The Kalifa review, commissioned by the HMT sets out a strategic plan for the UK to remain a world class centre in fintech. Earlier this week, Director of Financial Crime, Philip Creed and the rest of the Emerging Payments Association’s Project Financial Crime team gave their opinion on the Kalifa report in the first podcast of the EPA’s Insights Series.
In July 2020, Ron Kalifa OBE, Chairman at Network International and ex-CEO of Worldpay started an independent review to identify priority areas to support the UK’s fintech sector with the objective of ensuring continued growth and maintaining its position as a global leader in fintech. He has spent the past year listening to the industry and he introduces the review with the following comments.
“Fintech is not a niche within financial services. Nor is it a sub-sector. It is a permanent, technological revolution, that is changing the way we do finance. Its essence is in both fast-growing fintech companies, and the investment and use of technology by our incumbent financial institutions. It’s in the way we regulate previously unknown technology and set new standards. But most importantly, it’s about delivering better financial outcomes for customers, especially consumers and SMEs. We want to deliver these outcomes across the UK and export them to the world.”
The 5 point plan
The report’s recommendations can be summarised in the following 5 point plan.
- Policy and regulation
- Deliver a digital finance package that creates a new regulatory framework for emerging technology
- Implement a “Scalebox” that supports firms focusing on scaling innovative technology
- Establish a Digital Economy Taskforce (DET) to ensure alignment across government
- Ensure that fintech forms an integral part of trade policy
- Retrain and upskill adults in support of UK fintech by ensuring access to short courses from high-quality education providers at low cost
- Create a new visa Stream to enhance access to Global Talent for fintech scaleups
- Build a pipeline of fintech talent by supporting fintech scaleups to offer embedded work placements to Further Education and Higher Education students and Kickstarters
- Expand R&D tax credits, Enterprise Investment Scheme and Venture Capital Trusts
- Unlock institutional capital to create a £1bn “Fintech Growth Fund” of sufficient scale to act as the catalyst in developing a world leading ecosystem
- Improve the listing environment through free float reduction, dual class shares and relaxation of pre-emption rights
- Create a global family of fintech indices to enhance sector visibility
- Deliver an international action plan for fintech
- Launch an international “Fintech Credential Portfolio” (FCP) to support international credibility and increase ease of doing business
- Drive international collaboration through the Centre for Finance, Innovation and Technology and launch an International Fintech Taskforce
- National connectivity
- Nurture the high growth potential of the top 10 fintech clusters
- Drive national coordination strategy through Centre for Finance, Innovation and Technology
- Accelerate the development and growth of fintech clusters through further investment, such as in R&D
The EPA’s Project Financial Crime Views
fscom’s Director of Financial Crime, Phil Creed said that the review was very welcomed by the fintech sector and his overall impression is that it has been well received.
"The report is shining a light on fintech at a really important time in the UK, post Brexit."
On point 1, Policy and regulation, Phil said that the challenge with regulation is with how much the government is going to diverge from Europe and whether there will be equivalence or not. The current regulations have several challenges for payment and e-money institutions. One of them is safeguarding and the holding of client assets and another is open banking. It is an area ripe for change. Currently, the EBA states that AISPs and PISPs need to be regulated for AML. However, they do not touch customer funds so it is almost impossible for them to launder money. Open banking is here to make things bigger, better and faster and to handcuff that innovation makes no sense. Phil says the UK needs to make a statement here.
CEO of Cybertonica, Joshua Bower-Saul said he liked the fact it wasn’t a parochial report. It didn’t stay within its own domain, it looked at how the combined government and private stakeholders across all the verticals could be co-ordinated to get some real power back into the ecosystem. The five chapters are certainly the correct areas. The opinions cited in the report may have been more forceful in the skills section and the regulatory evolution as there is more work to be done in these areas.
Jane Jee, CEO of Kompli-Global and Lead for the EPA's Project Financial Crime said she agreed with all panellists that the whole Fintech/RegTech sector welcomed the Kalifa review. However, she felt that the ability of RegTechs to help defeat financial crime was not given great visibility in the report. In her view, the Regtech sector deserved a separate focus rather than being seen as merely a subset of fintech. She hoped the new proposed regulatory framework would help boost the RegTech market.
Read the Kalifa Review full report here and you can listen back to the podcast below.
This post contains a general summary of advice and is not a complete or definitive statement of the law. Specific advice should be obtained where appropriate.