The recently published “Kalifa Review of UK FinTech” (Kalifa Review) is the result of an independent review that began in July 2020, with the objects of supporting growth and widespread adoption of fintech in the UK, and maintaining the UK’s global fintech reputation.
The Kalifa Review can also be seen as a call to action for New Zealand: to take a similar approach to maintain and grow a competitive position in the global fintech market as well as reaping the benefits that come from becoming a more attractive jurisdiction to such players.
Who needs to read it? Why?
The Kalifa Review will be of particular interest to current and budding participants in the NZ fintech sector, as well as those with a general interest in the area. It has strong authority from a prevalent jurisdiction with which participants can leverage and engage with New Zealand regulators and the New Zealand government to act fast and strengthen support for fintech.
New Zealand government agencies such as the Ministry of Business Innovation and Employment (MBIE) and Ministry of Justice (MoJ) and regulators like the Financial Markets Authority (FMA) and the Reserve Bank of New Zealand (RBNZ) should also consider what action New Zealand should take.
What does it cover?
The Kalifa Review sets out proposals for how the UK government can build on its existing strengths, and creates a 5 point plan of recommendations that will support UK firms to scale and continue innovation. It also highlights opportunities for job creation, financial inclusion, boosting trade and investment, and enabling the UK to extend a competitive edge over other leading fintech hubs.
See here the full Kalifa Review or a summary.
We also set out some relevant fintech articles by our experts below:
- Regulation of FinTech: Jurisdiction Analysis (report produced by us for the New Zealand Treasury)
- Regulation of FinTech: A multi-jurisdiction approach (summary of the report)
At the core of the Kalifa Review are 5 recommendations based on the key areas to reinvigorate UK’s fintech sector – policy and regulation, skills, investment, international opportunities and national connectivity. The recommendations form a strategy for the UK fintech sector and provide a delivery model to help the UK achieve widespread adoption of the vision. We set these out below.
Policy and Regulation: “dynamic leadership that protects consumers yet nurtures fintech activity and encourages competition”
- The Kalifa Review proposes to achieve this vision by:
- delivering a digital finance package that creates a new regulatory framework for emerging technology;
- implementing a “Scalebox” that supports firms focussing on scaling innovative technology;
- establishing a Digital Economy Taskforce; and
- ensuring that fintech forms an integral part of trade policy.
Skills: “ensuring fintech has a sufficient supply of domestic and international talent and the means to train and upskill our current and future workforce”
- The Kalifa Review proposes to achieve this vision by:
- retraining and upskilling adults to meet the needs of UK fintech by ensuring access to short courses from high-quality education providers at low cost;
- creating a new visa stream to enhance access to global talent for fintech scaleups; and
- building a pipeline of fintech talent by supporting fintech scaleups to offer embedded work placements to further education and higher education students and kickstarters.
Investment: “completing the funding ladder from start-ups right through to IPO”
- The Kalifa Review proposes to achieve this vision by:
- expanding research and development tax credits to enterprise investment schemes and venture capital trusts;
- unlocking institutional capital to create a £1 billion “Fintech Growth Fund” of sufficient scale to act as the catalyst in developing a world leading ecosystem;
- improving the listing environment through free float reduction, dual class shares and relaxation of pre-emption rights; and
- creating a global family of fintech indices to enhance sector visibility.
International: “a targeted approach to exports and inward investment”
- The Kalifa Review proposes to achieve this vision by:
- delivering an international action plan for fintech, combining public and private sector priorities;
- driving international collaboration through the Centre for Finance, Innovation and Technology (CFIT), and launching an International Fintech Taskforce; and
- launching an international “Fintech Credential Portfolio” to support international credibility and increase ease of doing business.
National connectivity: “leveraging the output of fintechs across the UK and facilitating connectivity amongst them”
The Kalifa Review proposes to achieve this vision by:
- nurturing the high growth potential of the top 10 fintech clusters;
- driving national coordination strategy through the CFIT; and
- accelerating the development and growth of fintech clusters through investment such as in research and development.
Our view
The Kalifa Review signifies a leading jurisdiction’s enthusiasm to achieve the full impact and opportunity of its thriving fintech sector.
The question is what is New Zealand doing? The five recommendations of the Kalifa Review may equally be seen as a roadmap for New Zealand to develop fintech here.
With the combined impacts of the Covid-19 pandemic and Climate Change, “the time to act is now” – for New Zealand to engage more deeply with other countries to align with us and provide greater ease of access to exporters and investors.
- With Covid-19 having heavily impacted parts of the economy, we need to diversify – developing industries, such as fintech, which provide services that can be exported without dependence on physical supply chains. In addition, as expatriate Kiwis from the tech sector have returned to New Zealand, because of Covid-19, we have a once in a generation opportunity to use their skills to develop NZ based businesses.
- The Climate Change Commission’s draft advice to government makes clear we will need to fundamentally shift our economy to meet our international commitments. The fintech sector is emissions light (at least in NZ) and can be a major contributor to overseas earnings as other sectors are being called on to reduce their climate impact.
New Zealand needs to better signal its commitment and engagement to develop fintech to compete with other small open markets, let alone big players like the UK, that are currently more proactive.
New Zealand too can, if it draws inspiration from the Kalifa Review, reap the benefits from the opportunities identified above including future jobs, trade and global leadership, financial inclusion and creating economic benefits. Unlike the UK’s current and proposed strategies, we do not yet have any government-led sandboxes or innovation hubs to engage with businesses.
Arguably, the message of the Kalifa Review is also reflected in the purpose under the Financial Markets Conduct Act 2013 to “promote innovation and flexibility in the financial markets”. With this in mind, regulators and the New Zealand government should, as well as continue to, encourage and support similar activity and growth in the kiwi fintech sector.
Some of the early work has already been done. Back in 2019, we assisted The Treasury with a comparative report Regulation of FinTech: Jurisdiction Analysis, but those foundations need to be built on – now.
What next?
If you have any questions in relation to the Kalifa Review or would like to learn more about our fintech experience or discuss how we can help you, please contact one of our experts.
