All you need to know about the Kalifa Review of UK FinTech

By Puja Sharma

The Kalifa Review of UK FinTech highlights the opportunity to create highly skilled jobs across the UK, boost trade, and extend the UK’s competitive edge over other leading fintech hubs. It sets out a series of proposals for how the UK can build on its existing strengths, create the right framework for continued innovation, and support UK firms to scale.

Ahead of the first anniversary of the Kalifa Review of UK FinTech, here’s all you need to know about it.

At Budget 2020, the Chancellor asked Ron Kalifa OBE to conduct an independent review to identify priority areas to support the UK’s FinTech sector. The Review formally launched in July 2020 with objectives for supporting the growth and widespread adoption of UK FinTech, and for maintaining the UK’s global fintech reputation.

The Kalifa Review of UK FinTech highlights the opportunity to create highly skilled jobs across the UK, boost trade, and extend the competitive edge over other leading fintech hubs. It sets out a series of proposals for how the nation can build on its existing strengths, create the right framework for continued innovation, and support UK firms to scale.

Policy and Regulation: Deliver a digital finance package that creates a new regulatory framework for emerging technology. Skills: Retrain and upskill adults in support of UK FinTech by ensuring access to short courses from high-quality education providers at low cost. Investment: Expand R&D tax credits, Enterprise Investment Scheme, and Venture Capital Trusts.

Unlock institutional capital to create a £1b “FinTech Growth Fund” of sufficient scale to act as the catalyst in developing a world-leading ecosystem. 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. National Connectivity: Nurture the high growth potential of the top 10 fintech clusters. Drive national coordination strategy through Centre for Innovation, Finance, and Technology

The report’s recommendations include:

• Amendments to UK listing rules to make the UK a more attractive location for Initial Public Offerings
• Improvements to tech visas to attract global talent and boost the FinTech workforce
• creation of a regulatory FinTech ‘scalebox’ to provide additional support to growth-stage FinTech
• A Centre for Finance, Innovation, and Technology, to strengthen national coordination across the fintech ecosystem to boost growth

Over the past decade, the UK has been quietly undergoing a FinTech revolution – in jobs, innovation, improvements to people’s lives, and increased opportunities in global trade. Yet for many, the image of FinTech is stuck in Shoreditch, an area of East London populated by start-ups and coffee shops catering to the mythologized young laptop entrepreneurs of “Silicon Roundabout”. A look at the record of achievement helps project the true picture. Let’s quickly scroll back 10 years. Back then, it took days to open a current account. Now you can be onboarded in minutes, and more safely and securely, leveraging RegTech solutions and challenger bank innovation.

• A multifaceted agenda with ambitious goals

Both the scope and the proposals of the review are ambitious. FinTech is defined in a broad sense, encompassing new businesses offering fintech services as well as incumbent financial institutions using technology. There are 15 recommendations spread across five categories: policy and regulation; skills and talent; investment; international competitiveness; and national connectivity. These are the results of months of discussion with scores of contributors from the public and private sectors.

• There is plenty of support for FinTech scale-ups

The review found that whilst the UK is recognised as a global leader in supporting FinTech start-ups, there is much more it could do to help attract and retain businesses as they move beyond the start-up phase and seek to grow into global champions. Many of the recommendations are aimed at addressing this from various angles.

From a capital perspective, for example, the report identifies that there is a significant scale-up funding gap in the UK and that domestic sources of capital could be used to plug it. It recommends the creation of a £1b FinTech-focused and market-led growth capital investment vehicle to be funded by holders of domestic institutional capital. It acknowledges that there are certain regulatory obstacles to achieving that which would need to be addressed.

• FinTech learning pathway from financial services

Aside from securing access to the global talent pool, the report also makes recommendations about retraining and upskilling adults from other sectors and developing a pipeline of homegrown talent through the UK’s education system. It suggests creating a specific learning pathway to make it easier for financial services talent to transition to the FinTech industry. According to the review, the key talent requirement for fintech development is “deep experience in the financial services domain and people management experience”.

• Anticipation of consolidation

A notable observation in the report is the indication that some degree of consolidation will be critical to the growth of UK FinTechs, and the call for the Competition and Markets Authority to be more flexible in its merger control reviews in this rapidly developing sector.

• Cross-industry collaboration

FinTech firms and incumbent financial institutions should continue to form partnerships in the report. Despite partnering’s benefits, levels of partnerships remain low. The report attributes this to regulatory factors which cause incumbents to be risk-averse (because they retain full regulatory responsibilities) and result in complex procurement processes. There are several measures that government and/or regulators can take to address these issues. About outsourcings, it recommends adding direct obligations to unregulated service providers.