Ron Kalifa OBE’s fintech review, published in 2021, provided a detailed plan to strengthen the UK’s position in the global fintech sector during a pivotal moment of opportunity and risk. The review emphasized that although the UK fintech industry was well-established, its future was uncertain. Released as part of former Chancellor and current Prime Minister Rishi Sunak’s budget, the review outlined five key recommendations: policy and regulation, skills and talent, investment, international attractiveness and competitiveness, and national connectivity.
In 2022, nearing the review’s first anniversary, nearly 70 Innovate Finance members, including fintech founders and CEOs, sent an open letter to the UK government urging for further action on the reforms, citing insufficient progress.
In just one year since the review’s release, the Kalifa Review led to the establishment of the Centre for Finance, Innovation and Technology (CFIT), the initiation of regulatory programs like the FCA’s sandbox, and the overhaul of the UK’s listing regulations along with the upcoming introduction of scale-up visas. Nevertheless, the Innovate Finance letter stressed the need for ongoing efforts to foster a more innovation-friendly environment in the UK.
Two years later, amidst rising inflation, decreasing investments, and job cuts, the question arises: what has been accomplished?
Policy and Regulation
The review proposed the creation of a ‘Scalebox’ to support firms aiming to scale innovative technologies by building on the existing regulatory sandbox. Additionally, it suggested establishing a Digital Economy Taskforce (DET) to unify the various regulatory roles concerning fintech into a cohesive policy roadmap. Although updates on the Scalebox and the DET were last reported in April 2021, a new Department for Science, Innovation and Technology has been announced, merging research and funding with digital policymaking.
Skills
The review advocated for upskilling and retraining to provide affordable access to quality education. It also proposed a new visa stream aimed at attracting international talent, which currently constitutes about 42% of the UK’s fintech workforce. To maintain its leadership in fintech, the UK needs to enhance its immigration policies to avoid a potential talent shortage. In August 2022, the launch of the Scale-up visa was announced, allowing high-growth companies to recruit exceptional talent without ongoing sponsorship requirements after six months.
Investment
The review aimed to create a £1 billion ‘Fintech Growth Fund’ sourced from institutional capital to fill a £2 billion funding gap for fintech growth. As of August 2022, it was revealed that Lord Hammond, a former chancellor, was among prominent figures backing the initiative.
International
The review proposed the development of an international action plan for fintech, promoting collaboration through CFIT and introducing a ‘Fintech Credential Portfolio’ to enhance the UK’s credibility in international markets. Recently, Ezechi Britton was appointed as the first CEO of CFIT, which aims to unite expert coalitions to address challenges in fintech growth while supporting job creation and improving financial service accessibility.
National Connectivity
The review advocated for a three-year strategy to nurture the top ten fintech clusters nationally, supported by an improved coordination strategy led by CFIT, focusing on the development of these clusters through increased investment in research and development. Innovate Finance, FinTech Scotland, and FinTech North have formed a national network to promote collaboration among innovators and strengthen connections across the UK’s fintech ecosystem.
On the second anniversary of the Kalifa Review, Yoko Spirig, co-founder and CEO at Ledgy, noted that while the UK has maintained its position as a global fintech innovation leader, significant parts of the review remain unfulfilled. The London Stock Exchange is yet to be recognized as a premier destination for tech listings, and a comprehensive regulatory framework for cryptocurrencies is still lacking. Competitors like Berlin and Paris continue to enhance their talent and investment capabilities, necessitating ongoing support for the UK fintech sector to ensure it remains competitive.
Eric Huttman, CEO of MillTechFX, remarked that the volatile macroeconomic environment post-review has posed challenges but also opportunities for fintechs addressing urgent problems and providing efficiency to businesses dependent on outdated technologies. Many recommendations from the review have strengthened the UK’s fintech infrastructure during this difficult time.
Laurent Descout, CEO and co-founder of Neo, observed that while global fintech sectors faced a challenging year, London demonstrated resilience, with UK fintech investment declining only 8%, compared to a 30% drop worldwide. He emphasized that the foundations laid by the Kalifa Review have equipped London to sustain its competitive edge, expecting ongoing digital transformation to drive growth, particularly in the payments sector.