As technology entrepreneurs and venture capitalists in many parts of the world can attest, the combination of finance and technology (fintech) can be a catalyst for business success. The UK, long heralded as one of the world’s foremost financial centres, looks to leverage its fintech strengths to become a global hub, a desire driven in part by the absence of a services Brexit agreement. This, in particular, has seen the country lose trading business to the European Union (EU). Combined with a report on UK fintech released in early 2021, these are the drivers for sparking a ‘big bang’ moment in fintech.
For perspective, the UK had undergone a financial revolution before that positioned it as a global financial centre. Changes to the London Stock Exchange (LSE) in the late 1980s that opened the door to a tech-driven financial market equipped London to become an attractive destination for international finance and capital. From ushering in electronic trading to fostering competition, the reforms of the ‘80s led to an enormous increase in average trading value on the LSE and the creation of multiple roles within share trading, investment advice and banking services.
The Fintech Revolution
For the UK is to set the agenda again and play a leading role in the creation and use of digital financial services, it requires sweeping policy changes and massive investment to ward off competition from Europe. These changes are among those recommended by the Kalifa Report on UK Fintech, a government-commissioned report that is among a series of reviews into finance and technology. Both sectors find themselves under pressure to compete globally, as there is growing competition to attract and retain viable start-ups.
Among the changes recommended are reforms to the company listing regime, with the Kalifa report recommending dual-class share structures that allow founders to maintain control even after taking their companies public. There is also a proposal to reduce the free-float threshold, which would enable companies to offer less of their stock when listing.
From an investment perspective, the report calls for entrepreneurial incentives and Silicon Valley-style funding to be introduced, alongside the expansion of Venture Capital Trusts, the Enterprise Investment Scheme, and research and development (R&D) tax credits.
The review identifies a £2 billion funding gap within the fintech sector and recommends the formation of a privately financed £1 billion ‘fintech growth fund’ to help entrepreneurs continue to build their ventures.
Adopting the proposed changes would make the business environment much better for many fintech entrepreneurs, including Razi Salih. Mr Salih has more than ten years of experience in fintech, having established multiple successful projects.