Kalifa Fintech Review: Others waiting for the UK’s fintech crown to slip

Ron Kalifa, former head of Worldpay, last week published his review of the UK fintech report containing recommendations to improve policy, competitiveness and investment into the UK fintech industry.

Corporate Partner James Worrall and member of RWK Goodman’s Financial Services team summarises the key recommendations from the report:

• National connectivity – developing smaller fintech “clusters” outside of London to nurture high growth potential. Clusters should form a collaborative web to strengthen connectivity rather than competing with one another.
• International connectivity – developing a forward thinking plan to drive international collaboration including the launch of a “Fintech Credential Portfolio” to support and increase the ease of doing business.
• Regulatory change – establishing a “Digital Economy Taskforce” responsible for creating a policy roadmap together with the development of “common data standards” and the evolution of the existing “open banking” regime into an “open finance” system (by allowing fintech companies access to data held by large financial institutions, subject to strict conditions, to help develop new innovative services). Further, for the UK to tighten the regulation of cryptoassets and explore the need for digital currency legal reform.
• Investment – implementing a “scalebox” arrangement whereby firms focusing on innovation tech would receive additional support, particularly in their growth phase. Creation of £1 billion “Fintech Growth Fund” to act as a catalyst for growth and development of the fintech ecosystem. Consideration given to expanding the application of R&D tax credits, Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT).
• Skills – set up new retraining programmes for further education institutions to help workers get to grips with new, essential technical skills.
• Listings – relaxation of some public market listing requirements to encourage more fintechs to undertake IPOs in the UK, including the reduction of free float requirements on the premium segment from 25% to 10% for a limited time post-IPO, permitting golden shares or dual share class structures and maintaining previously temporary relaxations of pre-emption rights.

James adds, “With the report highlighting that UK fintech will lose its dominance in the global industry if the government does not back reform, it is crucial that the governments takes account of and implements the recommendations without delay. UK fintech businesses generated £11bn of revenue in 2019, some 10% of the global market and the government should take proactive and rapid steps to support the growth of the UK fintech ecosystem”.

The Kalifa Review is available in full here