Fintech News Today: Ron Kalifa’s Fintech Strategic Review – Experts analysis. With Budget 2020, the Chancellor asked Ron Kalifa OBE to conduct an unbiased review to recognize goal aspects to allow for the UK’s fintech sector (see here the Report). The Review formally released in July 2020 with goals for supporting prevalent adoption and the development of UK fintech, and also for keeping the UK’s worldwide fintech reputation.
The Kalifa Review of UK Fintech highlights the chance to make highly trained jobs throughout the UK, increase trade, as well as extend the UK’s competitive advantage over some other top fintech hubs. It sets out a series of proposals for the way the UK is able to build on its current strengths, produce the best framework for ongoing innovation, and assistance UK firms to scale.
The report’s recommendations include :
- amendments to UK listing rules to create the UK a far more appealing place for Initial Public Offerings
- improvements to tech visas to entice worldwide skill and increase the fintech workforce
- construction of a regulatory Fintech’ scalebox’ to offer extra assistance to development point fintechs
- a Centre for Finance, Technology, and Innovation, to improve national coordination across the fintech ecosystem to increase growth
Fintech is not a niche within financial services. Nor is it a sub-sector. It is a permanent, technological revolution, that is changing the way we do finance. Its essence is in both fast-growing fintech companies, and the investment and use of technology by our incumbent financial institutions, said Ron Kalifa OBE.
Adam Holden, CEO of compliance solutions software provider, Oxfordshire-based NorthRow, said:
“Over the past decade the UK has developed a fintech sector that is admired worldwide, particularly in the progress it has made in combating financial crime. While many of the more established financial services players have been slow to respond to the growing impact of fraudsters and bad actors, fintechs have been leading the way in developing stronger counter-measures to combat fraudsters.
“Fintech companies have often considered their efforts to be under-appreciated by the Government. As an example, when CBILS and BBLS were first launched, many fintech companies were excluded, in favour of the traditional banks. I recognise that some of this was for liquidity reasons, but they were arguably better placed to effectively and efficiently police the processes when speed was of the essence. The outcome was a potential multi-million pound bill to the Government for fraudulent cases.
“In order to keep ahead of the game – both in keeping the UK ahead of the competition and keeping us ahead of the bad actors – the industry in the UK needs access to the very best talent, and we can achieve this far quicker with regional funding to support the previous focus on London investment.”
Fintech News Today: Oliver Prill, Tide CEO commented:
“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.”
Fintech News Today: Charles Delingpole, Founder and CEO of ComplyAdvantage, said:
A £1bn startup fund
“£1bn of additional capital is very welcome, but the government needs to be mindful that there is already a huge number of commercial growth and venture capital funds in the UK. Any ‘startup fund’ would need to be meaningfully differentiated.”
The adoption of dual-class share structures.
“This is a bit of a storm in a teacup, and instead of allowing ‘dual class structures’ to pull focus, we should instead be looking at ‘change of control’ rules, which are a prohibitive force when it comes to going public companies in the UK.
Whilst the adoption of ‘dual-class share structures’ has attracted considerable attention, in reality the practice is few and far between. Most venture capital firms in the UK have sufficient leverage, and therefore ‘dual-class’ structures are uncommon. It’s unlikely that ‘dual class structures’ will increase in prevalence, and will drive significant additional listings on the LSE.
Probably far more relevant is the take-over code rules on change of control, which makes special-purpose acquisition companies (SPACs) difficult to list in the UK. When a reverse takeover occurs in the UK, trading is automatically suspended in stock, which prevents SPACs from being a viable vehicle for promoters in the UK. This is a very real prohibitive factor when it comes to listing companies in the UK, and needs to change.
‘Tech visas’ and digital skills courses
“At present, hiring the best talent can be a costly and timing consuming process, so any additional simplification and cost reduction is enormously welcome. Similarly, improving access to a much deeper pool of talented engineers is also welcome.”
Regional fintech clusters around the UK
“Zoom meetings and remote working haven’t changed the fact that London is a global financial centre, and therefore ‘regional clusters’ are unlikely to make a huge impact.
The idea of regional fintech clusters might be an attractive aspiration for politicians seeking to democratise access to financial services jobs, in reality, London is a global financial centre. Even though the pandemic has normalised remote working, London’s gravitational pull eclipses all other cities in the UK. Therefore, any specialisation is limited to servicing the needs of London, rather than being a specialist cluster in its own right.”
Fintech after Brexit
“The loss of passporting and the denial of equivalence for financial services is deeply problematic for UK fintech after Brexit. Therefore, economically it is absolutely crucial for anything that can be done to resolve the situation.”
Paul Christensen, CEO at Previse believes that the data sharing underpinning Open Banking should be applied to B2B payments, saying:
“The data sharing revolution can be applied to the painful and chronic problem of slow payments. B2B payments are crying out for the benefits open data can bring. By unlocking their ERP data in a secure way, large corporates can enable fintechs to make a smart calculation of payment probability, unlocking bank capital that can be used to pay suppliers, instantly. Bringing banks, corporates and fintechs together through the smart use of data, is an easy way to enable financial inclusion that can help Britain’s 6 million SMEs get back on their feet.”
Mark Leaver, Financial Services Technology Leader, PwC UK, comments:
“We are seeing technology companies increasingly performing roles that have historically been done by financial institutions themselves. Opening up the legacy platforms of financial institutions, letting in more agile technology-led organisations and enabling incumbents and new entrants to collaborate will help the industry to better serve customer needs and become more efficient.
“At the same time, as industry and consumers navigate an increasingly digitised world accelerated by the Covid-19 pandemic, while competition from around the world is on the rise, it is hugely encouraging to see the recommendations in the Kalifa Review of UK FinTech published today.
“Building on the strong foundations that the UK FinTech sector has laid, we look forward to working with the industry to support the proposed Centre for Finance, Innovation and Technology in the delivery of the five-point plan.”
Access to investment
Michael Magee, PwC UK Financial Services Deals Leader, comments:
“Despite a highly liquid investor market across the UK and an active FinTech Deals market that we expect to see the fastest recovery in as Covid-19 subsides, we know that many FinTechs still struggle to access the funding and support they need to grow and mature.
“The proposed £1bn investment vehicle – the FinTech Growth Fund in Ron Kalifa’s report – would be transformative in addressing this challenge, with the potential to turbo-charge growth in the sector, assisting FinTechs of all shapes and sizes, and as a result unlocking innovation at scale across the financial services industry.
“Creating a fund owned and managed by institutional investors will provide access to more patient capital for FinTechs, giving them breathing space to realise their vision without investors seeking a shorter exit and giving those FinTechs that make their home in the UK a chance to grow in an inclusive, welcoming environment.”
Isabelle Jenkins, UK Financial Services Leader, PwC, comments:
“Ron Kalifa has not shied away from recommending big changes to maintain the momentum of the UK’s FinTech sector. Reducing free float requirements and introducing dual-class share structures will encourage FinTechs to list in the UK by ensuring those who built the businesses retain more control of them, ensuring their success will have a great impact on UK economic growth.
The current requirements for listing might discourage more mature Fintechs from seeking public market capital in the UK. Therefore, measures to put in place equity and hybrid financial capacity, and infrastructure to drive economic growth in the UK, will help the UK’s FinTech sector remain ahead of the global pack.”
Skills and talent
Steve Davies, Partner, Digital Innovation in Banking, PwC UK, comments:
“Talent, rather than technology, is the most critical enabler for successful digital transformation, and with FinTech driving the wave of digitisation through the financial services industry today, the focus on both global talent attraction and digital upskilling in Ron Kalifa’s report are welcome.
“The Kalifa Review seeks to move UK Fintech into the lives of businesses and individuals around the nation. We have a world class asset and the five-point plan is something the UK FS industry can all get behind.
“Although not referenced in the report, it is also going to be paramount to increase the diversity of the sector in order to ensure no unintended biases in the technology solutions and products developed, and we are proud to be a signatory of the FinTech for All Charter in support of this imperative.”
Claire Reid, Regional Leader, Scotland; Head of Technology, Data & Analytics, PwC UK, comments:
“Areas such as central Scotland and Wales have a proven record of nurturing FinTech ‘unicorns’ and the creation of FinTech clusters throughout the country would promote this even further, supporting nuanced specialisms across specific regions and supporting scale while making FinTech a more inclusive industry.
“As well as unlocking opportunities for innovation across the regions, the proposed clusters will ensure talented workers are able to remain closer to home, keeping talent within the region and contributing towards the government’s levelling up agenda while creating the right conditions for an industry that has an important role to play in the economic recovery across the regions.
Importantly, the clusters will also allow regional bodies to begin to deliver on the proposals in the Research and Innovation for UK FinTech report published last month, helping FinTechs in all corners of the UK to leverage local strengths and networks to create jobs, deliver innovative solutions and drive economic growth.”
Policy and regulation
Conor MacManus, Director, Financial Services Risk and Regulation, PwC UK, comments:
“As the FinTech ecosystem matures, with challengers and big technology players coming to the market and FinTechs becoming increasingly embedded across the financial services value chain, it will be critical that our UK regulators continue to innovate to ensure consumer protection while fostering the right environment for competition and growth.
“We therefore welcome steps to build a regulatory environment in the UK that drives FinTech innovation. Further support for FinTechs as they scale up will be an important part of this. The creation of Digital Economy Taskforce (DET) will also help coordinate the delivery of the Government’s vision of the UK as a leading FinTech hub.”
Christoph Gugelmann, Founder and CEO of Tradeteq comments on the UK Fintech Review report 2021:
“The recent review highlights a need for financial institutions and fintechs to find more effective ways of collaborating to remain a hub for the industry. Regardless of the impact of Brexit, the need for certain financial processes will remain a staple of the UK. UK export finance is one such example and would benefit greatly from fintech involvement. Banks have to increase their lending capacity through secondary trade finance distribution. Automation is therefore required to reduce the transactional friction costs, while AI-based credit scoring processes can create the required risk transparency. Corporates will gain better access to cheap liquidity while banks are able to work their balance sheets harder and as such boost their profitability. Fintechs further help institutional investors to diversify their portfolios in a time where it has become more challenging to identify yield in liquid markets. In short, breaking down the boundaries in sectors such as UK export finance is a key method for the nation to maintain its footing as a leader in financial services and fintech innovation.”
Leon Muis, Chief Business Officer at Yolt Technology Services , said:
“This review confirms what we’ve known all along – better communication across our entire industry is essential for the progression and adoption of open banking. It goes beyond fintechs working with incumbents – we need to see end user businesses getting the opportunity to feed into the development process, providers both established and new working with them, and crucially better guidance and support across the whole sector.
“Our recent research uncovered that nearly half of financial services businesses feel that they need better education and guidance around open banking and the associated risks, particularly with data security. It also showed a number of misconceptions that many businesses hold around the technology, which is hampering widespread adoption.
“Responsibility rests on several shoulders, including ours, so collaboration is crucial if progress is to be made, and that’s what YTS is committed to doing. The shared end goal should be a truly open financial system, but the barriers of myth and misconception must be broken down if we are to get there.”
David Nicol, CEO of LedgerEdge, a London-based fintech building a new corporate bond platform with distributed ledger technology, commented on the Khalifa Review:
“We are happy to see this call to accelerate investment and create a vibrant ecosystem for UK fintech startups. There’s a global arms race for talent and money in fintech, and we welcome the UK’s response to the challenge of providing a thriving environment for our exciting sector.”
Fintech News Today: Ron Kalifa’s Fintech Strategic Review – Experts analysis