Hogan Lovells and KPMG outline Policy & Regulation recommendations in UK FinTech Strategic Review

Announced in the 2020 Budget and launched in July 2020, the review into the UK FinTech industry seeks to identify opportunities to support further growth in the sector, and ensure the UK remains a global FinTech hub.

Dr Kay Swinburne, Vice Chair of Financial Services at KPMG UK, chaired the Policy and Regulation chapter, leaning on her experience as a former MEP to review how policy and regulation can shape the future of the FinTech industry. Reflecting on the importance of implementing policy changes swiftly, Kay notes: “Against a backdrop of geopolitical uncertainty, retaining the UK’s position as a global FinTech hub is vital. So to ensure that innovative companies can still thrive after Brexit, a new bespoke government policy and regulatory framework tailored for FinTech is needed. Critically, a joined-up approach across government departments and regulators will be integral to creating a more agile regulatory environment, one that is able to embrace innovation and ultimately create a world leading FinTech ecosystem. I therefore hope our recommendations will be universally adopted at pace.”

Hogan Lovells Financial Institutions partner Rachel Kent, and deputy chair of the Policy and Regulation chapter, commented: “FinTech represents the future of innovation in financial services, and while the UK’s position is well established, its future is not assured. Being outside the EU has created an opportunity to re-examine and re-shape our regulatory framework to ensure it remains attractive and enabling to FinTechs. We have outlined in today’s review key areas for regulatory and policy focus that will allow us to continue to nurture our start-up culture, whilst also giving our high growth firms the support to become global giants.”

The key recommendations set out in the review on how policy and regulation can help make London, and the UK, the destination of choice for FinTech are:

• Deliver a digital finance package that creates a new regulatory framework for emerging technology: The UK must prioritise new areas for growth and cross-industry challenges such as financial inclusion, and adopt specific policy initiatives that will help create an enhanced environment for FinTech.
• Implement a “Scalebox” that supports firms focusing on scaling innovative technology: This would include enhancing the regulatory sandbox, making permanent the digital sandbox pilot, introducing measures to support partnering between incumbents and FinTech and RegTech firms, and providing additional support for regulated firms in the growth phase.
• Establish a Digital Economy Taskforce (DET): Multiple departments and regulators have important FinTech competencies and functions. The DET would be responsible for collating this into a policy roadmap for tech and digital, in particular, the digital finance package. It would provide a ‘single customer view’ of the government’s regulatory strategy on tech and a single touchpoint for the private sector to engage.
• Ensure that FinTech forms an integral part of trade policy: The UK must build upon early successes and ongoing industry engagement and further develop its global trade policy in relation to FinTech, ensuring a coherent and consistent approach, as well as to secure commitments in its future trade agreements that would benefit FinTech.
• Adopt policies that create a supportive environment where FinTechs can flourish: Recommendations include establishing policy for: Digital ID’s; Artificial intelligence; machine learning; Environmental, Social and Governance; crypto assets; financial inclusion; open finance; smart data; CBDC; and the digitalisation of financial market infrastructure.

Commenting on the importance of the regulatory environment to the future of the UK FinTech industry, Ron Kalifa OBE said: “UK FinTech is at a pivotal moment and we must capitalise on its success in order to retain its position as a global leader. This position is in no small part down to our attractive regulatory and policy environment. It is vital to keep up this forward momentum. If Britain takes the right steps now, it can become a truly dominant global player in this market.”