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The Financial Conduct Authority (FCA) has released a 5-point plan, explaining how the United Kingdom can retain its status as one of the global centers for fintech innovations. Upon the announcement of the United Kingdom’s budget for 2020, Chancellor Rishi Sunak commissioned Ron Kalifa to conduct an independent review of the U.K. fintech sector.
And on Friday, eight months later, the FCA published the 108-page report, which contains multiple clear guidelines to uphold the U.K.’s position as a fintech powerhouse.
In 2019, over $95 billion was spent by U.K. fintech firms, and with 10% of the global market share, the U.K. is already ahead of the curve when it comes to fintech adoption. Investments in U.K. fintech firms totaled $4.1 billion in 2020, which is more than the next five European countries combined. Kalifa still identified areas where the U.K. could improve its approach to creating a conducive environment for the next generation of fintech players.
The report notes:
“However, the trajectory of U.K fintech is at an inflection point of opportunity — and risk. While the UK’s position has been well established, its future is not assured.”
Currently, the three main threats to the U.K.’s fintech dominance are COVID-19, Brexit, and overseas competition. Concerning Covid-19, the report states that the pandemic 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.
That said, the report proposes five ways in which the U.K. can create an enabling environment for fintech in the coming years.
The report recommends that the U.K. creates a new regulatory framework for emerging technologies and a digital finance package for this purpose. A “scale box” should be created to support companies focused on scaling new technologies, and a digital enforcement task force should be established to ensure uniformity among government bodies.
The report also suggests that fintech firms should learn to increase their public awareness strategies. This will enable them to have a voice when it comes to trade policy.
Analyzing the social aspect of the unavoidable digital transformation, the report recommends that educational services should be created to retrain and upskill adults. In other words, a pipeline of fintech skill acquisition units should be formed to support individuals with fintech-worthy talents.
Concerning investments in fintech firms, the report proposes that existing Enterprise Investment Schemes and venture capital trusts be expanded, plus research and development tax credits for fintech firms should be increased.
The report also calls for the creation of a 1 billion pound fintech growth fund 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 partnerships. It will also make the process of conducting international business easier in general.
The report further suggests that existing Centres for Financial Innovation and Technology should be better equipped to drive international collaboration. An international fintech task force should also be launched to ensure alignment between participating countries.
Concerning fintech development within the U.K.’s borders, the report proposes that the top 10 fintech clusters should receive special 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 also highlights that the goal is not to neglect other areas of the country but to ensure that existing fintech hubs can reach their full potential.
The CEO and co-founder of Revolut—a London-based fintech firm—Nik Storonsky, said the Kalifa review could provide a pathway to ensure that 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.”