Exclusive: UK’s leading fintech bosses call on government to ramp up efforts to overhaul regulation

A group of the UK’s leading fintech bosses have called on the Government to ramp up efforts to overhaul regulation and build a world-leading environment for the sector, in a letter seen exclusively by City A.M.

Bosses at over 60 of the biggest fintech firms in the UK, including digital banks Monzo and Starling, payments giant Checkout.com and buy-now pay-later firm Klarna, have signed the letter compiled by industry body Innovate Finance.

The come as the industry prepares to mark a year since the launch of the  Treasury-commissioned Kalifa Review of Fintech, which laid out a roadmap for the UK to cement its place as a global leader in fintech.

While praising the progress made so far, bosses have called on the fintech industry “not to rest on our laurels” and to “build on current momentum” to overhaul regulation and create an environment where firms can grow.

“The regulatory rule book requires further updating, and regulators must have the capability and culture in place to allow them to fully embrace innovation while protecting the consumer and financial stability,” the letter said.

The leaders also call on more institutional investors to back high-growth fintech firms and fill a funding gap in the UK, and said that there are further opportunities to use fintech to develop the 10 “Fintech clusters” across the UK.

Janine Hirt, chief executive of Innovate Finance, which helped mastermind the Kalifa review last year, told City A.M. that the progress on the report’s recommendations had been good but there was more to be done.

“We also think that industry, governments and regulators can do more to celebrate the success stories here in the UK, and promote the successes of fintech,” she said.

“It’s a phenomenal industry for the UK and benefits the end society and the individual on the street, so championing and promoting that is really important to continue its strength.”

Minister have launched a charm offensive on fintech firms in recent weeks as they look to woo more high-growth firms into listing in the UK.

Downing Street recently hosted bosses from firms including Klarna and Oaknorth, both signatories of the letter today, as it aims to tempt them into going public in the capital.

The letter commended a number of moves made so far by the Government, including changes made to the UK listing regime, commitments to build a new industry-led Centre for Finance, Innovation and Technology (CFIT), as well as the work of the Bank of England and on a Central Bank Digital Currency.

Hirt said the establishment of a ‘scalebox’ by the Financial Conduct Authority (FCA) would also be key to supporting fintechs as they grow.

But both Hirt and the signatories of the letter said that a dearth of growth capital was holding back the sector from realising its growth potential. 

Figures in January showed that the UK’s fintech sector had seen record funding last year but funding for firms at the so-called growth stage still lagged.

Of $11.6bn pumped into UK fintech, $7bn went into late stage rounds, while just $1.6bn was channelled into funding firms at the growth stage level.

Author of the review Ron Kalifa told City A.M. last month that institutional investors and pension funds would be key to filling the gap in funding.

“There is a £2bn fintech growth capital funding gap in the UK, and as a consequence there are many entrepreneurs who prefer to sell at the growth stage rather than build their businesses and create prosperity and jobs in the future,” he said.

There is around £6tn in the UK pension scheme alone. A small portion of that could be diverted to high growth tech opportunities which would create jobs, help with levelling up and drive international trade.”

A HM Treasury spokesperson said:

“We will continue to work at pace, alongside the industry and regulators, to drive forward our reforms to keep the City at the top table now we have left the EU.”

“This includes reforming our listings regime to encourage more companies to list on UK markets, ensuring we are world leaders in green finance, facilitating the adoption of new technology in wholesale markets, and reforming the regulatory framework to encourage international competitiveness.”