Ambitious new plans to help fintechs scale up and ensure the UK remains at the cutting edge of digitalising finance were announced by the Chancellor today (19 April 2021).
Speaking at Fintech Week, the Chancellor Rishi Sunak set out proposals to enhance the UK’s competitive advantage in fintech, from regulatory support and reforms to help firms grow, to a new taskforce to lead the UK’s work on a central bank digital currency.
Building on opportunities generated since the UK’s departure from the EU, the Chancellor confirmed the UK will be taking forward many of the recommendations made in the recent Fintech Review, led by Ron Kalifa, and the Listing Review, led by Lord Hill.
Chancellor of the Exchequer, Rishi Sunak said:
“Our vision is for a more open, greener, and more technologically advanced financial services sector. The UK is already known for being at the forefront of innovation, but we need to go further. The steps I’ve outlined today, to boost growing fintechs, push the boundaries of digital finance and make our financial markets more efficient, will propel us forward. And if we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre.
Supporting growing firms and fintech hubs across the UK
To support fintech firms to scale up, the Financial Conduct Authority (FCA) will take forward a ‘scale box’ - a package of measures to enhance its pioneering regulatory sandbox, which has been invaluable for allowing start-ups to test new propositions, and to provide a one-stop shop for growth stage firms.
It will also launch the second phase of its Digital Sandbox to enable firms to test concepts that tackle sustainability and climate change-related challenges, helping to deliver a greener financial sector that supports the transition to net zero.
The Chancellor also backed the creation of an industry-led Centre for Finance, Innovation and Technology (CFIT) and committed to work with regional and national fintech bodies to make it a reality. The CFIT would work closely with the regional hubs to identify and address sector challenges in support of fintech growth across the UK.
These initiatives build on announcements made at Budget 2021 to help fintech firms access the talent they need, which included a new ‘scale up’ visa stream allowing skilled people with a job offer at a recognised UK ‘scale up’ to qualify for a fast-track visa without sponsorship or third party endorsement.
Pushing the boundaries of digital finance
The Chancellor also set out new initiatives to ensure the UK remains at the cutting edge of digitalising financial services.
A new Taskforce, bringing together HM Treasury and the Bank of England, will be established to explore a possible UK central bank digital currency (CBDC). Two new forums will also be established to engage technical experts, and key stakeholders including financial institutions, merchants, business users, civil society groups, and consumers through the process.
To support private sector innovation, firms exploring how to use technologies like distributed ledger (DLT) to improve financial market infrastructure will have access to a new sandbox. This new regime will be inspired by the FCA’s sandbox and HM Treasury will work together with the Bank of England and the FCA to deliver this.
In addition, the Bank of England has launched a new ‘omnibus’ account to allow access to innovative financial market infrastructure providers that can support delivery of faster, cheaper, 24-hour wholesale payment and settlement using central bank money.
Reforms to listing and capital markets rules
In a further boost for innovative companies seeking to raise money in the UK, the Chancellor confirmed how the Government will take forward all the recommendations directed towards it by the Listing Review.
As part of this, the UK will consult on changes to its prospectus regime – which governs the information a company must publish when raising finance - this summer, to ensure the rules are not overly burdensome but provide investors with the information they need, tailored to the type of transaction.
The consultation will also explore how to make it easier for companies to provide the forward-looking financial information investors want to see, which would particularly benefit technology and life sciences companies with high-growth potential, and their investors.
A group of experts will also be convened to look at how to improve the efficiency of rights issues – when a listed company invites its existing shareholders to purchase additional new shares – and the role technology could play in streamlining the process, as recommended by the Review.
Separately, ambitious reforms to the UK’s wider capital markets regime will also be consulted on this summer, including proposals to delete the share trading obligation and double volume cap. The consultation process aims to deliver a rulebook that is fair, outcomes-based and supports competitiveness, whilst ensuring the UK maintains the highest regulatory standards.
Here is the stakeholder reaction to the Chancellor's speech at Fintech Week, setting out ambitious new plans to help fintechs scale up and ensure the UK remains at the cutting edge of digitalising finance.
Alastair Lukies CBE, Chair, FinTech Alliance said:
“The UK has long been the best place to start a FinTech, but work is still needed to help businesses scale and grow. It is positive to see some of the recommendations of the Kalfa Review being so readily implemented in this regard.
The Chancellor has shown all the necessary leadership to take forward the hard work the UK has put into the FinTech sector over the past 15 years, and has rightly recognised that there has not been a better time to support our scaling UK FinTechs, which will form a key part of the economic recovery from Covid-19.
The plans outlined today, as well as offering individual businesses the chance to scale, will help the entire UK-wide FinTech ecosystem to mature together so we continue to lead on a global scale. This means in addition to maintaining London’s crown as a world-leading financial services hub, our vibrant regional ecosystems will be able to bring a variety of innovations to the global stage.”
Charlotte Crosswell, CEO, Innovate Finance said:
“We welcome the ambitious proposals set out by the Chancellor in response to the Kalifa Review to support the long-term future of the UK’s fintech industry.
Financial innovation will play a vital role as we emerge from the crisis, especially in areas of financial inclusion, SME financing and digital transformation of financial services. As UK fintech firms mature, the FCA scalebox will be instrumental in supporting fast-growth companies across the sector.
We particularly support the newly announced Centre for Finance, Innovation and Technology, which promises to help consolidate the UK’s position as the leader of innovation in financial services.
The new measures set out today will help our fintech businesses achieve their potential and create the backbone of the economy in the years ahead.”
David Postings, Chief Executive, UK Finance said:
‘The Chancellor has embraced the greater flexibility we now have outside the EU to ensure that UK banks, and financial services more widely, are competitive internationally. The steps announced today will enable the UK to cement its position as a global leader in financial innovation and capital markets, whilst driving competitiveness and market efficiency. We look forward to working with HM Treasury and the regulatory authorities to deliver on the steps set out today by the Chancellor.’
Ron Kalifa, Chair, Fintech Review said:
"I welcome the Government's response to my review that will support our fintech scaleups, providing them with the support, skills, capital and regulatory framework that they need to succeed.
Today's announcements will go a long way to ensuring we can deliver the strategy I set out earlier this year to ensure better financial outcomes for customers, especially consumers and SMEs. We want to deliver these outcomes across the UK and export them to the world."
Peter Harrison, Group Chief Executive, Schroders said:
“We really appreciate the focus that the Chancellor is giving to financial services and technology innovation in the UK. The ambitious plans set out today provide an opportunity to build on the UK’s position as a major international market. Rishi Sunak has said that the UK was “one of the best places in the world to start, grow and list a business”. These most recent initiatives should, in time, make it the best.”
Jes Staley, CEO, Barclays said:
“Barclays welcomes the measures announced by the Chancellor, which will place the UK firmly at the forefront of digital innovation in financial services, and ensure that the UK remains one of the world’s most attractive global financial centres.”
TS Anil, CEO, Monzo said:
“Our mission at Monzo is to make money work for everyone and we believe fintech has the power to create a better and fairer society. We wholeheartedly support the Chancellor’s commitments to the Kalifa proposals, which will help boost the UK’s international competitive advantage in fintech, helping the industry to achieve its full potential.”
Anne Boden, founder and Chief Executive, Starling Bank said:
“We welcome the announcement about exploring the potential of a central bank digital currency. At some point in the future there will be an intersection between digital and fiat currencies. The world is going the way of digital currencies and we have to find a place for them in the mainstream,"
Guillaume Pousaz, Founder and CEO of Checkout.com, said:
“We welcome the Chancellor’s commitment to enhancing the UK’s collaborative and global Fintech ecosystem. Checkout.com was able to grow from a startup to the UK’s largest fintech, in part, due to its forward-thinking approach to regulation and ability to attract world-class talent. Giving us and other fintechs better access to the world’s brightest and best people through visa reform, and sharpening the regulatory support available to scaling firms, will fuel our sector’s continuing growth.”
Sarah Williams-Gardener, CEO, Fintech Wales said:
“We absolutely welcome today’s comments from the Chancellor of the exchequer, and the recognition that the UK needs to cement its position as the world’s pre-eminent financial centre. We cannot rest on our laurels and the initiatives outlined in today’s announcement will go some way to creating an optimum environment for FinTechs to thrive.
“Another key element to this – as highlighted by the Kalifa Review – will be the growth of FinTech clusters throughout the UK so that, together, we can form a greater foundation for the UK as whole. At FinTech Wales, this is our mission and we have already been quietly starting, scaling and selling amazing FinTech businesses for decades.
“And now, we aim to be the destination where FinTechs can scale and to deliver on this goal, we are creating a hub where start-ups are nurtured, scaling Fintechs are supported on their next stage of innovation and we broker relationships between the established financial institutions and the very new FinTechs. We are directly delivering on the Kalifa review and are very excited about the opportunity for growth that Wales is contributing to the UK position as a pre-eminent global financial centre.”
Nicola Anderson, CEO, FinTech Scotland said:
“FinTech Scotland welcomes the proposals set out by the Chancellor today as the UK continues to embrace FinTech and the opportunities it presents to enable and grow our future economy. Through collective action we can ensure the UK, as a whole, embraces FinTech innovation across financial services, the digital and broader economy; leveraging regional skills and expertise to unleash the full potential of all the nations and regions within the UK.”
Dr Christopher Sier, Fintech Envoy for the North said:
“The Chancellor’s announcement puts substance behind all of the key recommendations from the Kalifa review. In particular, the Centre for Finance, Innovation and Technology (CFIT) will have a massive impact as its remit will be to coordinate the extraordinary capacity and capability in the UK regions, such as the North of England. In addition, his support for developing new capital markets infrastructure is very welcome, given the current very high cost and risk of the heavy intermediation that is the current norm. The impact of such low cost, low latency and low operational risk infrastructure could be ten of billions of annual cost savings, which will ultimately be passed on to the consumer and reflected in a strong uptick in the performance of their long-term savings.”
As part of the regulatory scalebox, the City of London Corporation and FCA will launch the second phase of the Digital Sandbox.
The second phase of the Digital Sandbox will enable firms to test concepts that tackle sustainability and climate change-related challenges, helping to deliver a greener financial sector that supports the transition to net zero.
City of London Corporation Policy Chair Catherine McGuinness said:
“We warmly welcome the Chancellor’s proposals to enhance the UK’s competitive advantage in fintech. We are particularly pleased that many of the recommendations made in the Kalifa Review will now be taken forward.
“This is a vital step if we are to maintain the competitiveness of a sector which has a huge role to play in driving the post-pandemic recovery across all sectors of the economy, not only financial services.
“We also welcome the new steps set out by the Chancellor to support fintech’s growth across the UK with the creation of a new FCA ‘scale box’ and an industry-led Centre for Finance, Innovation and Technology. These are critical measures to ensure that our fintech across the UK can continue to thrive.We look forward to continuing to play our part on this important agenda.”