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The Future of Fintech in the U.K. – The Kalifa Review

Global spend on financial crime compliance at financial institutions reaches $213.9 billion
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Over the past decade the UK has become a fintech hub, emerging as a successful incubator of innovation in the banking and financial services sector. However, the trajectory of UK fintech is at an inflection point of opportunity – and risk. While the UK’s position is well established, its future is not assured.

To support and bolster the UK’s fintech sector’s presence across the globe, an in-depth review was launched in July 2020, led by Ron Kalifa OBE. The long-awaited review, which was released at the end of February 2021, identifies underlying threats to UK fintech and highlights a series of proposals for how the sector can build on its existing strengths.

According to the Review, the three broad threats to the UK’s fintech leadership position are:

  • Competition: Overseas centres are seeking to emulate the UK’s success. Competitor jurisdictions such as Singapore, Australia and Canada are investing heavily across many areas, including capital, skills and direct support for fintechs.
  • Brexit: Brexit has created regulatory uncertainty in specific areas relevant to fintech. Firms must navigate the immigration system for European Union talent for the first time – whilst rival jurisdictions are rolling out aggressive attempts to lure talent in.
  • Covid: The pandemic has accelerated digital adoption globally in a way that marketing or policy never could. This is creating opportunities for jurisdictions that are quickest to diagnose what’s happening and nimblest to capitalise on the opportunities for fintech.

The Kailfa Review highlights the following as opportunities for the sector:

  • Jobs: Fintech is embedded across the UK with the potential to create high income tech-based employment, becoming an engine of the “levelling up” agenda, as well as playing a part in upskilling and retraining the existing workforce. The sector’s direct GVA contribution to the economy is estimated to be £13.7bn by 2030, with job creation contributing to 70% of this.
  • Trade: Enabling fintechs to achieve global scale and reach via access to international markets, and continuing to lead on regulation and standard-setting in fast-moving tech.
  • Inclusion and Recovery: Supporting citizens and small businesses to access more, better and cheaper financial services – and doing so in a sustainable way to help “build back better”.

To help the UK build on its existing strengths, the Review has identified a Five-Point Plan of recommendations to deliver this approach:

1. Policy and Regulation

  • Deliver a digital finance package that creates a new regulatory framework for emerging technology
  • Implement a “Scalebox” that supports firms focusing on scaling innovative technology
  • Establish a Digital Economy Taskforce (DET) to ensure alignment across government
  • Ensure that fintech forms an integral part of trade policy

2. Skills

  • Retrain and upskill adults in support of UK fintech by ensuring access to short courses from high-quality education providers at low cost
  • Create a new visa Stream to enhance access to Global Talent for fintech scaleups
  • Build a pipeline of fintech talent by supporting fintech scaleups to offer embedded work placements to Further Education and Higher Education students and Kickstarters

3. Investment

  • Expand R&D tax credits, Enterprise Investment Scheme and Venture Capital Trusts
  • Unlock institutional capital to create a £1bn “Fintech Growth Fund” of sufficient scale to act as the catalyst in developing a world leading ecosystem
  • Improve the listing environment through free float reduction, dual-class shares and relaxation of pre-emption rights
  • Create a global family of fintech indices to enhance sector visibility

4. International

  • Deliver an international action plan for fintech
  • Launch an international “Fintech Credential Portfolio” (FCP) to support international credibility and increase ease of doing business
  • Drive international collaboration through the Centre for Finance, Innovation and Technology, and launch an International Fintech Taskforce

5. National connectivity

  • Nurture the high growth potential of the top 10 fintech clusters
  • Drive national coordination strategy through Centre for Finance, Innovation and Technology
  • Accelerate the development and growth of fintech clusters through further investment, such as in R&D

To read the full report, click here.

If you would like to find out more about how we support fintech and financial institutions, call us on 020 7404 7477 or contact us here.

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