As the closing keynote at this year’s Finance Malta conference, I had the great experience of bringing together the many wise and interesting views already expressed during the 10th anniversary event while threading in a few thoughts of my own on the major topics of the content-rich day.
Brexit was the first major topic of discussion; the politics are one thing, the negotiations another, and as for the end result? Well, nobody knows, but the key message shining through from the speeches, beginning with that of Lord Marland of Odstock, was simple: Opportunity! Moreover, this opportunity must be overlaid onto the key understanding that financial services centres are not a zero-sum game.
In a world of expanding products with increasing global prosperity driving a greater demand for services there is always opportunity. Brexit delivers another possible source of both outright ‘new new’ things and the ‘tail’ of some UK operations that prefer or require a closer EU regulatory embrace.
Brexit opportunity is not the misguided notion of defenestrating the British financial services industry; rather, it is about building on modest opportunities that emerge from the new European order – both within the EU, bilaterally with the UK, and indeed beyond in the Commonwealth and those 180 or so nations not within the EU’s customs union.
Malta’s Anglo-Saxon legal base and broad English fluency makes it an attractive base for business. Therefore, one Brexit message was clear – this is an opportunity, and Malta has a wondrous chance to further expand its financial centre because of the possibilities that will emerge even before the fog of negotiation clears.
Of course, the opportunity spelt out by Brexit runs parallel to the fabulous possibilities within the rapidly extrapolating world of financial technology, or ‘fintech’. While general media is clearly more oriented to the impacts on online banking and the retail investor, the reality is that the serious innovation of fintech is taking place in the wholesale markets.
One Brexit message was clear – this is an opportunity and Malta has a wondrous chance to further expand its financial centre
Fintech is a fascinating opportunity for Malta, albeit lined with many pitfalls. For one thing, it is vital to consider how to regulate, and indeed, where and when to regulate. The difficulty is in establishing a regulatory system that is fit for purpose in a fast-evolving world. Thus, many western nations are already locked into dangerous spirals of knee-jerk regulation to save old established industries by imputing new laws that will soon impede the serious evolution of our shared digital future.
When it comes to taxis, for instance, many cities from France to the US have been reacting to the rise of Uber and similar taxi-like services by protecting the old licensed cab monopoly that dates to the era of horses and carts. However, politicians protecting licensed cabs with restrictive regulation is a deeply dangerous precedent. Why? Well the future isn’t about Uber drivers versus taxi drivers. Rather, we are on the verge of an era when the driverless car will flourish across the world.
Thus, we must allow Schumpeterian creative destruction to achieve the better outcome for all citizens. Financial regulation faces the same issues – and those making the rules must possess the wisdom and perspective to regulate with an eye to what is a very different future driven by technology.
Meanwhile, at the heart of e-commerce we see that the core model of Airbnb or Uber, to name but two, is itself a variant of the finest model for growing commerce that the world has ever seen: the exchange.
Exchanges are not dissimilar to the open markets where Maltese traded with Phoenicians thousands of years ago, embodied today in the more regulated processes of the Malta Stock Exchange. Thus, we must ensure that we encourage exchanges to remain at the epicentre of all financial markets, enabling bourse-style processes like crowdfunding and suchlike to grow under pragmatic regulation.
Much of the Finance Malta conference discussion centred around Blockchain, the technology that has mushroomed from a nerd sub-Reddit topic to being seen as the future of all organisations within barely five years. True, there is much hype, but practically there is significant substantial potential too: the age of blockchain is upon us.
The Bitcoin cryptocurrency has driven the blockchain mainstream delivering a Copernican revolution in money and financial markets; however, the Distributed Ledger is hardly a new thing. Steve Tendon’s excellent presentation showed its origins through the likes of the Domesday Book in medieval England… the exciting point now is that the digital distributed ledger is coming of age with an incredible opportunity to make government, society and corporations of all forms, vastly more efficient.
I ended my presentation by looking forward to 2027: the 20th anniversary Finance Malta conference. There are indeed threats everywhere and any financial centre must guard its reputation zealously but, as we look at the big data universe ahead, one thing is clear – the Maltese islands must remain nimble to succeed. Stasis is not an option – that will only enable competitors to leapfrog the progress Malta has already made.
Whether in Brexit, on the Distributed Ledger or across fintech – from any angle of the financial services industry – the need to progress, to move up the value chain while regulating with a pragmatic eye to the long-term future, is clearly the only way to go. Malta has vast potential but there is no time to pause progress as the outcome in the digital world of opportunity awaits.
Thus, the end result for Malta in its chosen niches will be a simple binary option: Victory or death!
Patrick Young, a Fintech pioneer, author of the ground-breaking Capital Market Revolution! on the future of finance (FT 1999), recently relocated to Malta to pursue new entrepreneurial projects.
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