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Worldwide, FinTech is hailed as the future of finance. From the evolution of open banking platforms to the use of artificial intelligence, FinTech revolutionises the global economy by changing the way businesses and customers bank, invest and make payments. Over the past decade, the UK, too, has witnessed technology-led disruption across the financial sector. With over 10% of the global market share in FinTech, today, this sector is worth more than £11 billion a year to the UK economy.
High quality talent, progressive and clear regulations, availability of capital and access to an innovative financial services sector has established the UK as a global FinTech leader. This trajectory, however, is at a crossroads — overseas competitors strive to match the UK’s success, Brexit causes regulatory uncertainty, and the pandemic has accelerated digital adoption – thus posing a threat to the UK’s leadership position. There’s also an immense opportunity to leverage technology to ensure inclusive and sustainable growth for the economy.
The Kalifa Review, published on 26 February 2021 is an independent review led by Ron Kalifa OBE and aims to help the UK retain its leading global FinTech position and reputation. It outlines a strategy to highlight the opportunity for UK FinTech firms to scale up, acquire highly skilled talent, deliver improved financial services and gain competitive advantage over other FinTech hubs internationally. Russell Curzon, General Manager for financial services platform Nium in the UK, shares his thoughts on the Review and how the industry can leverage the report’s findings to further advance the progression of financial technology in the UK and internationally.
The combination of world-leading financial services and a vibrant tech sector has created a fertile environment for the FinTech industry to thrive in the UK. The country’s groundbreaking Open Banking framework has fueled increased innovation among large financial institutions, paved the way for the emergence of neobanks and other fintechs, and has inspired similar regimes around the world
The UK is home to more billion-dollar startups than any other country in Europe and enjoys ample demand for FinTech products. These factors, also identified in the Review, are crucial for UK to retain its throne as one of the leading FinTech nations in the world:
The UK has a well-rounded funding ecosystem supported by robust infrastructure, which arguably makes it one of the best places in the world for FinTech. Fast growing firms in the UK have easier access to funding than any other European market. Last year, the UK totaled $4.1bn in FinTech capital funding, ranking second only to the US.
The UK government recognises the significance of the financial sector and encourages it through positive regulatory policy. This has led to several empowering measures such as the establishment of:
● Innovation Hub that helps FinTech firms understand the regulatory framework
● Regulatory Sandbox which provides a secure space for firms to test new products
The UK has a high proportion of tech-savvy citizens who demand top quality financial services and products. A growing number of people in the UK are now becoming digitally active, with 71% of the population use the services of at least one FinTech company.
The UK's talent prowess is evident from the 76,500 people employed in the financial technology sector. Additionally, strategic actions such as the inclusion of FinTech courses in education curricula and FinTech-related programmes are helping attract new talent to the FinTech ecosystem.
Commissioned by the government, the Kalifa Review of UK Fintech intends to trigger sustainable innovation and define considerations with reference to best practices in eight international markets. One of its key recommendations is to consolidate the international operational support and increase the ease of doing business. Global connectivity – from the free flow of data, to harmonised regulatory standards – are critical to the success of FinTech. The UK must focus on cross-border collaboration to maintain its reputation as a global FinTech hub. The review thus calls for the launch of an international FinTech Credential Portfolio (FCP), a Centre of Finance to drive international collaboration and an International FinTech Taskforce.
An international taskforce is one, important means of driving global connectivity. But fintechs and the private sector can and should play a crucial role in driving international collaboration. Nium, for example, has its roots as a Singapore-based company with expertise in the Asia Pacific region and holds licences around the world – including in the UK and Europe. We enable fintechs, banks and financial institutions who aspire to expand their footprint globally. – . We also recognise the importance of an open, collaborative dialogue among UK firms and other countries. For instance, we have participated in UK FinTech Week and bilateral events such as India Day with the aim to support the UK’s efforts in strengthening collaborative ties with other economies focused on inclusive, sustainable growth of the digital economy.
How the UK can maintain international attractiveness and competitiveness
The UK FinTech sector has the potential to grow to approximately £38 bn in revenue by 2030, provided it can maintain its current market share. However, this leadership position cannot be taken for granted. The UK’s positive growth story has become a benchmark for overseas markets aspirations to emulate its approach. While London is still the top attractor of FinTech venture capital investment, Berlin, Paris and Barcelona are fast catching up.
In order to uphold its rank, the UK must continue to strengthen its in-bound global investment, as well as look to boost out-bound growth, by addressing factors that may hinder its prospects in this regard. For example, regulatory hurdles can be a deterrent for businesses looking to enter the UK or expand internationally. Support for cross-border expansion and easier access to updated information, including guidance on legal and regulatory requirements and market navigation, will allow FinTech firms to expand overseas.
In an effort to minimise regulatory barriers, the UK government-supported FinTech Bridges with other nationsaims to bolster ties between governments, financial regulators and the FinTech industry. Optimum use of these agreements will provide assurances for sustained collaboration in a post-Brexit environment and lead to the sustained growth of FinTech in the UK. Further, entering into more FinTech bridge agreements with countries like the Netherlands will place the UK in a better position to reap the benefits of international cooperation among other growing fintech hubs.
How Nium can help UK FinTechs expand internationally
Global financial services platforms, such as Nium, that support FinTechs and startups through their global licensing agreements and sophisticated remittance capabilities, have a lot to offer to help the UK’s FinTech sector expand internationally. Nium can play a significant part in bringing the recommendations of the Kalifa Review to fruition.
Early-stage companies encounter a variety of hurdles when trying to expand internationally – many of which have been highlighted in the review. These include, the ability to build partnerships with established players, having a limited international profile and the absence of any mechanism to formally attest to their credibility. One of the biggest obstacles, however, is how to penetrate highly regulated markets confidently and cost-effectively.
Nium’s global financial infrastructure helps companies navigate this roadblock. We own licences in the world’s largest, most complex, and fastest-growing economies and work with clients over six continents. Our local presence in Asia has helped us develop trusted and collaborative relationships with regulators, businesses and consumers in these markets.
Our global portfolio of licences gives our customers quick access to financial services in highly regulated markets and new geographies; thereby creating the opportunity to generate additional revenue and improve customer experience. Nium’s modular financial stack provides the ability to send and receive funds through bank accounts, cards, and e-wallets, including real-time payments to over 65 countries. We enable customers to bring suppliers, business partners and clients together in a single platform, this facilitates faster growth and reduces operational complexity and cost.
The recommendations of the Kalifa Review aim to propel the transformation and development of the FinTech sector in the UK. At this crucial time, the UK must chart its course for the future by harnessing the high growth potential of FinTech firms, establishing new international relationships and cementing its position as a leader in technology and data. A financial technology platform such as Nium serves as a partner to fulfil these recommendations through continued innovation, financial inclusion and sustained growth in the UK and internationally.