The UK isn't doing enough to support the development of fintech, through both regulation and investment, a recently published report has concluded.
The Kalifa review of fintech, commissioned at last year's Budget, has outlined a strategy to support the growth and adoption of fintech across the UK.
The independent review, led by Ron Kalifa, the former Worldpay chief executive, found the UK was at a ‘pivotal moment’, but warned it risked falling behind.
The report’s recommendations include a new regulatory framework for emerging technology, and outlines the need to support private investment, and well as the expansion of tax credit schemes.
One of the major proposals was the creation of a ‘Digital Economy Taskforce’, comprising key regulatory and government figures, to better co-ordinate policymaking.
The report outlines the need for additional regulatory and investment capacity to allow technology firms to scale up, access the talent and finance they need, and deliver better financial services.
The UK has more than 10 per cent of the global market share in fintech and the sector is now worth more than £11bn a year to the UK economy.
In 2020, investment into UK fintech stood at $4.1bn in 2020 – more than the next four European countries combined.
But the report has outlined the potential threat posed by both Covid-19 and Brexit, as well as the overseas competition from tech-heavy investors, including Canada, Australia and Singapore, saying that the UK’s status as a world leader is ‘not assured’.
Kalifa said: “Fintech has the power to change lives, both in terms of job creation and better wages that are so essential to our recovery; and making financial services more accessible and relevant to people’s lives.
“Britain has a proud record of starting-up and scaling-up some of the best known fintech products, but we cannot rest on our laurels. The next powerhouses will not be created by accident.”
The publication of the report marks an important step in the Chancellor Rishi Sunak’s plan to make the UK the "most open and dynamic place in the world to operate a financial services business".
The government says it will now examine the recommendations and respond in due course.
Kristo Käärmann, Wise chief executive, said: “It’s great to see the Treasury seeking to support and improve the UK’s position on the world stage as a growth platform for tech companies in financial services.
“This should lead to even more competitive products and better services for consumers, both here in the UK and beyond the borders.”
According to the report, 97 per cent of fintech founders had used tax-incentivised investment schemes including the Enterprise Investment Scheme. 47 per cent were concerned about their ability to qualify for such tax relief if their business models switched from being unregulated to regulated in the future.
The review also called for a private sector-led ‘Centre for Finance, Innovation and Technology’ to support national coordination and growth in fintech across the UK as well as a ‘bespoke regime’ for the management and regulation of cryptoassets.