Britain’s top fintech bosses call on government to step up efforts to overhaul regulations

Monday, February 21, 2022 11:17 a.m.

A group of Britain’s top fintech bosses have called on the government to step up efforts to overhaul regulations and create a world-class environment for the sector, in a letter seen exclusively by AM City.

The bosses of more than 70 of the UK’s biggest fintech firms, including digital banks Monzo and Starling, payments giant and buy-it-now company Klarna, signed the letter drawn up by the industry body InnovateFinance.

The arrival as the industry prepares to mark one year since the launch of the Treasury-commissioned Kalifa Review of Fintech, which set out a roadmap for the UK to cement its place as the world’s fintech leader. fintech.

While praising the progress made so far, the bosses called on the fintech industry “not to rest on its laurels” and to “build on the current momentum” to revise regulations and create a environment conducive to business growth.

“The regulatory rulebook requires further updating, and regulators must have the capacity and culture in place to allow them to fully embrace innovation while protecting consumer and financial stability,” the letter states.

The executives are also calling for more institutional investors to back high-growth fintech companies and fill a funding gap in the UK, and said there are other opportunities to use fintech to grow the 10′ Fintech clusters” across the UK.

Janine Hirt, managing director of Innovate Finance, which helped organize Kalifa’s review last year, told City AM that progress on the report’s recommendations had been good but there was still a long way to go. .

“We also believe industry, governments and regulators can do more to celebrate successes here in the UK and promote fintech successes,” she said.

“It’s a phenomenal industry for the UK and benefits the ultimate society and the individual on the street, so championing and promoting this is really important to continue its strength.”

The minister has launched a charm offensive on fintech firms in recent weeks as they seek to attract more high-growth firms to list in the UK.

Downing Street recently welcomed bosses of companies such as Klarna and Oaknorth, who both signed the letter today as it aims to urge them to go public in the capital.

The letter welcomed a number of steps the government has taken so far, including changes to the UK registration scheme, commitments to build a new Center for Finance, Innovation and Technology (CFIT) led by industry, as well as the work of the Bank. of England and a central bank digital currency.

Hirt said the establishment of a “scalebox” by the Financial Conduct Authority (FCA) would also be essential to support fintechs as they grow.

But Hirt and the letter’s signatories said a shortage of growth capital is preventing the sector from realizing its growth potential.

Figures from January showed that Britain’s fintech sector saw record funding last year, but funding for so-called growth-stage companies still lagged.

Of the $11.6 billion injected into UK fintech, $7 billion was invested in advanced seed rounds, while only $1.6 billion was channeled into growth-stage funding ventures.

The review’s author, Ron Kalifa, told City AM last month that institutional investors and pension funds would be key to closing the funding gap.

“There is a £2bn fintech growth capital funding gap in the UK, and as a result many entrepreneurs would rather sell at the growth stage than build their business and create prosperity. and jobs in the future,” he said.

There is around £6billion in the UK pension scheme alone. A small part of this sum could be diverted to high-growth technological opportunities that would create jobs, help upgrading and boost international trade.

A UK Treasury spokesperson said:

“We will continue to work at pace, alongside industry and regulators, to push forward our reforms to keep the city on top now that we have left the EU.”

“This includes reforming our listing scheme to encourage more companies to list on UK markets, ensuring we are global leaders in green finance, making it easier to take up new technologies on wholesale markets and reforming the regulatory framework to encourage international competitiveness.”

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