The UK’s fintech sector is entering another policy cycle with competing priorities around fraud prevention, open finance, stablecoins, digital identity and access to European markets.
Innovate Finance has used its September 2026 report, FinTech as a Force for Good, to present six policy proposals to the UK government ahead of the Budget on 28 October. The proposals call for faster progress on Open Finance, broader responsibility for online fraud, a national sterling stablecoin strategy, a more competitive digital verification market, improved access to European markets and changes to several investment and share-tax measures.
The proposals have attracted broad agreement around some of the underlying problems, but industry responses differ over how those problems should be addressed. In particular, contributors cited in the report and subsequent industry discussion have questioned whether a fraud compensation fund would create sufficient incentives for prevention, whether the UK’s proposed stablecoin framework could weaken sterling-denominated digital money, and whether accelerating Open Finance regulation would resolve the underlying data-quality problems inside financial institutions.
Innovate Finance’s Six Policy Proposals
Innovate Finance’s September report places six requests before the government.
They cover both financial regulation and taxation:
- Accelerate Open Finance, with a regulatory framework targeted by the end of 2026.
- Extend fraud responsibility to social-media and telecommunications companies, including through an Ofcom-designated fraud origination redress fund.
- Develop a national sterling stablecoin strategy.
- Create a reusable digital verification market without unintentionally locking users into one provider, platform or wallet.
- Improve EU market access for UK fintech businesses that currently face additional licensing requirements.
- Reform selected investment and share-tax measures, including EMI, CSOP and Business Asset Disposal Relief, while abolishing stamp duty on UK shares.
The report uses several figures to support its argument.
It states that 66% of authorised payment fraud in 2025 originated on online platforms, while APP fraud increased 19% to £576.4 million, with 89% of the reported APP fraud value reimbursed by banks and payment firms.
It also highlights the concentration of stablecoins around the US dollar, stating that 99% of stablecoins in circulation are denominated in dollars, alongside approximately £300 billion of household cash held in low-interest accounts.
The report also cites Lloyds Bank analysis indicating that 68% of purchase-fraud reports originated on Meta platforms.
Fraud: From Reimbursement to Prevention
Fraud represents one of the most contentious elements of the proposals.
Innovate Finance argues that responsibility should extend beyond banks and payment providers because digital platforms and telecommunications networks can form part of the fraud chain before a payment reaches the financial system.
The argument is based on an incentive problem.
If a fraud begins on an online platform but the financial institution ultimately reimburses the victim, the companies involved at different stages of the fraud journey may not face equivalent financial incentives to prevent it.
Jonathan Frost, Director of Global Advisory for EMEA at BioCatch, supports greater responsibility across the ecosystem but argues that compensation alone does not necessarily constitute prevention.
His position is that banks, technology platforms and telecommunications companies can each see different parts of the fraud process, allowing criminals to exploit gaps between them.
This raises a broader policy question: should liability primarily compensate victims after fraud occurs, or should regulation impose stronger obligations on companies to identify, disrupt and report suspicious activity before losses occur?
The Proposed Fraud Origination Fund
Innovate Finance proposes an Ofcom-designated fraud origination redress fund that would bring social-media and telecommunications companies into the mandatory reimbursement framework.
Scott Dawson, CEO of DECTA UK, supports extending responsibility to those sectors but raises a condition around how contributions should be calculated.
His concern is that a fund could become simply another operating cost if payments into it do not change according to the amount of fraud associated with a particular platform.
Under a prevention-focused model, financial contributions would ideally create a direct economic incentive to reduce fraud originating through a company’s systems.
This distinction is significant.
A mechanism that merely distributes the financial cost of fraud could change who pays without necessarily changing how fraud is prevented.
Real-Time Intelligence Sharing
Another issue raised by industry participants is information sharing.
Frost argues that the UK’s fraud-response framework needs clearer requirements for different sectors to share intelligence and act within defined timeframes.
The alternative model would be closer to a statutory cross-sector duty to prevent, detect, disrupt and report fraud.
Innovate Finance’s Adam Jackson said the organisation agrees that reimbursement should not be treated as the end goal and that the priority should be identifying and stopping fraud.
He also pointed to work developed with industry members on technology-enabled fraud prevention and the government’s Online Crime Centre, which is supported by £31 million under the UK’s Fraud Strategy 2026 to 2029.
The distinction remains important: coordination and data analysis are not necessarily equivalent to a statutory obligation requiring all relevant sectors to share intelligence in real time.
Open Finance: Faster Regulation or Better Data?
Innovate Finance wants the UK to accelerate Open Finance and establish a regulatory framework by the end of 2026.
Industry support for greater urgency is accompanied by concerns about implementation.
Akber Datoo, CEO of D2 Legal Technology, argues that regulatory acceleration by itself will not make financial data usable.
The underlying problem is data quality.
Financial institutions can hold information across fragmented systems, with different data structures, ownership arrangements and legal interpretations.
If those underlying problems are not addressed, giving consumers or third-party providers greater access to data could simply make poor-quality information available more quickly.
This creates an important distinction between:
Data access — the ability to obtain information.
and
Data usability — the ability to obtain accurate, structured and machine-readable information that can support reliable financial services.
Why Open Finance Matters to UK Businesses
Despite these concerns, industry representatives point to significant economic potential from more efficient open financial infrastructure.
Ciaran O’Malley, Director of Commercial Enterprise at Airwallex UK, highlights Innovate Finance’s estimate that a 3% improvement in cross-border payment efficiency could unlock £56 billion for UK businesses.
The figure illustrates why Open Finance is being discussed alongside broader UK competitiveness.
Faster and more standardised access to financial information could support areas such as:
- Automated financial services
- Cross-border payments
- Business cash-flow management
- Lending and credit assessment
- Personal financial management
- Embedded finance
- AI-enabled financial services
But the benefits depend on implementation quality and the ability of financial institutions to produce reliable data.
Sterling Stablecoins and the Dollar-Dominant Market
Stablecoins represent another major point of disagreement.
Innovate Finance has called for a national strategy for sterling-denominated stablecoins as policymakers consider how digital money should develop within the UK financial system.
The underlying challenge is the dominance of the US dollar in the stablecoin market.
The Innovate Finance report states that 99% of stablecoins in circulation are denominated in dollars.
Can Taner, Chief Product Officer at Bitpace, argues that aspects of the Bank of England’s regulatory framework could make sterling stablecoins less competitive than dollar-denominated alternatives and tokenised bank deposits.
His criticism focuses on the reserve structure for systemic sterling stablecoins.
The Bank of England’s 70:30 Reserve Framework
The Bank of England’s June 2026 policy statement on sterling-denominated systemic stablecoins changed the proposed backing structure from 60:40 to 70:30.
Under the framework discussed in the source material, up to 70% of backing assets can be held in short-term UK government securities, while 30% must be held as deposits at the Bank of England.
The deposit component does not earn interest.
The Bank’s rationale is connected to its treatment of stablecoins primarily as payment instruments rather than conventional stores of value.
Industry criticism focuses on the economic effect of holding a substantial portion of backing assets in non-interest-bearing central-bank deposits.
For issuers and service providers, the question is whether those requirements could make sterling-denominated stablecoins less commercially attractive than dollar alternatives.
The Dollarisation Question
The debate has implications beyond stablecoin companies.
If digital payment activity increasingly uses dollar-denominated stablecoins because of liquidity, market depth and regulatory conditions, the UK’s domestic digital-money ecosystem could become increasingly dependent on dollar infrastructure.
Innovate Finance itself has previously raised concerns about this possibility.
The policy challenge is therefore two-sided.
Regulators need to maintain appropriate safeguards around stablecoins, while policymakers also need to consider whether those safeguards could unintentionally encourage users and businesses toward foreign-currency digital assets.
The balance between financial stability, consumer protection, payments innovation and currency competitiveness remains unresolved.
UK Fintech and Access to European Markets
Innovate Finance also highlights the changing economics of operating between the UK and European Union.
The report argues that some UK firms now need two licences to access markets that previously could be reached through European regulatory arrangements.
Dawson describes the additional requirements as creating duplicated governance, compliance, capital and operational costs before a company acquires its next customer.
The report uses Berlin and London as an illustration of the changing competitive environment.
The comparison should not be reduced to whether one financial centre is categorically stronger than another. Instead, it demonstrates how licensing requirements can influence where internationally oriented fintech companies establish operations.
Ciaran O’Malley argues that businesses in the AI era are increasingly international from the outset, making access to multiple markets an important consideration when choosing an operating base.
Digital Identity and Verification
Innovate Finance’s fourth proposal focuses on creating a reusable digital verification market.
The objective is to allow digital identity and verification credentials to be reused across financial services without unintentionally creating dependence on a single provider, platform or wallet.
A reusable identity infrastructure could potentially reduce repetitive customer onboarding processes.
For financial institutions, verification is required across areas such as:
- Customer onboarding
- Anti-money-laundering controls
- Fraud prevention
- Account opening
- Credit applications
- Payments
- Business verification
However, digital identity infrastructure also raises questions about data governance, privacy, interoperability, cybersecurity and market concentration.
A competitive ecosystem would need to allow credentials and verification services to work across multiple providers rather than creating a new form of digital infrastructure lock-in.
Which Proposals Can the Budget Address?
One of the most important distinctions in Innovate Finance’s submission is between policies that can potentially be announced through a Budget and those requiring longer regulatory or legislative processes.
Several of the tax proposals are directly suited to fiscal policy.
These include changes involving:
- Enterprise Management Incentives
- Company Share Option Plans
- Business Asset Disposal Relief
- Stamp duty on UK shares
The report states that proposed changes to Business Asset Disposal Relief would reduce the maximum saving from £1 million to £60,000.
These measures can potentially be addressed through fiscal announcements.
Other proposals are considerably more complicated.
Why Fraud Reform Would Take Longer
Creating a new fraud redress mechanism involving social-media and telecommunications companies would require changes to existing legislation and regulatory processes.
The proposal would involve an Ofcom designation process and a new distribution mechanism.
The source material identifies the Financial Services and Markets Bill as a potential legislative vehicle after the Budget, with 2027 representing a more realistic implementation timeframe.
This means the fraud proposal is not simply a Budget measure.
It requires changes to the legal and regulatory architecture governing responsibility for fraud.
Open Finance and Stablecoins Have Different Timelines
Open Finance also operates on a regulatory rather than purely fiscal timetable.
Accelerating it would require changes to regulatory implementation, secondary legislation and coordination among financial authorities.
Stablecoin policy similarly involves several institutions and technical questions, including accounting treatment, collateral requirements and financial-stability safeguards.
Digital verification would require its own legal, technical and procurement framework.
Consequently, Innovate Finance’s six proposals cover different policy mechanisms even though they appear together in a single report.
The Central Policy Tension
The debate ultimately comes down to a recurring challenge in financial regulation: how quickly innovation should be enabled while maintaining safeguards.
For Open Finance, faster implementation may increase access to financial data, but poor-quality data could reduce its usefulness.
For fraud, broader reimbursement responsibility may alter incentives, but the mechanism must be designed so that prevention improves rather than merely shifting costs.
For stablecoins, stronger reserve requirements may support financial stability, but policymakers also need to consider their effect on the competitiveness of sterling-denominated digital money.
For digital identity, reusable verification could reduce friction, but interoperability and market concentration remain important considerations.
What Happens Next?
The 28 October 2026 Budget provides an opportunity for the government to address the proposals that fall directly within fiscal policy.
The regulatory proposals are likely to require longer processes involving the Treasury, FCA, Bank of England, Ofcom and other relevant institutions.
Innovate Finance’s submission therefore represents both a Budget document and a broader regulatory programme.
The industry’s responses show that there is substantial agreement about several underlying challenges facing UK fintech, while disagreements remain over the mechanisms that should address them.
Conclusion
Innovate Finance’s September 2026 policy submission places fraud, Open Finance, stablecoins, digital identity, European market access and fintech taxation on the UK’s policy agenda ahead of the October Budget.
Industry responses broadly recognise the importance of these issues but expose significant differences over implementation.
The fraud debate centres on whether financial responsibility should extend to platforms and telecommunications companies and whether reimbursement mechanisms can create sufficient incentives for prevention.
Open Finance faces a different challenge: accelerating regulatory timelines without overlooking the fragmented and inconsistent data infrastructure within financial institutions.
Stablecoins raise another strategic question, as policymakers seek to establish safeguards while avoiding conditions that could encourage greater reliance on dollar-denominated digital money.
The proposals therefore represent more than a list of Budget requests. They form part of a wider debate over how the UK can modernise financial infrastructure while maintaining competition, consumer protection and regulatory resilience.
