Against the backdrop of increasing digital finance adoption in the wake of the pandemic, Innovate Finance has published an open letter from over 70 CEOs and founders of UK-based fintechs to welcome the progress made one year on from the publication of the Kalifa Review of UK fintech and to call for further action to drive forward the UK’s position as a leading fintech jurisdiction.
Notable progress since the Review highlighted by signatories to the letter includes:
- the commitment to establish a Centre for Finance, Innovation and Technology (CFIT) expected to be up and running this year;
- on policy and regulation:
- work commenced by the Bank of England on the development of a central bank digital currency;
- the FCA’s scalebox to support fintechs as they grow and support for the development of net zero fintech solutions through its digital sandbox; and
- DCMS’s progress on the introduction of Digital ID;
- on skills:
- plans to implement a "scale-up visa"; and
- sessions with industry to better understand how the fintech sector uses current government skills initiatives, such as apprenticeships, and what more is needed;
- on investment:
- overhauling the UK listings regime aimed at making it more attractive to companies from around the world;
- the creation of a "golden share" for founders;
- reducing the minimum free float requirement from 25% to 10%; and
- the extension of R&D tax credits for innovation to data and cloud computing (boosting investment in fintech such as AI, open banking and SaaS); and
- on international, establishing the FinTech Export Academy and FinTech Champions Scheme.
However, despite the efforts made in the past year to give effect to the proposals in the Kalifa Review, it was noted that more can, and should, be done to build on the proposals, including:
- further updating the regulatory rulebook and implementing the capability and culture within regulators to allow them to fully embrace innovation while protecting the consumer and financial stability;
- introducing a new secondary objective for the regulators to promote UK growth and international competitiveness (identified as part of the Future Regulatory Framework);
- building a more proportionate regulatory and capital requirements regime for scaling and challenger banks;
- introducing a full UK crypto regulatory regime as recommended by the Kalifa review (see our latest blog on regulatory proposals for crypto here);
- extending open banking to new areas and supporting the scaling of regtech solutions;
- continuing to address the growth capital gap; and
- further nurturing the high growth potential of the top 10 fintech clusters across the UK.
As highlighted, the progress made to date is not insubstantial and the UK remains a highly attractive place to start and grow fintech businesses. However, in an increasingly competitive global fintech landscape, the UK must continue to invest in fintech to maintain its world leading status.
"…it is now more important than ever that we - industry, government, and the regulators - do not pause, but rather build on this current momentum and commit to cement the UK’s position as the best location in the world to start, build and scale a FinTech business"