Does the Kalifa Review of UK FinTech go far enough?

By Kayne Osbourne MCSI | Brexit, Compliance, Consumer Credit, Credit Brokers, Credit Lenders, E Money, FCA Regulation, Financial Industries, FinTech, Insurance, Investment, Investment Advisor, Investment Manager, News, payments, regtech | 0 Comments

FinTech is no longer a niche within financial services, nor is it a subsector. In fact, it is a core asset for Global Britain. This was the message from Ron Kalifa OBE, author of the Kalifa Review of UK Fintech, received with much praise by the industry.

The independent Treasury review published on February 26th is aimed at unleashing a ‘big bang’ on the UK FinTech sector to ensure it remains the world leader. The UK is already punching above its weight with a 10% global market share, but in order to maintain and extend this lead, our ecosystem needs support from seed-stage through to IPO, particularly from a regulatory perspective.

By this point, summaries of the Kalifa Review have propagated across the expected channels, but I am yet to see anyone seriously consider whether sufficient support has been considered for the compliance needs of FinTechs.

FinTechs need compliance to be an engine for growth, done poorly it can prevent it. That’s why we revamped our approach to managing compliance, leveraging technology to make manual compliance processes more efficient, scalable and easier to maintain. That covers the independent advisory side, but in-house, even armed with the best of regtech solutions to deal with market abuse, customer on-boarding, governance and policy management, FinTechs still struggle with the basics of understanding their ever-increasing regulatory obligations.

The Review is right to consider the need to close the talent gap which is a major issue particularly in light of Brexit, but no regard is given to the specific needs of FinTechs from a compliance perspective. If an aspiring FinTech cannot meet the FCA’s threshold conditions for authorisation and evidence sufficient compliance knowledge, skills and expertise at senior management level, it will not be approved, making fundraising difficult. Moreover, now that we are seeing regulatory divergence from the EU, the need for specialist expertise is more pressing than ever. Yes, a FinTech could always become an appointed representative (AR) or agent, transferring risk to a principal firm, but this can prove expensive in the long-term.

Many FinTechs become ARs or agents because compliance personnel with FinTech experience are in short supply, expensive, and it can prove a faster route-to-market. But this does not remove the problem, it simply kicks the can down the road. It is crucial, therefore, that FinTechs build their businesses with compliance in mind from the ground up, otherwise, it will not be an engine for growth, but a barrier that needs to be grafted on to existing infrastructure that may not be accommodating.

I would like to have seen specific proposals for FinTechs to be able to offset their compliance costs along with ambitious plans to deliver the regulatory support FinTechs need at all funding stages. The Review’s recommendations for National Connectivity, executive education and reskilling 90% of the adult workforce to be FinTech-ready go some way toward continued prosperity, but more needs to be done to consider the practical day-to-day compliance issues faced by firms and how to transform them into opportunities for growth.

Kayne Osbourne MCSI

COMPLIANCE MANAGER

Kayne joined FinTech Compliance from  a leading City consultancy where he worked with a number of wealth managers, payment service providers, asset managers, brokerage houses and corporate financers. As a Chartered Member of the Chartered Institute for Securities and Investment,  Kayne holds a Level 6 Diploma in Investment Compliance and graduated with an MA  in Political Theory from the University of Essex. Kayne works closely with our clients, ensuring that all mandates are delivered to the highest degree of excellence and professionalism.

To find out more about Fintech Compliance, our services, and how we can help you stay compliant> Get In Touch

Tags: , , ,