Kalifa called out the that while the UK fintech sector was established, the future cannot be assured. Launched as part of former Chancellor and now Prime Minister Rishi Sunak’s first budget, the Review outlined five core recommendations, including policy and regulation; skills and talent; investment; international attractiveness and competitiveness; and national connectivity.

In 2022, ahead of the first birthday of the Review, nearly 70 Innovate Finance members including fintech founders and CEOs penned an open letter to the UK Government, calling for further progress in implementing the reforms, because enough progress had not been made.

In one year, the Kalifa Review had set up the new Centre for Finance, Innovation and Technology (CFIT), spearheaded regulatory initiatives such as the FCA’s sandbox and the Bank of England’s continued work on digital currencies, as well as the overhaul of the UK listings regime and the impending introduction of scale-up visas.

However, the Innovate Finance members’ letter stated that: “rather than resting on our laurels, it is imperative that we continue to build on this momentum and work together to establish an environment in the UK that is even more supportive of and conducive to innovation in financial services.”

Two years on, amid inflation and a sharp decline in investment and job losses, what progress has been made?

Policy and regulation

The Review proposed the implementation of a ‘Scalebox,’ which would support firms focused on scaling innovative technology by enhancing the existing regulatory sandbox. Kalifa also discussed the founding of a Digital Economy Taskforce (DET) to collate various functions of regulators related to fintech into a policy roadmap for a single view.

The Scalebox and the DET was last heard of in April 2021 at the time of the launch of the Review, but Sunak has announced a newly formed Department for Science, Innovation and Technology, bringing together research and funding from BEIS with the digital policymaking from DCMS.

Skills

The Review recommends upskilling and retraining by ensuring access to education from high-quality institutions at lowered costs. A new visa stream was suggested with the aim of opening up access to international talent which currently represents around 42% of UK fintech employees.

To remain a global leader in fintech, the UK must strengthen its position on immigration or risk a significant shortage in human capital. In August 2022, it was announced that high growth companies would be able to attract exceptional talent to the UK with new Scale-up visa.

Unlike other sponsored visas, the Scale-up visa allows businesses to employ high-skilled individuals who will receive 2 years’ leave to remain in the UK without requiring further sponsorship or permission beyond the first 6 months.

Investment

The Review sought to establish a £1 billion ‘Fintech Growth Fund’ pulled from institutional capital to address a £2 billion fintech growth capital funding gap. The intention for this was that it would be a market-led fund, funded by holders of domestic institutional capital and would utilise existing regulatory concessions applicable only to the fund itself.

In August 2022, it was revealed that Lord Hammond, the former chancellor, is among a host of heavyweight figures being enlisted to back the new venture, which has been provisionally named the Fintech Growth Fund. Other names cited include fintech veteran Al Lukies and the Fintech Alliance's Phil Vidler.

International

The Review proposed delivery of an international action plan for fintech, driving international collaboration through the Centre for Finance, Innovation and Technology (CFIT), and by launching an international ‘Fintech Credential Portfolio’ (FCP) - akin to a quality stamp - to bolster credibility perceptions in international markets.

This month, CFIT named Ezechi Britton as its first CEO. CFIT’s core objectives are to bring together time-limited ‘coalitions’ of experts to address barriers to fintech sector growth; and to support the creation of high-income, tech-based employment nationwide; firms achieving global scale; and improving access by citizens and small businesses to financial services.

National connectivity

The Review proposed the delivery of a three-year strategy to nurture the nation’s top 10 fintech clusters, improved national coordination strategy led by the CFIT, and the growth of fintech clusters via accelerated development and investment in R&D.

Innovate Finance, FinTech Scotland and FinTech North have created a national network that will encourage innovators up and down the country to connect and form multiple fintech hubs and centres of excellence.

The FinTech National Network intends to foster collaboration between the hubs and provide valuable connections to amplify their collective message. The network will focus on mutually beneficial initiatives, such as skills and talent, capital and investment, and diversity, and seek to connect respective FinTech ecosystems across the UK, as well as to international markets.

To mark the second anniversary of the Kalifa Review, Yoko Spirig, co-founder and CEO at Ledgy, said: “The Kalifa Review was implemented to encourage innovation and extend the UK’s competitive edge over other leading fintech hubs. Over the last few years, the UK has held on to its position as a world leading fintech innovation hub, with investment in the sector outpacing other European markets.

“However, several components of the Kalifa Review have not been delivered. The London stock exchange is not yet seen as a top-tier destination for tech listings, and the UK is still missing a fully operational crypto regulatory regime as recommended by Kalifa. Other fintech hubs like Berlin and Paris are building talent and investment capacity all the time, so the UK cannot be complacent.

“As a scaling Swiss fintech, we decided to open a London office last year because we believe the UK is the deepest and most sophisticated market outside the US. But the recently announced European Tech Champions initiative also highlights that the continent is doubling down on tech investment in a bid to cement Europe’s position as a startup friendly tech hub. Against this backdrop, it’s vital the UK government continues to support the fintech sector, encourage balanced risk-taking and drive innovation, if it wants to remain ahead of its European rivals.”

Eric Huttman, CEO of MillTechFX, said: “Since the release of the Kalifa review, the overall macro-environment in which fintech’s operate has been dominated by elevated volatility, higher interest rates and higher inflation. While the uncertainty that has come from this macro backdrop has been difficult to manage, it has also presented opportunities for fintechs solving real world problems and delivering significant efficiency gains and cost savings to those who really need it, such as firms reliant on legacy providers and outdated technology.

“Many of the recommendations in the Kalifa Review helped put the focus on UK fintech and build resilience which has been vital during this tough period. Momentum has not slowed and it’s vital that the fintech community continues to work together to drive the industry forward and build trust to increase adoption among businesses and consumers beholden to legacy processes and providers.”

Laurent Descout, CEO and co-founder of Neo added: “The past 12 months have been challenging for fintechs globally, but London has largely weathered the storm. While fintech investment dropped 30% overall in the last year, it only fell 8% in the UK, highlighting its resilience as a fintech hub.

“As we approach the Kalifa Review’s second anniversary, it’s clear the foundations laid to date have helped London maintain its healthy competitive advantage and we expect digital adoption will continue to boost growth in many areas, including the payments market.”