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Seven habits of highly effective UK FinTech boards

Authors

  • Christopher Woolard CBE

    Partner, Financial Services Consulting, Ernst & Young LLP; EY UK FinTech Leader; EY Global Financial Services Regulatory Network Chair; EY EMEIA Financial Services Regulation Leader

  • Tom Bull

    EY UK FinTech Growth Leader

  • Tom Hill

    Senior Manager, UK Financial Services, FinTech, Ernst & Young LLP

8 minute read 13 Sep 2024
Related topics
Financial services
Banking and capital markets
Emerging technology

Research from EY teams and Innovate Finance shows how UK FinTech boards can add value and what skills and practices are most useful.

In brief

  • In the UK FinTech industry, effective board leadership can make the difference between sustainable growth and performance.
  • A strong board can help UK FinTech companies to draw investment, attract talent, accelerate innovation and navigate the barriers at different phases of growth.
  • Our research identified leading practices that differentiate high-performing FinTech boards and can be adopted widely across the industry.

Within the dynamic UK FinTech market, a wide range of firms have produced breakthrough innovations and achieved breakout results. Though FinTech success stories have different purposes, products and value propositions, they have one critical attribute in common: effective board leadership.

In our work with UK FinTech companies, we have seen time and again the powerful positive impact that skilled and engaged directors can have. Experience also shows that the opposite is true: FinTechs without a thoughtfully constructed, well-managed board often put themselves at a disadvantage, especially as they confront common challenges associated with growing and scaling a promising new business at pace.

In conjunction with Innovate Finance, EY teams have conducted research to understand both ‘the why’ and ‘how’ of high-performing boards. We found that FinTech boards can add value by enabling strategic growth and providing strong governance. Having the right individuals on the board can lead to more innovative ideas, more refined go-to-market strategies, higher levels of operational performance, healthier and more collaborative cultures and a greater social impact. All these attributes are attractive to investors, an important consideration in a challenging FinTech funding environment. 

Yet many high-potential FinTechs struggle to establish a strong board as they begin to grow. Because discussion of leading practices for boards is rare, FinTechs haven’t learned from each other about finding the right advisors or setting the right priorities. Our research is designed to help fill that gap.

How EY can help

The seven habits of highly effective FinTech boards

1. Keeping close to customers

Our FinTech board effectiveness report reveals that, whilst 66% of respondents consider customer-related issues to be of high importance, only 19% believe they have been highly effective in addressing customer priorities at the board level. Successful FinTechs are notable for their ability to stay close to their customers over time. Boards can help ensure that customers’ voices continue to be heard even as FinTechs grow. When directors understand the importance of customer insights and the value of rich customer experiences (e.g., accessible and personalised customer journeys), they can help CEOs and founders infuse customer-centricity more deeply within the business. As one FinTech founder told us, “Having entrepreneurial knowledge on the board is crucial, as members can raise ideas the founder hasn’t thought about in order to make the product more robust.”

As part of promoting a customer-centric culture, directors should also help define appropriate metrics for monitoring customer satisfaction, engagement and loyalty. An example would be using Net Promoter Scores, which represent a market research metric that assesses the willingness of customers to recommend a company, product or a service to other people through surveys. Reduced customer complaints and increased retention would also be effective indicators to include when monitoring improvements in customer centricity. Allocating time during board meetings to review customer and product stories (e.g., positive feedback and ratings, top complaints and pain points) is another way in which the board can keep the focus on customers, even as the business grows. 

 

2. Defining a higher purpose

The strong growth trajectories of many top UK FinTech companies have been fuelled by purposeful goals (e.g., a more inclusive financial system) that extend beyond their own bottom lines. FinTech investors also value a clear and compelling purpose as a proven driver of sustainable growth. One investor told us, “Even the most experienced venture capitalists (VCs) cannot have fast growth without a sense of purpose.” Purpose is also useful for decision support and balancing the needs for profitable returns for investors with the creation of substantial value for other stakeholders. 

Integrating purpose with business strategy
of UK FinTech board members say the firm’s purpose has been embedded into their organisation.

Based on our research, we predict purpose will remain a priority for FinTech boards and a strong differentiator for FinTechs. According to the CEO of a publicly listed FinTech, “Purpose should be a strong thread throughout the organisation.” 

3. Embracing regulation to prompt innovation

In traditional financial services, regulations are often viewed as barriers to innovation and profitability. Effective FinTech boards help their firms see the innovation opportunities associated with various regulations. Consider how the Financial Conduct Authority’s (FCA’s) Consumer Duty is designed to guide firms to develop more customer-centric products and experiences. Directors can help the organisation understand that regulators want the FinTech sector to grow and create guidelines to ensure that the benefits of growth reach consumers and society as a whole. 

Boards are critical for helping founders and CEOs understand the fundamental role and importance of regulations and striking the right balance of compliance and growth. The primary goal must be to embed risk and compliance thinking deeply into everyday operations and the organisation from day one. Such a commitment will make it easier for FinTechs to scale safely and successfully in the future, compared to those firms that try to “retrofit” compliance later. 

4. Supporting diversity in all its forms

Our FinTech board effectiveness report findings on diversity offer both good news and bad news. The good news is that respondents (83%) agreed that their boards had a diversity of skills and experience. At the same time, there is much more FinTechs can do to address the diversity gaps, especially relative to gender diversity, as our 2023 research² made clear.

According to the EY European Boardroom Monitor,¹ just 33% of 2023 appointments to UK financial services boards were female, down from 61% in 2022. In Europe, including the UK, just 44% of appointments to financial services boards were female, down from 51% in 2022. The UK FinTech industry remains below the target set by the FCA for at least 40% female representation on FinTech boards. 

Having a diverse board, which avoids “groupthink”, invites broader perspectives and enables better decisions. Ideally, these should be diverse in various ways, including in terms of experience, gender, disability, generation, racial/cultural background and modes of thinking.

The FinTech board effectiveness report
of UK FinTech companies have at least one female member on the board.
The FinTech board effectiveness report
of all UK FinTech board members are women.

There is also good news relative to diversity of skills and experience. FinTech boards typically include a range of skills, including finance and accounting, risk management and compliance and a strong focus on innovation and technology. Our FinTech board effectiveness report highlights that most FinTech boards (74%) have members with technology and innovation skills.

Directors can set the tone from the top by demanding diversity in all its forms, across the entire organisation. When boards themselves are diverse, members have an easier time promoting diversity throughout the firm. 

5. Board structure evolving throughout the growth journey

Given the dynamic nature of the UK FinTech industry, it’s not surprising that many of our research participants emphasised the importance of board evolution over time, as individual firms progress through common growth phases (e.g., start-up, scale-up, public offerings). Typically, early-stage FinTechs have one or two board members, potentially including investors, and the discussion is centred on day-to-day operations and administrative matters. As the business expands and boards focus on long-term strategy, new members, including non-executive directors (NEDs), are often brought in to provide additional skills (e.g., regulation, scaling experience, market-specific knowledge). As one FinTech advisor told us, “The board you start with shouldn’t necessarily be the one you end with.” 

For high-growth FinTechs, boards can serve as a forum where founders find answers to unfamiliar questions related to scaling. As the business matures, boards must face the potentially tricky issue of determining the right time for founders to move on. Board chairs can provide critical leadership in forming succession plans and determining when the firm needs different skills than founders provide. The establishment of committees (e.g., for audit, risk, compensation) is an important step and may necessitate the addition of new directors with different skills and expertise. Experienced directors and chairs can help the CEO determine the right time to establish such committees. 

Graph
6. Inviting external perspectives

High-performing FinTech boards are notable for a certain sense of humility among directors, who don’t assume that they have all the answers and are always open to learning from outside experts. That can include NEDs, who can provide valuable skills and perspectives at key times in the growth cycles. The most effective NEDs and external advisors will have a ‘coaching mindset’ and look to help others get better at their roles. They may also raise challenges and provide constructive criticism in objective ways. 

Further, a number of CEOs and board chairs told us about the value of independent board effectiveness reviews, particularly in improving board productivity and alignment. These assessments often include a focus on the return on investment for the board itself. According to the CEO of a top 50 UK FinTech, an independent board effectiveness review “changed how we spend our time and increased the amount of time we spend on strategy. Whilst these changes are small, they have made a material difference to our last few meetings.”

7. Focussing on the future

It’s common for FinTech boards to spend more time on what has happened versus what needs to happen in the future. Whilst the emphasis will vary based on a company’s maturity levels and objectives, all survey respondents agreed that the focus should be on strategic and forward-looking matters.

One director said, “Most of the meeting time should be spent discussing the future.” Also, a FinTech board member expressed the wish to “spend 20% of our time looking backwards and 80% on forward plans.”

Our research reveals a progressive approach to board effectiveness that sets a benchmark for traditional financial services firms. FinTech boards are pioneering with their agile strategies in managing board tenures and skillsets, ensuring they are well-equipped to navigate the evolving market landscape and product development. Their openness to external advice highlights a recognition that expertise can extend beyond the boardroom, fostering a culture of continuous learning and adaptability. Furthermore, these boards’ view regulation not as a hindrance, but as an opportunity to prioritise customer-centricity and establish a robust foundation for sustainable growth. These practices, among others observed, underscore an optimistic outlook on the UK FinTech industry's potential to drive economic expansion, purposeful profitability and a financial system that is more inclusive, responsive and stable.


Summary

In the EY FinTech board effectiveness report, we explore best practices for building and managing boards across the typical phases of growth. These include being customer-centric, defining a higher purpose, implementing regulation whilst innovating and embracing diversity. In addition, ensuring the board structure evolves throughout the growth journey, inviting external perspectives and focussing on the future are essential practices for the effectiveness of UK FinTech boards.

About this article

Authors

  • Christopher Woolard CBE
    Partner, Financial Services Consulting, Ernst & Young LLP; EY UK FinTech Leader; EY Global Financial Services Regulatory Network Chair; EY EMEIA Financial Services Regulation Leader
  • Tom Bull
    EY UK FinTech Growth Leader
  • Tom Hill
    Senior Manager, UK Financial Services, FinTech, Ernst & Young LLP
Related topics
Financial services
Banking and capital markets
Emerging technology

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.