Launched by former Chancellor and now Prime Minister Rishi Sunak, the Kalifa Review into the future of the UK fintech sector outlined five core recommendations: policy and regulation; skills and talent; investment; international attractiveness and competitiveness; and national connectivity.
Kalifa Review is “Work in progress”
But two years on, what progress has been made? For businesses both large and small, it remains a work in progress and the entire Review process has completely overlooked the issue of sustainability, among other things – writes Jeremy Baber, CEO at Lanistar.
Initial thoughts
When the Government announced the launch of the Kalifa Review, the majority of fintechs welcomed the initiative as one that was clearly designed to place the fintech industry in a central role in the UK’s future economy.
However, it is clear that this was always going to be a marathon and not a sprint, and as we pass the two-year anniversary, there is still much work to be done.
What has also complicated the picture is that the economy is facing new challenges, with the rise in inflation, higher interest rates and an ongoing war in Ukraine adding to the economic woe.
On top of this, the Review itself – and its implementation now slowly underway – has overlooked almost entirely the issue of sustainability in the industry.
There is virtually no reference to net zero or sustainability in the Review itself, which currently labels the biggest challenges as Covid, Brexit and competition.
Where do we stand two years on?
In the lead up to the Review, Ron Kalifa OBE stated that fintech is not a niche within financial services, nor is it a sub-sector.
It is a permanent technology 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.
It’s in the way we regulate previously unknown technology and set new standards. But most importantly, it’s about delivering better financial outcomes for customers, especially consumers and SMEs.
Fast-forward two years and it’s clear that some areas have received more focus than others:
Regulation
The Review had made reference to the launch of two interrelated initiatives: the formation and support of a ‘Scalebox’ designed to help scale technology by enhancing the existing regulations; and the creation of a Digital Economy Taskforce.
This latter initiative was truly ground-breaking as it was designed to bring together all the pre-existing regulators into one body, to drive one roadmap for the sector. No-one has seen or heard anything about either. This is without doubt the biggest policy failure we see two years on.
Skills shortages
To maintain the UK’s position in the global fintech space, the Review dedicated considerable space to upskilling and reskilling, and how to effectively open up the economy to international talent. Here, the Review appears to have made some gains.
August 2022 the Government changed the visa scheme to allow talent into the UK via its new Scale-up visa. This is transformative for many smaller businesses and those now scaling up.
This new visa means that highly skilled people can get two years’ leave-to-remain without the burden of sponsorship or detailed permissions so often required.
Money, money, money
The Kalifa Review was clear: that without investment the sector will struggle. As a result, it recommended the establishment of a Fintech Growth Fund of £1 billion, funded by UK institutional capital.
There can be no doubt that for many fintechs, this is the more critical issue – access to funds to help drive growth. Progress has been a bit stop-start, but late in 2022 a Fintech Growth Fund was launched.
That said, it still remains to be seen what impact it is having, what its remit is and what investments it has made to date.
Start-ups forged at the height of the pandemic saw no Government assistance because they did not qualify, and there is no Government-backed fintech investment funds of any note. This lack of support and action is an issue hurting all of the UK’s fintech start-ups.
International co-operation and standing
Two outcomes highlighted by the Review and only just coming to fruition again illustrate that the Kalifa Review is very much a work-in-progress.
The two bodies the report called for to help drive international collaboration – the Centre for Finance, Innovation and Technology (CFIT) and the Fintech Credential Portfolio (FCP) – have only just come online.
Connectivity
The Review was always clear on the timetable for roll-out of a programme to improve the national co-ordination of the UK’s top ten fintech clusters. This three-year timetable does appear to be on schedule, but we are yet to be convinced we are in fact delivering the recommended connectivity. Time will tell on this.
What are the next steps?
There can be no doubt that many of the recommendations in the Review have helped provide much-needed focus on the UK fintech sector. Many of the recommendations to deliver and build a resilient environment are underway but there is still much to be done.
It could be argued that the central planks of the Review are now in place, but progress is slow and there are huge parts of it that have seen no action at all.
We are still missing an operational regulatory regime for crypto, although the Government has now launched a consultation. Further, the London Stock Exchange is still not the destination for tech listings, as we have seen recently with WANdisco and Softbank-backed semi-conductor business Arm.
If the UK is to remain at the centre of the global fintech industry, we cannot remain complacent. We recognise that the UK must invest in its fintech sector to maintain its global position.
But the Review has totally overlooked the Government’s net zero objectives and that means it falls to enlightened fintechs themselves to help drive the green agenda.
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