Upon the announcement of the United Kingdom Budget for 2020, chancellor Rishi Sunak commissioned Ron Kalifa OBE to conduct an independent review of the U.K. fintech sector. On Feb. 26, eight months later, the FCA published the 108-page report, and it contains multiple clear guidelines aimed at cementing the UK’s position as a fintech powerhouse.
Over $95 billion was spent by U.K. fintech firms in 2019, and with 10% of the global market share, the U.K. is already ahead of the curve when it comes to fintech adoption and business. Investments in U.K. fintech firms totaled $4.1 billion in 2020, notes the report — more than the next five European countries combined.
Kalifa still identified areas where the U.K. could improve its approach to creating a welcoming environment for the next generation of fintech players.
“However, the trajectory of UK fintech is at an inflection point of opportunity — and risk. While the UK’s position is well established, its future is not assured,” notes the report.
The three main threats to the U.K.’s current fintech dominance are identified as COVID-19, Brexit, and overseas competition. Concerning the pandemic, the report notes that the lockdown has accelerated the adoption of digital technologies in a way that policy and marketing never could, and whichever country comes to this realization first stands to benefit the most.
With that in mind, the report proposes five key ways in which the U.K. can create an environment more conducive to fintech in the coming years.
Policy and Regulation
The report recommends the U.K. create a new regulatory framework for emerging technologies, and urges it to create a digital finance package for this purpose. A “scalebox” should be created to support companies focused on scaling new technologies, and a Digital Enforcement Taskforce should be formed to ensure uniformity among government bodies, notes the report.
Additionally, the report suggests that fintech firms themselves should have their voices heard when it comes to trade policy.
Focusing on the social aspect of the inevitable digital transformation, the report recommends that education services should be created to retrain and upskill adults in the U.K. A pipeline of fintech talent should be formed to support fintech scaleups by offering work placements to students in further and higher education, it adds.
Concerning investments in fintech firms, the report proposes that existing Enterprise Investment Schemes and Venture Capital Trusts be expanded, while research and development tax credits for fintech firms should be increased.
The report calls for the creation of a £1 billion ($718 million) fintech growth fund and recommends that a group of fintech indices be built to enhance global visibility for the industry.
The creation of an international action plan for fintech, and the launch of a “Fintech Credential Portfolio” would enhance international credibility, and make the process of conducting international business easier in general, the report states.
The report suggests existing Centres for Financial Innovation and Technology should be better utilized to drive international collaboration, while an international fintech taskforce should be launched to ensure alignment between participating countries.
Focusing on fintech development within the U.K.’s own borders, the report proposes that the top 10 fintech clusters should receive particular attention, and should be nurtured to achieve their highest growth potential.
Notable growth clusters have been identified in Edinburgh, Scotland, where the number of fintech firms has increased from 26 to 151 in just over two years with the help of enterprise funding. Other notable clusters within the U.K. include Cardiff, Wales, and Manchester, Leeds and Birmingham in England.
The report notes that the goal is not to neglect other areas of the country but to ensure that existing fintech hubs can reach their full potential.
CEO and co-founder of the London-based fintech firm Revolut, Nik Storonsky, said the Kalifa review could provide a pathway to ensuring the U.K. retains its place among the top fintech destinations in the world:
“It is essential to preserve and strengthen the UK’s position as the first choice to launch and grow a fintech business. I welcome the Kalifa Review and the Government’s commitment to ensuring that the UK remains a world leader in innovation and growth.”
Referencing the U.K.’s newfound independence in the wake of the Brexit agreement, CEO of consumer banking and payments at Barclays, Ashok Vaswani, said:
“As the UK looks to forge its own path in the world, it is absolutely right that the Government explores how it can ensure the ongoing success of the UK fintech sector.”
This post first appeared here: https://cointelegraph.com/news/fca-releases-detailed-5-point-plan-to-make-uk-a-fintech-powerhouse