As many U.K. government officials on both sides of the aisle have noted throughout the controversy, there’s complicated and then there’s Brexit. The detachment from the EU common market has put the country in a precarious position as a FinTech hub. To reinforce that goal and encourage continued digital innovation, a new report from the U.K. government says that new policy frameworks and job training must be embraced.
The report, officially titled the “Kalifa Review of UK FinTech” — after Ron Kalifa, formerly the CEO of Worldpay — said that the U.K. had been part of the accelerating digital transformation of banks, asset managers, insurers and other parts of the financial services ecosystem. “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,” Kalifa wrote in the report.
At present, the U.K. has an estimated 10 percent of the global market share, with revenue estimated to be 11 billion pounds annually. The total tech spend by U.K. financial services firms was nine billion pounds as recently as 2019, said the report. In addition, SMBs and corporates have embraced the new offerings generated by these tech upstarts: As many as 71 percent of these enterprises are using the services of at least one FinTech firm.
But there exist challenges to the U.K.’s standing as a FinTech hub. Competition is ramping up, particularly in “competitor jurisdictions” such as Singapore, Australia and Canada. COVID-19 remains a tailwind that is giving rise to competition. Brexit, too, offers its hurdles: “Firms must navigate the immigration system for European Union talent for the first time – whilst rival jurisdictions are rolling out aggressive attempts to lure talent,” said the review.
But done well, a robust FinTech sector can create jobs across the U.K.; trade would increase, and access to better and cheaper financial services would help individuals and businesses “build back better.” Among the recommendations: There should be a “digital finance package” to help shape a regulatory framework for emerging technology in general.
Policy, Regulation And Scaleboxes
The report recommends a “scalebox” that would enhance the regulatory sandbox that is already in place in the U.K., where digital pilots would be made permanent and partnerships between FinTechs and financial institutions (FIs) would be encouraged. The Kalifa Review also advocates the creation of a digital economy taskforce (DET) that would centralize and streamline efforts.
“Multiple departments and regulators have important FinTech competencies and functions,” per the report. “The DET would be responsible for collating this into a policy roadmap for tech and digital, in particular, the digital finance package. It would provide a ‘single customer view’ of the government’s regulatory strategy on tech and a single touchpoint for the private sector to engage.”
And in reference to the financing that would underpin the innovation: The Kalifa Review recommends the establishment of a one-billion-pound “FinTech Growth Fund.” It also said that research and development tax credits should be expanded.
The report recommends, too, that skill development is emphasized with a “sufficient supply of domestic and international talent and the means to train and upskill workers.” Foreign talent represents roughly 42 percent of U.K. FinTech employees, said the report. Talent development efforts could be tied to a government-backed “Centre for Finance, Innovation and Technology led by the private sector, and a “skills platform” that offers courses to help train workers.
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