Kalifa Fintech Review: One Year On

The Kalifa Review of Fintech was published almost one year ago. The document was constructed to help guide the UK in its mission of supporting and promoting its prominence as a global Fintech hub. The UK has long been a vital financial center – second only to New York City – but when it came to Fintech, the UK led the world.

As the anniversary nears Judith Hartley, CEO of British Patient Capital, has issued the following comment on the status of the UK Fintech sector. Hartley states:

“The launch of the Kalifa Review was an important milestone in the development of the UK’s fintech sector, acknowledging both the important role the sector is playing in the economy and ensuring the UK can retain its position as the fintech capital of Europe.

Over the past year, we have seen considerable market activity with phenomenal levels of investment. In our own underlying portfolio, we saw banking software developer Thought Machine and insurtech business Zego become unicorns in 2021, and digital bank Revolut became a decacorn when it was valued at $33bn in a funding round in July. By any measure, it has been an exceptional time for UK fintech.

But structural issues remain. While funding nearly doubled in 2021, the majority of private market capital continues to come from outside the country, with UK institutional investors, in particular, being reticent when it comes to investing in domestic innovation. By not investing in UK venture and venture growth funds, UK institutional investors are failing to capture the value being created by fast-growing businesses operating in some of the most exciting and dynamic sectors in the economy.

The UK has a history of innovation in the finance sector, and many of our current generation of home-grown start-ups and scale-ups are poised to become global leaders in financial services. Yet, in order to do so, access to capital is crucial.  As the largest domestic LP investor in UK venture and venture growth funds, we have deployed over £1.3bn since our inception in 2018, and while we are sector agnostic, a significant portion of our underlying portfolio companies are in the fintech space. By taking a long-term patient capital approach, institutional investors can fuel the growth of the UK’s most promising and innovative fintech companies, capture the value they create, and help ambitious entrepreneurs on their growth journey.”

While Hartley notes that access to capital needs to be improved there are other challenges as outlined by Christian Faes, Chairman of Fintech Founders and founder and Chairman of LendInvest. In a recent hearing at Parliament, Faes expressed his opinion that little has been accomplished as outlined by the Review and supported by a survey of Fintech Founder members. His biggest concerns revolve around regulatory challenges and interacting with emerging Fintechs as smaller firms tend to get lost in the regulatory shuffle. He cited a big misstep when the Competition and Markets Authority did not approve the merger between Seedrs and Crowdcube – a move that compelled Seedrs to be bought by a US platform.

“It’s about having an environment where innovation is encouraged. We are trying to create market [and] global leading sectors.”

In other words, the UK remains a top hotspot for financial innovation but that should be an indicator to work harder and do more and not rest on one’s laurels. It is not easy being the king.

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