. I was in talks with them about being on the board as a non-exec director, and during that process the CEO actually decided to step down, and so they asked me to come in as interim CEO. Six months turned into a year and the rest is history — I ended up joining permanently. 

The reason I was interested in it was I felt that it was an organization that was quite unique. There wasn’t anything like it. It has this unique position at the center of the ecosystem, helping companies large and small. It was really important for this sector to have this support, and I believed I was in a unique position to do that. So I thought, why not do it from within a big organization rather than try to do it myself?

Q.     Your member companies run the gamut from brand new startups with little or no revenue to global banking giants founded hundreds of years ago. What are the startups looking for from you?

A.     That’s our biggest category of membership, the earlier stage up to Series A. I’ve done two startups; it’s a lonely journey. These companies join us for a variety of reasons. Some join to plug into the capital and investment programs we run. Some join to get support and network with others is a similar position. Some join to meet the bigger institutional members, such as the banks. It’s helpful to understand the landscape if you are trying to sell into a large bank. That’s quite a lot of the work that we do, supporting companies in that journey. 

Q.     And what are the larger, more established members looking for?

A.     We have quite a range of large members, from banks to consultancies to law firms to accountancy firms. Some are looking to promote what they are doing within the sector more, particularly the professional services firms. Quite a lot of them like to take a thought leadership position on some of the themes around it, and support the work we do there, whether it’s the talent program or the capital program or our diversity program.

A lot of the banks originally (if you can cast your mind back to when FinTech was just starting to get more noise) were there really to meet more FinTech companies; to understand them and potentially invest in them. That’s changed quite significantly over the last few years, and now we see them more trying to work out the ecosystem and look at partnerships and collaboration. And a lot of the time actually they want to adopt the technology themselves as well. You can just bring in a cost saving. So we’ve seen more banks moving from making an investment to make money on the investment — and they may still take an investment — to doing that because they’re going to take a cost saving by using the technology. 

Then you get the really advanced ones asking how they can learn from these FinTech companies around their own innovation journey and their own cultural program, as well. How do you replicate that type of innovative thinking? How can you be more nimble, how can you have an attitude toward innovation that potentially the larger banks didn’t have?

We see quite a range of reasons to join. But ultimately all of our members are there to connect into one ecosystem where they can access the different parts. I might talk to a consultancy that wants to do more work with a law firm that might want to have a couple of FinTech companies along. So they’re not just there for the FinTech companies, they’re not just there to meet their peers— they actually want to be part of the ecosystem. And then we plug them into regulators, government, etc.

Q.     Are they looking for you to lobby regulators and government on issues that are important to them?

A.     Quite a few are. We tend to do more collective work. We identify what the issues are for the sector and where the opportunities are for growth. 

We have lobbied on things like immigration rules. We had an immigration white paper produced by the UK government last year and we did quite a lot of work on that for the FinTech sector. We’ve done quite a lot of work on peer-to-peer lending; we’ve done work on the FCA’s regulatory sandbox. We try to provide that collective voice. We then bring companies that are more interested in a particular area into the conversation.

Q.     I’ve already bought my ticket to this year’s Global Summit. What should people expect this year? What will be new and different?

A.     We’re in our fifth year. This year we are doing it with our UK FinTech Week partners such as the London Stock Exchange, HM Treasury, and the Department for International Trade, so we’re all helping to make these two days successful and also giving attendees a reason to stay on for the week. There are two days of Summit and then other events go on during the week. More reasons to stay on may attract more of an international audience.

This year we will have one stage more dedicated around the different technologies coming through, so companies can come and listen to particular verticals; whether that’s RegTech, whether that’s AI or cyber security. And then, they may go to the other space, which will be more on themes such as how do we tackle the skills and talent issues in the country, how do we tackle capital and investment. So — the themes on one stage and the technologies on the other. 

Then we are planning to give people a lot more spaces to meet, to set up meetings in advance, and then help facilitate some of those meetings so that we get FinTech companies meeting investors and we get FinTech companies meeting regulators.

Everyone can go to lots of conferences every year. I think we have quite a unique position in that people do come to this one because they actually see the opportunity to have true, real life, value-added meetings.

Q.     Tell me about Pitch360. Who should apply?

A.     Pitch360 is about allowing companies to pitch directly to investors. That is open to everyone and we have a judging panel that looks at where the best opportunities are and who gets the chance to be on that stage. It’s for companies looking to raise their profile, raise money. It can be all sizes.

Q.     Promoting diversity and inclusion are important priorities for Innovate Finance. What should I know about your Diversity Programme and the Women in FinTech initiatives for 2019?

A.     This is the first year we have a cutoff for our Women in FinTech list. We felt it was right this year to look at the top 150 women in the sector. This will be one of our flagship events for the year. The nomination period is closed, and the judging will start in the next couple of weeks. The list will be announced in late February. This year we’ve got the Standout 35, the five people in each section who’ve really gone over and above their day jobs.

Also, we’ll be trying to build up the Women-in-FinTech community. We have very senior women ‘round our table. We’re very fortunate that a lot of people come out and support our efforts — whether that’s at what we call the Women in FinTech Power Hour (our first one was with Alison Rose, Deputy CEO of NatWest Holding at RBS Group); or at brainstorming sessions where we encourage women to come in, meet others, and discuss issues.

This may be where we actually do have to lobby the government a bit more, on the diversity piece. The investment numbers are pretty shocking in terms of how much venture money goes to female-led businesses, and there’s absolutely no reason why that is, apart from the fact that a lot of VCs don’t have women on the investment team. Which you’ve got to think could be where we could start. Is there work we could do around that, to try and raise that profile, or is that even something where we should have targets, like a set percentage of women on boards? We will definitely continue to raise the profile.

There are two reasons to do that. One, we do believe in full diversity in the sector. It’s really important that people have diverse teams in age, gender, race, everything. We know it brings a different set of thinking into companies. FinTech was quite male dominated from the beginning as a lot of FinTech companies were started by senior bankers. If you look at how many women there are at senior banking levels, the numbers aren’t good. There’s only 29% of women in the sector, and we’re still not seeing women coming into the sector. We have to really ensure that we make that change now, and we’ll continue to shine that spotlight on it.

This isn’t just people checking a box on and saying we’ve done our diversity strategy; this is actually every single one of our members, from the largest bank and largest consultancy down to the smallest startup, focusing on it. Aswe have a skills and talent gap across financial services, and especially in FinTech, excluding women — whether unconsciously or consciously — makes the pool a lot smaller. We have to think about how we solve the talent gap through diversity strategy. It has to be done. We have to be more creative. There are not enough people coming into the sector with specialized skills and talent. 

Diversity isn’t the only solution, but it is one of the solutions. We will continue to run a series of events around that — how to bring more diversity around the board table, how to build more diverse teams, and also what are the opportunities for more young women to come into the sector. Bit of an education piece, as well.

Q.     What are you up to in Singapore? You recently signed a MoU with Singapore FinTech Association, the cross-industry and non-profit organization supporting the development of the FinTech industry in Singapore.

A.     That’s the start of looking at how we can leverage the FinTech Bridge they’ve got going. If we sign these MoUs, it gives us the opportunity to use them as a springboard for working with that particular association. That may be referrals for companies that are looking to expand in each country — this week I had Singapore refer me to someone who’s interested in becoming a member. We have to realize that FinTech is a very global sector from day one. Most start-up companies are going to be exporting their products at some point. We have a responsibility to look at how we can support them and help them on that overseas journey.

I don’t anticipate sending lots of Innovate Finance people overseas in order to do that because we have a lot of these reciprocal agreements where we can work with associations like in Singapore, to really ease that journey. We are always very happy to work with overseas markets and ensure that we have the contacts there. We pass them on, we look at what else we can do, we encourage the regulators to get together at the Summit. We are really looking at true partnerships.

Q.     What is InnFin doing to safeguard London’s place as a the leading European FinTech hub in the face of Brexit?

A.     Never enough! I’ve been to see the Government three times this week already and it’s only Wednesday!

It’s extremely important that we raise the issue of FinTech companies that are struggling to get ready for Brexit because they don’t have the resources that a big bank has.

Q.     They still don’t know what Brexit means!

A.     No one knows what Brexit is. We don’t even know if we’re having Brexit. 

The incumbent banks have resources. They have European offices in place. They don’t want to, but they could repaper their contacts. FinTechs do not have that luxury. But at the moment, they don’t know what they should get ready for. We are pushing government to give as much clarification at all stages of the process as possible. We have tried to do that as much as we can. We have an upcoming webinar on Brexit. We are planning a roundtable on Brexit — this is with our MPs. 

I was in Parliament yesterday, talking with MPs and some in the House of Lords. It is important that we educate them as to what FinTech is, as well. Some of our MPs are very up to speed on FinTech and others aren’t. FinTech offers competition, it offers transparency, it offers a better result to the end consumer and to small businesses. We have a responsibility therefore to give it as much support through the Brexit process as possible. 

But there’s obviously going to be a lot more cost involved, and that’s a problem. Some of these companies are small. They may have raised money, and now they may need to use some of that precious fund on overseas offices. 

For us, we have access and can go and get answers, where answers are available, and we can go back to members with webinars, white papers. We’ve been asking the government to even get one-pagers ready and have that ready to go for smaller companies. For us, it’s education, trying to get members in touch with the right people, to push government for clarification. We are quite fortunate within the UK that because the FinTech sector has done so well and because cabinet ministers realize the importance of the sector and the opportunities of the sector, we are able through our work to push hard. There is quite an open door. We do have some senior civil servants who are quite keen to help the sector, protect it, and grow it. There is tremendous support for the FinTech sector here. 

Q.     The availability of talent is a limiting factor in firm growth. The UK appears to be making it harder for FinTech firms to recruit the best talent from anywhere in the world. What steps are being taken so that the sector will still have access to the best talent regardless of geography? Is the Startup Visa part of the answer?

A.     It’s a very international sector in term of workers. 42% of people working in UK FinTech come from overseas. It’s really important that we showcase that this is talent we want to keep and that we want to keep these businesses in the UK. Brexit creates that risk — are we going to retain that sector or is that talent going to think that there’s potentially more opportunity elsewhere?

There are a couple of things we can discuss. The Startup Visa is designed to encourage people to come and start businesses here. We give visas to people who can start businesses in the UK. That’s very much driven by the Department for International Trade.

There is definitely still more work to be done regarding students. If people come to study here, how do we ease that process of applying to stay on and start businesses? That is getting better. We have raised that as that has been an issue for a lot of people.

Where specialized talent is lacking in the country, we have to make sure that talent can still come in. Not quite a point system but a similar type system. Obviously, a lot of the Brexit negotiation and the referendum was around immigration. A lot of people felt there was too much immigration and it was taking jobs away from people. But we have to make sure we don’t close the gate to talent that we actually need and that the skills that we need are available.

But let’s face it, we also need to look at our education system and say what’s our five- and ten-year plan? It’s a global talent race. It was an issue before Brexit, and it will become more of an issue post-Brexit. We have to ensure, therefore, that we are looking at the pipeline of our own talent as well overseas talent, to make sure we plug that gap in the future. Or it’s only going to get worse.

Q.     The numbers I’ve seen regarding venture funding for UK FinTechs still look good, but that has to be an issue of concern going forward. What do you think will happen to funding of FinTechs in the UK post-Brexit? I know that European Investment Fund activity has already dropped considerably. Is the British Patient Capital Fund going to pick up some of that slack?

A.     That’s one of them. We do work closely with the British Business Bank which has that fund available. I think there’s a bit more education to be done with some of the companies regarding how to access some of that funding. And we are working with the British Business Bank to ensure that they understand the landscape as well as what needs to be done.

A lot of the funding already comes from VCs and from private equity but we will continue to lobby for funding for the sector. There is general sympathy for the sector and the entities that need more funding, and it is something we raise with the government on a very regular basis to see what else can be done to ease that.

I believe personally — and this is one of the reasons I came into Innovate Finance — that there is money available. I worked at NASDAQ for ten years. I don’t think we have the risk appetite in the UK compared to US markets, but what we do have is a sector that is doing very well and a sector that US investors will recognize has the ability to grow quickly. 

We are under national regulation versus federal and state regulation. We have a system where the government provides support, and we have sandboxes. Because of that, investors do recognize that there are good opportunities to invest in and grow these companies.

But I think we need to do a better job as a country in 1) encouraging early-stage investing and 2) encouraging bigger ticket sizes when it comes to growth investments.

I used to work for the London Stock Exchange. One of the reasons I moved to NASDAQ is how hard it was to raise money for tech companies in the UK. They tended to do later raises in the US, they tended to do IPOs in the US, they felt there was better understanding of tech in the US. With FinTech, we have an opportunity because it’s a sector that is very well understood in the UK, so we have to make sure we are showcasing some of the opportunities to invest in some of these FinTech companies and what their stories are.

Q.     What steps are you taking to help UK startups realize their global ambitions?

A.        It’s very important that we help companies as they do look to export, whether that’s across Europe or across the world. What we do a lot is showcase opportunities for support, whether it’s me, or whether it’s through some of our MoUs, or whether it’s our Department for International Trade going on trade missions, or the Lord Mayor raising their profiles. 

We have a sector that a lot of people globally are looking at and want to hear about. That’s a real opportunity and we must make sure that Brexit doesn’t stop that and if anything, we have to continue to push ourselves more to showcase our capabilities.  It’s a bit of a marketing effort, in my view, but if you look at the 2017 statistics (they’re about to release 2018), they show that 50% of money raised by UK FinTech came from overseas. That shows you the attractiveness of the sector for investors and that hasn’t been hampered by Brexit, yet.

Q.     Do you still see US, European and Asian FinTech startups looking to establish a presence in the UK?

A.     Yes. We do get approached not just by European companies, but by companies from Asia, the Middle East and the US. London is still the biggest financial services center within Europe. If B2B companies want to do business in financial services, chances are they’re going to come here. We have to make sure we keep our financial services sector, so they’ll still want to do that. 

Q.     What advice do you have for FSIs seeking to develop a culture of innovation on the inside?

A.     It starts at the top. It has to be discussed at the board level. We’re getting there now. We went for a long time where banks just put their innovation hubs, their accelerators or incubators into Shoreditch here in London and feel they’d done their FinTech innovation strategy. A very limited number of people would really understand it. 

Even over the last 12 months, I’ve seen a shift where even if those hubs still exist(and most of them do), there’s much more interaction between that hub and the rest of the group. The group recognizes that they can understand what lessons they’re going to learn. It’s actually using that to bring cultural change.

I personally would love to see more banks use the opportunity to allow some of their more senior staff to work with these FinTech companies and then bring their expertise back and allow it to infiltrate the bank.

So it’s getting better. The best banks at doing this are the ones thinking about how they are going to encourage innovation in every part of the organization. Mind you, those are the financial institutions that will continue to succeed. There’s the opportunity to play catch-up for the ones that held onto their old ways of doing things a bit longer than they should have, but now is the time to do it.

Q.    Has PSD2 lived up to its promise thus far?

A.     Depends what you believe its promise was. Some people thought open banking was going to open the floodgates.

Open banking is just the foundation for work to be done. It has been a year since it came in and we are seeing a lot more conversation around what needs to happen next. It’s not enough so far. So, if people went in with a relatively low expectation, it might have met that low expectation, but now is the time to drive it forward. 

So, still work to be done on that one.

Q.     Innovate Finance has been involved in the regulatory sandbox created by the FCA. What have we learned so far?

A.     The regulatory sandbox was to give people a safe harbor to test their products using data. That can only be a very good thing. We continue to have very good feedback from companies. We work closely with the FCA on this, and we continue to have conversations around the global sandbox the FCA is doing.

It will go to the next level as we get more specific use cases in there. Now people will be actively encouraged to us the sandbox to tackle some of the real core issues such as digital ID.

Q.     The FT’s Jemima Kelly believes that regulatory sandboxes are a symptom of a global regulatory race to the bottom and thus a danger to financial consumers. She also objected to the way some FinTech startups publicize their participation.  This seems to me to be missing the point by a wide margin. What are your thoughts on the topic?

A.     We have to understand what it’s there for. It’s there to provide an environment where you can test. If you don’t start somewhere, how can people innovate? Firms want to innovate; they want to test their products. Why would you not want to create a safe environment in which to test it with the regulator?

I had regulatory approval for two startups that I’ve done, but it’s extremely hard if you have to do that with the full force of the regulator and you’re not able to test it in advance. I can attest to that! Surely it has to be safer when you do go live if you’ve actually looked at some of the issues and you’ve gotten ready for full regulation. But people are entitled to their opinions.

In FinTech, these are regulated companies. We have to ensure that when they go live, they’re really ready to go live. Anything that gets them ready for that has got to be a positive.

Q.     Is Innovate Finance potentially a model for other cities, regions, or industries?

A.     It could be. We often get approached for, “How do I build Innovate Finance overseas?” But we really are in a unique position currently in the UK. We are an association that is not like a normal trade body. We don’t just collect dues and lobby. We actually bring the ecosystem together.

You could argue that having geographical proximity in London is an incredible help to that. Take the US — you’ve got East Coast and West Coast. You’ve got Chicago. Your regulatory market is fragmented — you’ve got regulators who are in DC and everywhere else across the whole country. We don’t have that. I can get to either of our regulators within ten minutes. I can get to a cabinet minister within 30 minutes from my office. I can walk to my FinTech companies within five minutes. I can get to the banks within 15.

What that allows you to do is foster community. We have incredible groups that come together to discuss what needs to be done in the sector. Around my advisory board, I have senior bankers and CEOs of big FinTech companies. The regulator comes as an observer. City of London Corporation comes in. The British Business Bank sits there. Everyone is listening to everybody’s views. That’s very difficult to replicate.

So yes, it would be great to think you could have lots of those around the world. But at the moment, I think we’re quite unique in terms of how it’s done in London.

Q.     What will be different about Innovate Finance a year from now?

A.     When I joined, we had 250 members, plus the regulators and the government. That’s a very strong ecosystem. I want to do more with them. That’s where we’re unique: to be able to bring in investors to do speed dating one week, and the week after to do a Brexit seminar, and the week after that to maybe look at a diversity action plan, and the next week to look at how we take the regulatory sandbox global. That’s pretty unique! We want to stay at the heart of the ecosystem and get people to come to us and tell them that if they are thinking of working within the FinTech community, they should come to us first and we will point them in the right direction.

I want to do more on the skills and talent programs. I am looking at a “schools campaign” to demystify what financial technology actually means, and use some of that to inform our thinking around education. And I want to do more about capital and investment. We want to profile the investors who currently invest in FinTech, and for the investors, provide a profile of the FinTech companies that they should invest in. I think there’s more to be done there. 

Those are our big programs for this year. Probably enough to keep me going for 12 months! It’s an exciting time for the sector. We’ll give FinTech companies as much support as we possibly can to ensure that the sector continues to flourish. 

Q.     What else would you like people to know about Innovate Finance?

A.     We do international work, obviously. I encourage anybody — especially from the US — (there is a lot of interest from the US into UK FinTech) to see us as their first port of call. Come see us. If people are interested in RegTech companies or AI, we can point them to the right place. We definitely want to be seen as the first stop. We know the ecosystem and we’ll be your one-stop shop in terms of connecting.

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