When the Fintech Founders group that I chair recently hosted an event with Ron Kalifa, to discuss his ongoing Fintech Review, the energy and enthusiasm of the founders on the call was palpable. Many of the men and women who took part, all of them Fintech entrepreneurs, have been struggling over the last twelve months.
But as we look to emerge from the haze of the last few years – from the uncertainty of Brexit, and the trauma of Covid – these founders know that there are great opportunities that lie ahead, as long as the Fintech sector gets the backing it deserves.
We already have a world-leading Fintech sector, which could and should have played a much greater role in responding to the Coronavirus pandemic. In the US, and many other countries, governments were quick to include Fintech lenders as a key part of the solution, recognising that they are nimbler and faster-moving than incumbent banks when it comes to providing funding to customers.
Unfortunately, the UK didn’t respond in the same way and it is therefore little wonder that when we surveyed Fintech founders – those entrepreneurs who have taken the risk to set up businesses and are at the coalface of building the sector – a majority said that their views were not properly heard in policy and regulatory circles.
That is where the Kalifa Review, widely expected to be published imminently, comes in.
The Kalifa Review is a vital opportunity for the Government to acknowledge and help shape the future of Fintech in the UK.
The scope of the Review is impressive – ranging from Fintechs still at the early stages of seed funding through to larger, more-established businesses – and looking at the challenges faced by both. There has already been press speculation that it might put forward a new £1bn Fintech Growth Fund.
This would be a welcome move to address the financing gap that some founders are experiencing at the later stages of the journey (for equity, debt and other funding), and would also be a clear signal of the Government’s determination to ensure that the UK remains the best country in the world to launch and scale a Fintech business.
This would be an important statement of intent because this is the time for the Government to back the Fintech sector unequivocally. The initiatives of the past decade have helped build the sector that we have – such as the regulatory framework for bringing peer-to-peer lending and crowdfunding to the mainstream, or the FCA’s regulatory sandbox. But these are now old initiatives, and other countries are fast catching up.
One of the main concerns expressed by the members of our Fintech Founders group is around continued access to workers with the necessary skills to drive their business growth.
Many of these skilled workers want to base themselves in the UK and it is essential we can to access their talent in the future. We need to see this requirement reflected in the UK’s new visa regime and the Kalifa Review will, I hope, set out some practical recommendations for how the UK continues to attract the talent it needs.
It is clear that the UK’s pre-eminence in Fintech needs to be protected and strengthened. Other countries have shown their determination to build alternative Fintech centres, from France and Luxembourg, to the Middle East and on to Singapore and Australia.
The Kalifa Review needs to address other key challenges which currently affect founders, from the uncertain future status of passporting on financial services to the need for a more competitive environment for new Fintech banking and lending products.
In too many areas, innovation is stifled in a landscape skewed heavily towards incumbents. Open Banking is a good example of this: an innovation with the potential to force competition on large, established banks, resulting in lower costs, better technology, and better customer service.
However, current regulations around Open Banking limit its usefulness for Fintech challenger firms, meaning the incumbents can protect their positions and the disruptors are disadvantaged.
If the Kalifa Review hits the right notes, and the Government responds positively, the future will be a hugely exciting one for those of us in Fintech. If we get this right, Fintech can play a key role in driving recovery and growing our economy.
But to get it right we need the Kalifa Review to come up with the goods, the Government to respond in kind and then for Fintech founders to rise to the challenge. The Kalifa Review can be a launchpad for the Fintech sector. It can’t come soon enough.