Kalifa and Crosswell: Unlocking capital crucial for fintech growth

The UK Government must work to raise and unlock domestic capital in order to fuel fintech growth and make the sector “come to life”, according to Ron Kalifa and Charlotte Crosswell, co-authors of the Kalifa Review.

Speaking during a live interview, Kalifa stressed that growth will be a key driver in bolstering the sector and safeguarding the UK’s status as a leading fintech hub.

“Finding a way to unlock capital and reusing it for this is a way to ensure we can actually make progress. That’s the way to think about the growth funnel – and growth is something that has been a real challenge for the sector.”

Kalifa noted that £6trn is currently locked up in UK pension funds, and pointed to his recommendation that £1bn should be put into a growth fund to help fund the fintech sector. These growth strategies, he said, should be undertaken through the Centre for Finance, Innovation and Technology (CFIT).

“The [CFIT] is essentially the bastion in terms of how to bring all of the recommendations together under one roof.”

The CFIT is a new, private sector-led body created to support national coordination and growth in Fintech across the UK. It was conceived as part of the Kalifa Review, which was commissioned by the UK government at last year’s budget.

The review also comprised five key areas to help the UK maintain its competitive edge over other leading fintech hubs: Policy and regulation; skills; investment; international action; national connectivity.

Crosswell echoed Kalifa’s concerns around capital, arguing that whilst “the headlines” don’t present it as a major issue, the UK must secure more homegrown funding for the sector.

“The inside story is that capital is coming from overseas. And the problem is when you go overseas for capital, that potentially influences things like where you’re going to put jobs and where your intellectual property is going to be.”

Croswell draws a parallel with what the UK tech sector saw in the 1990s when many startups completed series A funding and subsequently migrated to the US West Coat. A continuation of this, she argued, will result in a drain of UK intelligence and talent and “stifle success stories of the future”.

“We need to go and seize the opportunity,” said Kalifa. “We’re not interested in getting businesses funded from external sources, because if you start doing that, the business might migrate elsewhere. The goal here is to create an agenda which creates jobs and great businesses for the future.”

Crosswell and Kalifa both argued that appropriate government and regulatory action must continue to drive these initiatives.

For instance, as per the review’s recommendations, the Financial Conduct Authority (FCA) will later this year introduce a scalebox – a series of measures designed to help fintechs scale quickly. On unveiling the package, Chancellor Rishi Sunak said it would provide a “one stop shop” for growth stage firms.

“The challenge that regulators have is finding that balance between wanting to encourage innovation, but making sure people understand the risks,” said Crosswell. “We don’t want startups facing the balance sheet requirements of large banks – it’s about finding proportionate regulation.”

Kalifa offered a similar sentiment, noting that the situation boils down to a principles versus rules-based approach, and that the right balance needs to be struck.

“Regulation shouldn’t be seen as stringent. It isn’t about relaxing it, it’s about making sure it’s appropriate.

“There are some aspects which need to be revisited on the back of Brexit, but we cannot relax the rules to the point where consumers or SMEs will get damaged.”