Today, the Kalifa Review into UK FinTech, commissioned by HM Treasury, was published.
The review was commissioned by the Chancellor at Budget 2020 and has been headed up by Ron Kalifa OBE, former CEO of WorldPay.
Formally launched back in July 2020, the review aimed to set objectives for supporting the widespread growth and adoption of FinTech in the UK, as well as ensuring the country remains a global FinTech hub.
The review outlines recommendations for this growth under five key pillars:
- Policy and regulation
- Skills
- Investment
- International growth
- National connectivity
It’s time to scale up
A key theme that came out of the report was scale. The UK is home to a huge number of successful FinTech startups – with the last 10 years marking what Kalifa describes as “a quiet revolution” – but now, as the market matures, it’s time to think about how FinTechs can scale, grow and expand internationally to boost the UK’s exports.
At the virtual launch event today, Ron Kalifa said: “The UK has developed a reputation for being a very desirable location to start a FinTech business, but there are challenges when it gets to scale.”
We have yet to see how many of these recommendations will be implemented, but here’s a breakdown of what it might mean for a FinTech:
You could access better talent…
- Much of the report centres around creating a pipeline of talent for FinTech to address the current skills shortage. This will include commitments for higher and further education, but also reskilling adults.
- It also recommends a FinTech Visa programme to encourage foreign talent – which currently makes up 42% of FinTech employees in the UK.
Connecting to Government could be more efficient…
- Overall, collaboration is the order of the day from this review. Kalifa recommends the establishment of a Centre for Innovation, Finance and Technology which would provide an implementation plan to establish an entity that is then led by the private sector.
- “There’s a lot of very well-intentioned organisations,” he commented, “but this is an organisation that’s going to start to identify opportunities where new IP and products are being created, but the path to growth requires market-wide intervention to support scale and adoption.”
- Again, the mission is for FinTechs to achieve true scale, which Kalifa says will involve a “value chain of actors” from policymakers, data providers, incumbent institutions, consumers and business groups, to the FinTechs themselves.
- A Digital Economy Taskforce (DET) has been suggested to collate multiple departments and regulators into one single policy roadmap. This might help to cut through the noise and create a “single customer view” of the Government’s regulatory strategy on technology, and single touchpoints to engage the private sector.
You could get more support for developing your ideas…
- The review suggests a “scalebox” supported by Government and regulators to help ideas scale and grow.
- Earlier today Kalifa said: “The UK has set a benchmark for policy-led innovation… key initiatives like the FCA sandbox have set a precedent which many others have started to learn from”. He explained that the UK’s sandbox idea has now been taken up by 15 other countries.
- A “scalebox”, according to the review, would add additional support to FinTechs in their growth phase, could make the Regulatory Sandbox available on a rolling basis, and could focus on priority areas like Digital ID.
International growth could get easier…
- FinTech should form a more integral part of trade policy, says Kalifa, with the launch of an International FinTech Taskforce.
- As part of the international plan for FinTech, a “FinTech Credential Portfolio” will help increase ease of doing business.
- Enabling FinTechs to achieve global scale and reach via access to international markets is a key priority outlined in the review, which means the UK should continue to lead on regulation and standard-setting in fast-moving tech. Kalifa reiterated that FinTech is a core asset for “Global Britain”.
You could have more opportunities to access capital…
- This includes expanding R&D tax credits to support innovation, an Enterprise Investment Scheme and Venture Capital Trusts.
- A FinTech Growth Fund worth £1bn has been suggested. Earlier today Kalifa acknowledged the gap that exists for FinTechs at high growth stage – especially when they outgrow friends and family or angel investment but are not yet ready for traditional private equity.
- He added that such a fund would need to involve those with knowledge and understanding of the business models FinTechs operate on, regulatory implications and who can provide targeted operational support.
You could keep control of your FinTech for longer…
- Some of the improved access to capital recommendations include helping founders retain control over their business, for example improving the listing environment with free float reduction, dual class share offerings and relaxation of pre-emption rights.
If you’re based outside London, you could gain extra support…
- The review recommends a focus on national connectivity, including nurturing the growth of the top 10 FinTech clusters in the UK, driving coordination strategy through a Centre of Finance, Innovation and Technology.
- It also makes recommendations to accelerate the development of FinTech clusters.
