Travers Smith LLP | Natalie Lewis, Louisa Chambers and Jonathan Gilmour

United Kingdom

All questions

Introduction

The United Kingdom continues to regard and position itself as one of the premier jurisdictions in the world for fintechs.

Although there is no tailored regulatory regime for fintech, regulators such as the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA) and Payment Systems Regulator (PSR) are familiar with, and broadly supportive of, the sector and its potential to solve customer problems and improve customer outcomes.

Moreover, fintech was identified as one of the five priority sectors in the Financial Services Growth and Competitiveness Strategy published in July 2025. The sector has strong and well-regarded trade associations and is regarded as strategically important to economic growth.

Although there are no tax incentives aimed exclusively at fintechs, research and development tax credits may be available to innovative technology businesses (therefore not limited to fintechs). However, these credits will require careful assessment, and His Majesty’s Revenue and Customs (HMRC) (the United Kingdom tax authority) has recently shown a willingness to seek the return of these tax credits if they were claimed wrongly.

As there is no specific regime for fintechs as such, it follows that there are no specific digital information sources for the sector. However, as part of its commitment to encouraging innovators, the FCA has established a number of “services” within its innovation function, including:

  • Innovation Pathways, which provides pre-application support for innovative firms that meet its criteria, and leads to faster authorisation decisions for firms that do apply;
  • the Regulatory Sandbox, which provides a live test environment with real consumers and allows a range of firms (including those authorised, considering authorisation or not needing authorisation at all) to test innovative business models under FCA oversight;
  • the Digital Sandbox, which consists of a collection of data sets that fintechs can use to test and develop their products, as well as offering mentoring opportunities, the ability to demonstrate (to investors, for example) use cases and providing a market for providers of these data sets; and
  • in partnership with the Bank of England, the Digital Securities Sandbox (DSS), a regulatory sandbox designed to allow firms that operate trading venues or central securities depositaries (CSDs) to develop their models and experiment with new technologies, especially (but not limited to) distributed ledger technology (DLT). The Bank of England and the FCA have the power to amend or remove certain statutory provisions impacting upon trading venues and CSDs (or participation in such venues or CSDs) where current drafting is incompatible with the way the technology operates, in such a way as to allow the safe (and supervised) use of these businesses by market participants. Sixteen firms had entered the DSS as of February 2026.

In addition, the FCA has partnered with the PRA (which is constituted as part of the Bank of England and has primary responsibility for authorising businesses that accept deposits, ie, banks and building societies) to establish the New Bank Start-up Unit and the Scale-up Unit. The former provides information and support to those wishing to establish banks, and the latter offers advice to more established firms that are experiencing rapid growth. The Scale-up Unit accepted its first cohort (five banks and one building society) in January 2026.

Although many firms are critical of specific rules (a key example being that many fintechs consider that the authorised push payment (APP) fraud reimbursement regime, introduced in October 2024, is excessively onerous to challenger payments businesses), the consensus is that the political and regulatory environment is favourable to fintechs as a cohort. In addition, the United Kingdom’s high-quality universities, use of the English common law and language and favourable time zone all contribute to a dynamic and open fintech ecosystem.

This article first appeared on Lexology | Source