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The financial services industry reacts to Kalifa Review of UK FinTech

By Sunniva Kolostyak

February 26, 2021

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The industry has welcomed the Kalifa Review of UK FinTech, highlighting the importance of ensuring policy helps maintain the UK’s role as a tech hub after Brexit.

Kalifa ReviewThe long-awaited report issued recommendations to help the UK attract talent and IPOs, support growth-stage companies and launch an independent body to regulate the sector.

Here is what the industry had to say about the 108-page report.

Dr Kay Swinburne, Vice Chair of Financial Services at KPMG UK

Swinburne chaired the Policy and Regulation chapter, leaning on her experience as a former MEP to review how policy and regulation can shape the future of the FinTech industry. Reflecting on the importance of implementing policy changes swiftly, she said: “Against a backdrop of geopolitical uncertainty, retaining the UK’s position as a global FinTech hub is vital. So to ensure that innovative companies can still thrive after Brexit, a new bespoke government policy and regulatory framework tailored for FinTech is needed. Critically, a joined-up approach across government departments and regulators will be integral to creating a more agile regulatory environment, one that is able to embrace innovation and ultimately create a world leading FinTech ecosystem. I therefore hope our recommendations will be universally adopted at pace.”

Rachel Kent, partner at Hogan Lovells Financial Institutions

Kent, the deputy chair of the Policy and Regulation chapter, commented: “FinTech represents the future of innovation in financial services, and while the UK’s position is well established, its future is not assured. Being outside the EU has created an opportunity to re-examine and re-shape our regulatory framework to ensure it remains attractive and enabling to FinTechs. We have outlined in today’s review key areas for regulatory and policy focus that will allow us to continue to nurture our start-up culture, whilst also giving our high growth firms the support to become global giants.”

Bradley Rice, finance regulatory partner at law firm Ashurst

“The UK is at the centre of FinTech globally, and this review will help ensure that remains the case. FinTech will be placed at the centre of future trade deals post-Brexit and, with the UK FCA the original proponent of the Global FinTech Sandbox, it is easy to see how this can be leveraged. The creation of FinTech Taskforce setting the FinTech agenda at the top of Government will ensure an even more coordinated approach between Government, regulators, legislators and key players.

“The recommendations for the financial services sector are critical and will help already developing FinTech firms. The recommendations for artificial intelligence, developing financial market infrastructure, rolling out a central bank digital currency, the focus on ESG and developing our approach to crypto assets are already changes happening apace, but greater focus will ensure the UK can lead the world in this next era of financial services.”

Stephen Page, Founder and CEO of SFC Capital

Commenting on the news of a £1 billion FinTech Growth Fund, Page said: “Especially in the challenging aftermath of Covid when private investors will understandably double down to protect existing investments, it’s all the more important to support companies at the earliest stage to preserve the innovation pipeline. We need long-term thinking, not short-term support for perceived quick wins. As an early investor in Onfido, I hope to see the £1 billion FinTech Growth fund proposed in the Kalifa report supporting the truly early-stage start-ups. We don’t need another Future Fund for companies that have already secured venture capital funding, which excluded the 99 per cent of “true” startups that are still pre-VC.”

He also commented on tax incentive schemes: “It is no surprise to learn that 97 per cent of founders have used the brilliant tax-incentivised investment schemes offered in the UK, including Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (“SEIS”) and Venture Capital Trusts (VCT). The report highlights that there’s a difficulty in accessing these schemes but there is also a complexity within EIS rules which acts as a barrier for so many high-growth companies that would otherwise look to make use of the scheme. I believe there’s a further step to be made in simplifying the rules around EIS, which in turn could help unlock huge amounts of potential investment in high-growth companies. These changes should include an increase to the limit for the Seed investment stage (SIES) from £150,000 to £250,000, and to change the current restrictions on businesses using the EIS and SEIS schemes from ‘the age of the business’ to ‘the size of the business’.”

Catherine Birkett, CFO of GoCardless

“Brexit – and the uncertainty it has brought – has placed enormous pressure on all businesses. Access to talent, the validity of EU regulations in the UK and maintaining London’s position as the world’s epicentre for FinTech have all been heavily debated for years. FinTechs in particular have been left in the dark about what their future looks like without the EU. It’s refreshing to see the government and industry coming together with the Kalifa Review, to address these concerns and protect and support such a vibrant sector that helps to drive the success of UK business.”

“Recommendations to boost national connectivity and growing FinTech outside of London are critically important. As someone who grew up in the North and developed several regional offices during my career, I’ve seen first-hand the quality of talent up and down the country – and the prosperity a booming economy can bring. Investment into the regions – such as driving national coordination strategies through the Centre for Finance Innovation and Technology and encouraging each cluster to produce a three year strategy – will be a key part of the post-Covid recovery. I’m hopeful these recommendations will empower entrepreneurs everywhere, creating a future world where the whole of the UK is seen to be a centre for FinTech.”

“It’s also encouraging to see the Review emphasise the importance of further developing its global trade policy – with suggestions like driving international collaboration through the Centre for Finance, Innovation and Technology (CFIT), and launching an International FinTech Taskforce. For UK FinTech to maintain its position as the world’s most important investment hub, British financial services firms must be allowed to continue trading with the EU with an equivalence deal. If this is not possible, it will be imperative for the government to negotiate attractive individual contracts with trading partners worldwide – opening up international trading and talent corridors to strengthen the industry’s hand outside of Europe.”

Mark Davison, Managing Director UK and Ireland at Deposit Solutions

“An agreement on equivalency would be welcome but probably isn’t a sustainable solution to support any long-term plans.”

Oliver Prill, CEO of Tide

“We at Tide welcome the Kalifa Review of UK FinTech and support the recommendations and roadmap for the industry that has been set out.

“Support for UK FinTechs scaling internationally is of particular importance. With Tide beginning our journey in the India market and ambitions to scale beyond that in the long-term, we see that the introduction of a FinTech Credential Portfolio to support the credibility of UK FinTechs internationally has the scope to ease market entry significantly.

“We hope these recommendations are taken on board by Government and that FinTech can play a key part in post-Brexit trade negotiations.”

Ben Pollard, CEO and Founder of FinTech workplace pension and savings provider Cushon

“FinTechs are often the primary driving force behind transformational change in the UK financial services industry, particularly in legacy markets such as pensions. The recommendations in this review will go a long way to ensure we can continue to innovate and make financial services work better for consumers – whether through smarter, intuitive tech, or products which align with issues people care about, such as climate change.

“We’re particularly pleased to see the focus on skills and talent to ensure the FinTech sector can continue to thrive but while visas would ensure skilled international workers can relocate to the UK this may be a case of solving a new problem with old school thinking. The pandemic has shown us just how easy it is to work remotely from anywhere in the world. It’s not just a matter of attracting global FinTech talent to the UK but attracting global talent to UK-based companies regardless of where the talent resides. We hope the wider recommendations in today’s review will help do just that.”

Virraj Jatania, CEO and Founder of Pockit

“Entrepreneurs across the whole UK FinTech sector will welcome today’s report with open arms. These ideas and initiatives can breathe new life into our industry. They can set the scene for accelerated growth, keep businesses based in the UK, create new jobs and help people develop specialist skills.

“The FinTech sector is a key growth engine of the UK economy, and can be a centrepiece of our Covid-19 recovery. But for the sector to achieve its potential we need to roll out the welcome mat to FinTech talent from across the globe and to improve access to investment. This needs to happen now. Today’s proposals must not become lodged in the machinery of government.

“A flourishing FinTech sector can address social policy issues too. FinTechs can help the financially excluded, low income and unbanked consumers to cross the digital divide and find new ways to manage their money – simply and safely. Therefore, Government and FinTechs must work together to ensure the recommendations in today’s report also benefit the everyday consumer, and that people have the skills, confidence and understanding they need to unlock the opportunities of digital payments and financial management of their own affairs. Companies like Pockit are driving this inclusion – with credit score building, cashback schemes and by helping customers switch to Direct Debit and save on bills – but the sector needs a joined-up approach to really make a difference.”

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