The Kalifa Review - One Year On

Posted by CrowdProperty on 7th March 2022 -

In February 2021, Ron Kalifa former CEO of Worldpay, published his review of UK FinTech which highlighted the opportunities and challenges facing the UK. 

The aim of the review was to recommend to government, enterprises and regulatory authorities what could be done to reinforce the UK’s position as a leader in the global FinTech space. This is especially important to CrowdProperty, as it maps out the future of FinTech and financial services and how we can leverage this knowledge to help you grow your property business quicker.

 

FinTech has come at an important time, with changing consumer and business demands there has been an acceleration of the digital transformation of banks. This is because new market entrants are challenging the status quo by presenting alternatives to the incumbent financial service providers. It is here that FinTech has found its home. Charlotte Crosswell, former CEO of Innovate Finance summarised that “consumers and businesses are rapidly changing the way they interact with financial services and the FinTech sector is ideally placed to respond to this changing dynamic.”

Ron Kalifa highlighted that the UK capitalising on the FinTech revolution will in turn:

- Foster job creation and high income tech-based employment across the UK

- Better leverage the FinTech sector as a core asset for Britain’s international competitiveness

- Help citizens and small businesses access better, cheaper and more financial services, creating a more inclusive, democratic and sustainable financial services sector

And so now a year on we have begun to reflect on what progress has been made in levelling up the UK’s FinTech stance. Firstly it has become apparent that Brexit and the pandemic caused no disruption to the performance of the FinTech sector. The Covid-19 pandemic has shown itself of significant influence to this situation by creating a necessity for digital adoption. The reaction could never have happened on this global scale had it relied on just marketing or policy. As more companies have embraced technology, it’s pushing innovation to deliver better customer experiences.

Under Kalifa’s roadmap, there were five chapters in which the UK should strengthen its support – policy and regulation; skills; investment; international and national connectivity and so the progress made so far is.

Under policy and regulation, the Bank of England has begun work on Central Bank Digital Currency of which the Task Force and has been consulting on the creation of digital money. Secondly, the FCA has been actioning Kalifa’s recommendations by developing a scale box and a ‘regulatory nursery’ as part of a new regulatory framework. Government Department for Digital, Culture, Media and Sport (DCMS) has begun pilots for Digital ID as part of developing the UK’s data strategy.

On trade, an innovative digital trade deal with Singapore is under negotiation to create fresh opportunities for the advancement in FinTech.

To address the skills, the government remains on track to launch the Scale Up Visa in April 2022. Rishi Sunak’s budget also announced a new Global Talent Network to bring highly skilled people to the UK in science and technology sectors. Following this, Kalifa and the Department for Education FinTech had also hosted a roundtable which looked into ways of retaining and upskilling through increasing Government training schemes for FinTech firms.

Some lead has been taken under investment recommendations, R&D tax credits for innovation will be extended to include data and cloud computing and HM Treasury and FCA have had consultations on listings reforms over the summer. Secondly, the government are currently reviewing pension charge caps as a way to unlock defined contribution pension investment in tech.

The Department for International Trade has launched a number of FinTech trade initiatives including a FinTech Export Academy.

Since the review, the government has acted on Kalifa’s recommendation of creating a new Centre for Finance, Innovation and Technology (CFIT) which was back by the Chancellor in last April to receive £5 million seed funding to set it up.

All these steps taken so far has meant that there has been considerable investment into other regions and UK FinTech is expanding out of the cluster of London into other areas of the country.

Lord Gerry Grimstone, Minister for Investment, commented that: “2021 was a first-class year for UK investment” at $11.6bn which is an investment increase of 217% overall. The total capital invested in FinTech globally reaches $102bn which is an annual increase of 183%, with the UK being second behind only the US. As for Europe, the UK is leading the way in the FinTech revolution, representing 45% of all investment.

The pandemic meant that in 2020, the UK saw investment figures lie stagnant for the first time in years. However now as economies are recovering, the 2021 figures show a substantial annual jump and a validation of the sector’s strategic potential. It now stands that 8 out of 10 Brits use FinTech products demonstrating this huge market penetration.

It is clear that there has been a very positive impact on the UK economy and society and consequently, optimism is high for the trajectory of FinTech. In particular the pandemic has created a renewed focus on the critical role technology plays in levelling up financial services. Having already made significant progress since the publication, the shared opinion is that there is “opportunity for more."

Last year Kalifa identified pension fund investment as a key lever for unlocking the sector’s growth potential. City A.M has described that there’s "an appetite for change" after the government’s recent discussion on relaxing the rules so pension fund managers can invest in private equity and venture capital. Traditionally these have fees that exceed the pension charge cap of 0.75%. Whereas, typical fees charged on venture capital and private equity exceed 1.5 – 2% due to more ‘hands on’ role. Therefore, unlocking pension investment would present significant opportunities for investment growth of technology businesses.

The UK has made considerable progress, however given this factor there is still ‘a structural gap’ in comparison to the USA. And so it’s seen as vital to the UK’s competitive edge that these caps are lifted as Janine Hirt, CEO of Innovate Finance commented, “we are on the right trajectory in terms of levels of funding and now it’s time to also properly address the funding gap for underrepresented founders, if we are to create a truly sustainable and forward-looking sector.”

The progress seen so far is hugely exciting for us at CrowdProperty, with our relentless commitment to using technology and property expertise to deliver exceptional customer experience, we’ve built the best property development finance lender in the market, with our developers at the heart of what we do.

We are committed to revolutionising the market of property development finance. The market-leading technology platform coupled with the deep hands-on property expertise at the heart of CrowdProperty exceptionally matches the demand (quality SME property professionals undertaking quality property projects) and supply (many major global financial institutions and private investors) of capital to be a better, quicker, more reliable, more transparent and more value-adding funding partner with a relentless focus on exceptionally serving the UK’s largest database of property developers.

In keeping with Kalifa’s chapters, we launched in Australia in 2021 to offer a non-bank lending alternative to incumbent property development finance providers there - a market which faces similar (and in many cases more acute) pains to the UK, proving the scalability of our technology and expertise.

As highlighted by Kalifa, further investment into FinTech provides better inclusivity within the financial sector. And this is something that’s at the heart of CrowdProperty. Property developers seeking property finance have been poorly underserved by traditional funding sources over the years. Our technology means that we are unlocking the potential of small and medium-sized developers, by delivering the speed, ease, certainty, transparency and expertise that developers want. Our innovative and customer centric FinTech / PropTech approach sets us apart from other lenders.

Find out more about funding your projects better and growing your property business faster and more profitably at www.crowdproperty.com/apply.