Fintech Finance: Fintechs react to the Kalifa Report

At Budget 2020, the Chancellor asked Ron Kalifa OBE to conduct an independent review to identify priority areas to support the UK’s fintech sector. The Review formally launched in July 2020 with objectives for supporting the growth and widespread adoption of UK fintech, and for maintaining the UK’s global fintech reputation.

The Kalifa Review of UK Fintech highlights the opportunity to create highly skilled jobs across the UK, boost trade, and extend the UK’s competitive edge over other leading fintech hubs. It sets out a series of proposals for how the UK can build on its existing strengths, create the right framework for continued innovation, and support UK firms to scale.

Below, we’ve included reaction from across the fintech community.

In response to the Kalifa Review of UK fintech, Ben Pollard, CEO and founder of fintech workplace pension and savings provider, Cushon, said: “Fintechs are often the primary driving force behind transformational change in the UK financial services industry, particularly in legacy markets such as pensions. The recommendations in this review will go a long way to ensure we can continue to innovate and make financial services work better for consumers – whether through smarter, intuitive tech, or products which align with issues people care about, such as climate change. 

“We’re particularly pleased to see the focus on skills and talent to ensure the fintech sector can continue to thrive but while visas would ensure skilled international workers can relocate to the UK this may be a case of solving a new problem with old school thinking. The pandemic has shown us just how easy it is to work remotely from anywhere in the world. It’s not just a matter of attracting global fintech talent to the UK but attracting global talent to UK-based companies regardless of where the talent resides. We hope the wider recommendations in today’s review will help do just that.”

Erin Platts, Head of EMEA and President of the UK Branch of Silicon Valley Bank commented:

“We welcome the recommendations laid out in the Fintech Strategic Review. These have been driven by those who best understand the challenges and opportunities ahead of the UK’s fintech sector – it’s leaders. A thriving and future-proofed fintech sector has a vital role to play in the UK’s post-Covid recovery from an investment and job creation perspective, and the adoption of the measures, laid out in the review will go a long way to ensure the necessary conditions for the UK to be a fintech leader.”

“We’re delighted to see the proactive stance being taken to ensure the UK continues to have access to leading talent from across the globe, particularly in light of Brexit. The review’s recognition of innovation outside of London is to be welcomed, as having a truly national fintech sector is vital to ensuring its full potential is reached. Regional hubs have a crucial role to play in both job creation and ensuring that fintech becomes a major contributor to the UK Exchequer. Equally, ensuring we get capital into the hands of diverse founders of innovative start-ups is crucial for the growth of our ecosystem.”

“The Fintech Strategic Review recognises that despite the macro-headwinds from the Covid-19 pandemic, economic backdrop and Brexit, the UK remains the one of the most attractive places to found and build leading fintechs globally. By putting into practice the recommendations laid out today in the final report, the UK can capitalise on this competitive edge and build on the momentum seen to date and encourage more companies to go public through UK markets. We shouldn’t take our status for granted and we should do everything we can to continue attracting capital into the UK’s innovation economy as investment today will drive innovation tomorrow.”

Simon Cureton, CEO of Funding Options comments, “The Treasury-commissioned review by Ron Kalifa OBE is a good first step to reflect on developments in UK fintech to-date and what needs to be done to usher in the innovation required to retain its world-leading status. Despite the UK’s rise in fintech being feted in the wake of the last financial crisis, these businesses were left on the bench as the impact of COVID-19 began to be felt. The pandemic proved to be a catalyst for driving change and repairing the fissures that formed so quickly last year. As a data-first marketplace, we actively sought to address the challenges exacerbated by the pandemic to offer a frictionless digital journey to small businesses in desperate need of access to capital.

“Whilst the report’s focus is to create thousands of jobs that support the levelling up agenda, we need to first address a mindset that could once again stifle the industry’s ingenuity. Faced with a crisis, it’s human instinct to revert to type and adopt a risk-averse approach. Whilst talent and investment are key components to driving growth, it’s time to put faith in those who are at the vanguard of this revolution. Fintech has rapidly achieved maturity and should no longer be viewed as a “cool kid” on the block.

“It must be trusted to deliver on its promise, pressing from the front to refine the increasingly robust technology stacks that perform crucial due diligence at great speed, under severe stress. We saw people ‘play the system’ at taxpayers’ expense, securing loans that, in many cases, were fraudulent and will never be repaid. For an economic resurgence where fast access to competitively priced capital with accurate due diligence happening in minutes, only fintech has the answers.”

Mark Leaver, Financial Services Technology Leader, PwC UK, comments:

“We are seeing technology companies increasingly performing roles that have historically been done by financial institutions themselves. Opening up the legacy platforms of financial institutions, letting in more agile technology-led organisations and enabling incumbents and new entrants to collaborate will help the industry to better serve customer needs and become more efficient.

“At the same time, as industry and consumers navigate an increasingly digitised world accelerated by the Covid-19 pandemic, while competition from around the world is on the rise, it is hugely encouraging to see the recommendations in the Kalifa Review of UK FinTech published today.

“Building on the strong foundations that the UK FinTech sector has laid, we look forward to working with the industry to support the proposed Centre for Finance, Innovation and Technology in the delivery of the five-point plan.”

Karen Estcourt, Junior Producer at Fintech Finance comments “What has Wiz Khalifa got to do with fintech?”

Tim Hardcastle, founder of INSTANDA, comments on the key findings from the Fintech Review on behalf of the insurtech industry

“The Fintech Review is a critical intervention for the advancement of UK insurtech. Insurtechs like us are leading the world, but beating Silicon Valley competitors needs continued support so the Government’s focus innovation and scaling is particularly welcome.

“Talent is something that is currently holding the UK insurtech industry back, so we welcome the Government’s new visa stream and commitment to a more ambitious digital education strategy such as ensuring access to high-quality courses at a low cost. We hope this will include a focus on the insurance industry.

“We are also pleased with the focus on policy and regulation, as the insurance industry needs to retain a focus on protecting customers whilst encouraging growth. The recommendation to prioritise new areas for growth and cross-industry challenges will also be critical for the insurance sector, as the sector has much to learn from other financial services industries.”

Nigel Verdon, CEO of Railsbank – “It’s important to emphasise the Review is not simply about a set of individual recommendations, but a wider strategy for the sector with a delivery model. We’re not asking for the government to do everything, but rather a 80/20 rule – with main activity driven through the private sector and the government then asked to support and convene activity to enable the delivery of that strategy”

“Amidst ongoing Brexit debate (City warned EU will do London no favours on financial services, January 26) and in light of February’s upcoming industry report by Ron Kalifa, the fintech sector must come together to lead the UK’s economic recovery”

“Working alongside other fintech leaders, it’s been a privilege to contribute to the independent Fintech Strategic Review, commissioned by HM Treasury and led by Ron. It’s shocking the elephant in the room with Brexit is never acknowledged – the market dropped from 720 million people to 60 million overnight and has cost all of us millions to set up mirrored infrastructure in Europe”

‘That said, we now need to re-adjust. The UK is still a great place to start a fintech and then grow globally, supported by the Department for International Trade. And London is the smart place to float a fintech due to the global investor base still in the City. We should draw parallels with Scandinavia, where companies know how to grow globally because the local market is so small’

“One thing the UK government must address is the potential for a persecutory tax environment which will discourage talent in the UK, much like Francois Hollande chased the French talent to London and Singapore. Avoid that, and I see cause for optimism”

Mike Laven, CEO of CurrencyCloud – “We appreciate the work and effort that’s gone into developing the Kalifa Report and agree with its recommendations which are necessary, but not sufficient. What the UK fintech industry really needs is both access to talent and easy access to global markets.

As a Silicon Valley veteran, I know from experience that Fintechs need assurance of these things from the start. Unfortunately, the fallout of Brexit and the pandemic have recently made this more difficult.While we welcome growing the pipeline of homegrown talent and introducing skilled visas under the Kalifa Review, it will come to nothing if we can’t have equivalency to talent and markets that are available on our doorstep in Europe and globally. Only with simple access to people and services can we make the UK a world-class leader in Fintech

Justin Basini, CEO and Co-Founder of ClearScore says: “Today’s Kalifa Report is a great step forward for UK fintechs, and I would encourage the government to act on the key findings and recommendations to ensure that the UK’s fintech industry thrives and further reinforces its place as a global leader. Investment in retraining will be absolutely critical, not least at this point in time, as so many young people have been affected by the pandemic, and will require support and possible retraining to get back into work.

The recommendations for expanding R&D tax credits and expanding the EIS are absolutely paramount to promoting innovation and entrepreneurship within fintech by incentivising Brits to put money into building businesses. Whilst IPO listings and external funding are important tools in encouraging and fostering a environment of fintech entrepreneurship and innovation, I am a big believer that the best way to start and run a business is not to become reliant on external funding, but to give businesses the means to get to a place where they can self-fund their endeavour. Even if this means you have to grow more slowly than others in the market, there should be a focus on being less reliant on VC’s and lenders, and more focus on building a strong, reliable, profitable company from the outset. Prioritising growth over profitability can be risky, with many fintechs getting unstuck as they become heavily reliant on external funding, whilst struggling to generate income.

Without substantial structural changes by the government to investment in both fintech startups and scaleups, the UK will fall behind and cease to be the global player that it has been.”

Anders la Cour, CEO of financial infrastructure provider, Banking Circle comments:  “Globally, FinTech is one of the fastest growing and exciting industries and the UK has always been a hub for startups and businesses in the space, driving competition in Europe and the rest of the world. But as the Kalifa report reveals, the UK is at risk of losing its leading position. This would be hugely disappointing to the industry and the country, which has always been proud of its trailblazing position in the financial world. As a result of the pandemic, last year fintech funding was down compared to 2019, but COVID-19 also accelerated the focus on digitalisation, especially in the financial services sector, and this means there has never been a more important time to embrace innovation. The UK government needs to capitalise on this as a matter of urgency.

“The Kalifa report sets out sensible recommendations, which as a growing employer in the FinTech space, we’d be excited to see in action. In particular, the recommendation to set up a training programme offering short courses to help workers learn essential tech skills will be important . It is something the rest of the world should also look to implement. As the saying goes: “if you want to go somewhere quickly, go alone. If you want to go far, go together.” True innovation is achieved by giving back and investing in upskilling, which builds the next generation of digital leaders and innovators.

“Banking Circle is also keen to be involved with the proposed Centre for Innovation, Finance and Technology, contributing insight and intellect to ensure the UK does not fall behind in the FinTech arms race.”