Britain’s departure from the European Union has cut the fintech industry’s access to the world’s biggest single market, making the UK less attractive for fintechs wanting to expand cross-border.
The review headed by Ron Kalifa, former CEO of payments fintech Worldpay, sets out a “strategy and delivery model” that includes a new billion pound start-up fund and fast-tracking work visas for hiring the best talent globally.
“It’s about underpinning financial services and our place in the world, and bringing innovation into mainstream banking,” Kalifa told Reuters.
Britain has a 10% share of the global fintech market, generating 11 billion pounds ($15.6 billion) in revenue.
The review said Brexit, heavy investment in fintech by Australia, Canada and Singapore, and the need to be nimbler as COVID-19 accelerates digitalisation of finance, all mean the sector’s future in Britain is not assured.
“What the UK fintech industry really needs is both access to talent and easy access to global markets,” said Mike Laven, CEO of fintech Currencycloud. “Unfortunately, the fallout of Brexit and the pandemic have recently made this more difficult.”
The review said Britain increasingly needs to represent itself as a strong fintech scale-up destination as well as one for start-ups.
It recommends more flexible listing rules for fintechs to catch up with New York.
Britain’s financial services minister John Glen said past success of fintech was no guarantee of fulfilling future potential.
“We recognise the need to make the UK attractive a more attractive location for IPOs,” Glen said, adding that a separate review on listings rules would be published shortly.
“Those findings, along with Ron’s report today, should provide an excellent evidence base for further reform,” Glen said. The government will also explore how to make it easier for fintechs to attract people with the right skills.
New centre
A UK fintech wanting to serve EU clients would have to open a hub in the bloc, an expensive undertaking for a start-up.
“Leaving the EU and access to the single market going away is a big deal, so the UK has to do something significant to make fintechs stay here,” said Kay Swinburne, vice chair of financial services at consultants KPMG and a contributor to the review.
The review seeks to join the dots on fintech policy across government departments and regulators, and marshal private sector efforts under a new Centre for Finance, Innovation and Technology (CFIT).
“There is no framework but bits of individual policies, and nowhere does it come together,” said Rachel Kent, a lawyer at Hogan Lovells and contributor to the review.
Britain pioneered “sandboxes” to allow fintechs to test products on real consumers under supervision, and the review says regulators should move to the next stage and set up “scale-boxes” to help fintechs navigate red tape to grow.
“It’s a question of knowing who to call when there’s a problem,” Swinburne said.
($1 = 0.7064 pounds) 2 (Reporting by Huw Jones; editing by Hugh Lawson and Jane Merriman)