Analysing Risks & Opportunities in UK-India FinTech Free Trade Agreement (FTA)

Abstract

This paper examines the UK's role in Free Trade Agreements (FTAs) in the FinTech sector post-Brexit, focusing on global partnerships in international trade. Central to the UK's "Global Britain" strategy, the financial services sector is a key area of focus. The paper analyses the UK's ongoing FTA discussions with India, emphasizing the challenges and opportunities within the context of India's prominent tech sector and the outsourcing of UK financial services to India. Additionally, it reviews financial services components in successful FTAs between the UK and countries like Japan, Singapore, Australia, and New Zealand, as well as India’s agreements with the UAE and Japan, providing key insights for the UK-India FTA. This analysis, grounded in official documents and recent research, evaluates FinTech trade modes and regulatory barriers in both countries, offering case studies to illustrate these issues. It reviews responses and negotiations from regulatory bodies, other FTAs with countries like Australia, UAE, Singapore, and Japan.

The OECD DSTRI measures policy barriers to fintech trade, analysing key policy areas like infrastructure, electronic transactions, payment systems. India's DSTRI score of 0.28 suggests higher regulatory barriers compared to the UK's 0.02, highlighting significant challenges for digital service trade, particularly in infrastructure. The UK's "Global Britain" vision post-Brexit aims to enhance international influence but faces challenges related to "status insecurity" and foreign policy uncertainty. The UK-India Free Trade Agreement (FTA) negotiations underscore India's growing fintech sector's strategic importance. India's services sector, particularly IT and BPO, is a critical economic driver, contributing significantly to GDP. With 560 million internet users, India's expanding digital economy is an appealing partner for the UK. In 2023, UK-India trade reached £39.0 billion, with services comprising a significant share. The UK's £19.1 billion investment in India and India's £9.3 billion investment in the UK reflect strong economic ties, emphasizing a shift towards a service-oriented trade dynamic and the crucial role of financial services.