Reflections on UK FinTech, One Month in…

by Sameer Gulati, Head of FinTech

Having joined Cicero/amo as the Head of FinTech in April 2021, the last month has seen a flurry of activity for the UK’s Financial Technology sector. 

We’ve seen the publication of the Kalifa Review into UK FinTech, the UK Listings Review chaired by Lord Hill, and a number of announcements following UK FinTech Week, of which a non-exhaustive list includes HMT Treasury / Bank of England’s taskforce on digital currencies, the Financial Conduct Authority’s (FCA) Regulatory ‘Scalebox’, and the UK Department for International Trade’s (DIT) FinTech Export Academy and FinTech Champions Scheme. 

Of course not everything has been rosy, as the shadow of the Greensill scandal (to some arguably a FinTech firm, and to others not), looms large – having since spawned several independent and parliamentary inquiries into the role of “secret lobbying” at the heart of Government. So where does all this leave the UK’s FinTech sector moving forward? 

Following Chancellor Rishi Sunak’s written ministerial statement in response to the Kalifa Review, it’s clear the Government sees the sector as the future for financial services, and one which is more open, greener, and technologically advanced. However, for FinTech to be a key component of this future much still needs to be done. 

On capital raising, whilst UK FinTech continues to punch above its weight having secured £2bn across 117 deals in Q1 2021, there remains a £2bn annual growth funding gap which risks FinTechs scaling their operations elsewhere. Whilst the Kalifa Review recommends a £1bn FinTech Growth Fund deployed over 5 years, this would cover only approximately 10% of the total funding gap. As such, we need to think about the entire funding life cycle, with a view that whilst private market intervention will help, it is equally important to ensure the path towards IPO remains flexible, and internationally comparable for scalable FinTechs. On this, the Listings Review and the FCA’s consultation paper on special purpose acquisition companies (SPACs) will be instrumental. 

Looking at talent and skills, a perennial issue facing FinTechs has been the depth and diversity of its talent base. As June Angelides MBE, Principal at Samos Investments noted during UK FinTech Week “female founded FinTechs account for only 17% of the UK’s total venture capital investment in FinTech” and black founders have been found to systematically lack access to networks, or institutional investors. Accordingly, it will be important to engage earlier in the career pipeline to ensure there is equality of progression and continue to encourage diversity in STEM roles. Added to this is a lack of role of data – from drop-out rates for different subjects, to understanding and benchmarking the socio-economic background of senior leadership. In summary, it’s hard to have a vision for where the UK should aim tomorrow without first knowing where we are today. 

And finally, as several commentators have suggested, it is very possible that COVID-19 has acted as a digital accelerant for broader financial inclusion. Whilst there are still one million people in the UK without a bank account, within the first month of COVID-19 6m people downloaded a banking app for the first time. 

As such, as the UK starts to provide a roadmap for policy drivers such as Digital ID, cross-regulatory sandboxes, and the transition to Open Finance much remains to be written for the future of the UK’s Financial Technology sector. 

Sameer Gulati

Head of FinTech