Published on February 26, on the eve of the Budget, the Kalifa Review sets out five key areas where the government must support the sector in the aftermath of Brexit and the coronavirus pandemic if the UK is to maintain its competitive edge over other leading fintech hubs.
Kalifa's five-point plan:Policy and regulation:
- A new regulatory framework for emerging technology to create “an enhanced environment for fintech”.
- Introduce “Scalebox” that supports firms as they scale, alongside measures to support partnerships between incumbents and fintechs.
- Establish a Digital Economy Taskforce (DET) responsible for collating a “policy roadmap” for parties to engage with government.
- Proposals to “retrain and upskill” adults through short, low-cost courses to support UK fintech needs.
- New “visa Stream” to ensure global talent can be accessed by UK fintechs, with a focus on building a “pipeline of fintech talent” through work placement schemes in further and higher education.
- Expansion of R&D tax credits, Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT).
- Creation of £1bn “Fintech Growth Fund” to address £2bn funding gap in sector.
- Allow free float reduction, dual class shares and relax pre-emption rights to improve listing environment.
- Develop international action plan for fintech and drive international collaboration through various tasksforces and portfolios.
- Focus on scale and supporting regional specialisms in the UK alongside “significant intellectual property” being created at UK universities.
Ron Kalifa OBE, author of the review and the former chairman of Worldpay, urged the government to heed his recommendations if the UK wanted to “retain its position as a global leader in financial services”.
“We need to combine the best of government and policymaking with the innovative flair of the people who have built and lead UK fintech,” the report said. “This means building public-private coordination to ensure strategic focus and an official government mandate to pursue it.”
Economic secretary to the Treasury, John Glen MP suggested the government agrees with the Kalifa review’s findings, writing in the report: “We must not rest on our laurels. That is why the government continues to be focused on ensuring UK fintech succeeds.”
“Crucial” review welcomed
The Kalifa Review was praised by UK fintechs, with Funding Options CEO, Simon Cureton saying in an email that it was a “good first step”.
Similarly, TransferGo CEO, Daumantas Dvilinskas said in an email: “The review provides crucial steps to demonstrating how the UK can continue to lead the fintech revolution. Like so many others we have chosen the UK as a base because we believe it has the talent, infrastructure and policies that will help fintechs thrive and build an inclusive community that equally supports businesses and the customers they serve.”
Nicki Bisgaard, CEO and founder of EedenBull, a global fintech payments company welcomed the review saying in an email that the five areas of recommendations “mirror our own journey and focus, and that of the growing fintech sector”.
Bisgaard added that a regulatory framework that was fit for the future would be crucial.
“It is vitally important for the fintech sector to be given the freedom and support to innovate and grow, given how legacy, cumbersome regulation has hampered progress. It is critical that the industry embraces a new regulatory vision and framework in order to release the sector’s growth opportunities,” he said.
Away from fintech, Accenture UK’s managing director in banking, Tom Graham said in an email that he hoped the review would “future-proof our unique ecosystem” and ensure the UK’s position as a global financial services leader is not diminished.
Meanwhile Delloite’s head of fintech, Louise Brett said in a statement that the review represents a big bang moment for the sector and is an opportunity for the UK to ensure industry growth across the whole country, not just London.
Spectre of Brexit looms
However, the optimism around the review did not manage to overshadow the threat posed by Brexit and the pandemic to UK fintech.
Mike Laven CEO of Currencycloud said in an email that the recommendations are “necessary, but not sufficient”.
“What the UK fintech industry really needs is both access to talent and easy access to global markets… Unfortunately, the fallout of Brexit and the pandemic have recently made this more difficult.
“While we welcome growing the pipeline of homegrown talent and introducing skilled visas under the Kalifa Review, it will come to nothing if we can’t have equivalency to talent and markets that are available on our doorstep in Europe and globally,” Laven added.
Echoing those sentiments, Charles Delingpole, founder and CEO of ComplyAdvantage said in an email: “The loss of passporting and the denial of equivalence for financial services is deeply problematic for UK fintech after Brexit.”
James Allum, Payoneer’s VP and head of Europe, added his name to the list of those calling for better relations with other nations, saying in an email it was “essential” that the UK retained open borders and a system of international equivalence.
Chancellor Rishi Sunak MP said in a statement on the release of the report: “This review will make an important contribution to our plan to retain the UK’s fintech crown, create more skilled jobs, and deliver better financial services for people and businesses.”
However, the government refused to answer questions on how they would overcome Brexit-related issues on passporting, equivalence and access to talent that market participants said were scuppering the future of UK fintech.