08 Mar 2021

Fintech Review: key reforms to boost sector now

techUK welcomes the publication of the Fintech Review by HM Treasury, which was 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.

Following on this review and budget announcements techUK, will continue its work the industry, Government, regulators and stakeholders to build on this momentum to boost the fintech sector and innovation for the benefit of all.

The United Kingdom has been a global leader for the establishment and development of fintech and unlocking opportunities for the benefit of the economy and society as well as combining our efforts for the economic recovery across the country remain of the utmost importance.

In the last 12 months, Fintechs have demonstrated their resilience and efficiency as well as their high capability to scale and deliver for customers and various segments of the economy and society. In the coming months, as the country develops and establishes new connections and relationships internationally, but also as the country take decisive steps to level up the economy across nations and regions, fintech should be a key focus.

This independent review lead by Ron Kalifa OBE 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.

The Fintech Review focusses on five key areas, a “5 point plan”, for the industry:

policy and regulation: create a forward-looking framework for fintech and innovation
skills: retraining, upskilling and enhancing access to global talent
investment: dedicated fund, R&D and tax credits, public listings rules
international competitiveness: international fintech taskforce and credential portfolio
national Connectivity: drive R&D and nurture fintech clusters

Some of the key recommendations which could bring value immediately to the ecosystem include:

implementing a ‘scale box’ to provide regulatory support for growing firms
creating a £1 billion fintech ‘growth fund’ to help firms grow independently
establishing a private sector-led Centre for Finance, Innovation and Technology to support national coordination and growth in fintech across the UK

These focusses and recommendations provide a comprehensive package to drive forward fintech development and adoption. techUK looks forward to engaging with the industry, Government, regulators and stakeholders, to ensure we deliver for society and the economy through a fintech strategy with detailed recommendations and actions.

‘[Fintech] is a permanent, technological revolution, that is changing the way we do finance.’ Ron Khalifa

‘Our goal is simple: To ensure the UK maintains its position as the best place in the world to start and grow a fintech business.’ John Glen MP, Economic Secretary to the Treasury

A focus on policy: developing the right regulatory environment for fintech and innovation

The United Kingdom developed a vibrant financial services ecosystem through a world leading approach from regulators, authorities, and Government. The implementation of Open Banking is one example where the UK managed to take the lead and develop a strong competitive ecosystem.

Going forward as the UK develops a new relationship with the European Union and other international partners, the new regulatory regime will be key to ensuring the UK remains an attractive and competitive place for fintech. It will be essential to consider carefully when and where the UK will align or diverge from other jurisdictions.

A vision and strategy for fintech

techUK welcomes the call for a fintech strategy with clear objectives, actions and timescales to be implemented effectively, “in a way that keeps pace with technology developments”. Developing and delivering a strategy for the sector will be key to achieving positive results for the industry. It is essential to bring all the different actors together with a clear vision for the months and years ahead, and, furthermore, to ensure fintech is on the agenda of all relevant discussions for the financial services sector as a whole (for example the ongoing and future discussion on the economic recovery efforts).

In that respect the recommendation to establish a taskforce responsible for developing a policy roadmap for tech and digital particularly, the digital finance package, is vital. Providing a “single customer view” of the government’s regulatory strategy on tech and a single touchpoint for the private sector to engage would certainly simplify the process for the sector to help ensure full coordination across the board.

Some key topics and initiatives to develop: digital identity, Open Data and digital currencies

The report highlights that it is also important to adopt a cross-sectoral approach, as the fintech sector does not live in a silo and many developments on data, for example, also impact fintechs. The development on Open Data and Smart Data should work hand in hand with the progress from Open Banking to Open Finance.

techUK has been a key and long advocate for digital identity in the United Kingdom with key recommendations in white papers and engagement with the industry and stakeholders. Its application could increase inclusion, efficiency, security and drive costs down. techUK supports the call for the digital ID framework by the Ron Kalifa’s Review.

In Future of Digital Currencies techUK encouraged industry and the public sector to ensure the design and delivery of digital currencies to bring both security and value to consumers. Payments and currencies are developing at a fast pace across the world so it is essential to grasp what is at stake in terms of opportunities and risk. There are many exciting use cases around digital currencies, including financial inclusion.

The Fintech Review rightly emphasises the positive role that digital currencies and CBDC could have in the digitisation of financial services and the importance of interoperability. The ongoing work of the Bank of England and Treasury in this area is vital and techUK looks forward to continuing to engage with key stakeholders in this area.

Finally, as the UK is getting ready to host COP26 later this year, the inclusion of Environmental, Social and Governance (ESG) in the report is important. techUK has just submitted a list of events for COP 26 and will contribute to the debate on Green Finance through papers and events.

Ella Gago-Brookes

Team Assistant, Markets, techUK

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