Exclusive: ‘How UK Fintech can embrace the world’ – Russell Curzon, Nium in “The Paytech Magazine”
Russell Curzon, General Manager, UK & Europe, for FS platform Nium, shares his thoughts on The Kalifa Review’s recommendations for advancing UK fintech at home and abroad
Worldwide, fintech is hailed as the future of finance. From the evolution of open banking platforms to the use of AI, fintech revolutionises the global economy by changing the way businesses and individuals bank, invest and make payments. Over the past decade, the UK has witnessed technology-led disruption across the financial sector. With more than 10 per cent of the global market share in fintech, this sector is today worth more than £11billion a year to the UK economy, according to government figures.
High-quality talent, progressive and clear regulations, availability of capital and access to an innovative financial services sector, have established the UK as a global fintech leader. This trajectory, however, is at a crossroads – overseas competitors strive to match the UK’s success, Brexit causes regulatory uncertainty, and the pandemic has accelerated digital adoption. There’s also an immense opportunity to leverage technology, to ensure inclusive and sustainable growth for the economy. Commissioned by the UK government, The Kalifa Review Of UK Fintech, published in February, is an independent review, led by Ron Kalifa OBE, which aims to help the UK retain its leading global fintech position. It outlines a strategy to highlight the opportunity for UK fintech firms to scale up, penetrate global markets, acquire highly-skilled talent, deliver improved financial services and gain competitive advantage over other fintech hubs internationally.
The combination of world-leading financial services and a vibrant tech sector has created a fertile environment for the industry in the UK. The country’s groundbreaking open banking framework has fuelled increased innovation among large financial institutions, paved the way for the emergence of neobanks and other fintechs, and inspired similar regimes around the world. The UK has more billion-dollar startups than anywhere else in Europe, and enjoys ample demand for fintech products. Four factors, identified in the review, are crucial for the UK to retain its throne as one of the leading fintech nations:
Access to Capital
The UK has a well-rounded funding ecosystem, supported by robust infrastructure. Firms have easier access to funding here than in any other European market. According to Innovate Finance, $4.1billion of fintech capital was raised here last year, placing the UK second only to the US.
The UK Government recognises the significance of the financial sector and encourages it through positive regulatory policy. This has led to several empowering measures, such as the establishment of an innovation hub that helps firms understand the regulatory framework, and a regulatory sandbox that provides a secure space for firms to test new products.
The UK has a high proportion of tech-savvy citizens who demand top-quality financial services and products. Seventy-one per cent of the population is using the services of at least one fintech company, says Statista.
The UK’s talent prowess is evident from the 76,500 people employed in the financial technology sector. Additionally, strategic actions such as the inclusion of fintech courses in education curricula and fintech-related programmes, are helping attract new talent to the fintech ecosystem.
The Kalifa Review intends to trigger sustainable innovation and define considerations with reference to best practices in key international markets: India, the Middle East and North Africa, sub-Saharan Africa, and China. One of its key recommendations is to consolidate international operational support and increase the ease of doing business. Global connectivity – from the free flow of data to harmonised regulatory standards – is critical to success. The UK must focus on crossborder collaboration to maintain its reputation as a global fintech hub. The review therefore calls for the launch of an international Fintech Credential Portfolio, a Centre of Finance to drive international collaboration, and an International Fintech Taskforce.
An international taskforce is one, important means of driving global connectivity. But fintechs and the private sector can and should play a crucial role in driving international collaboration. Nium, for example, has its roots as a Singapore-based company with expertise in the Asia Pacific region and holds licences around the world. We enable fintechs, banks and financial institutions which aspire to expand their footprint globally. We also recognise the importance of an open, collaborative dialogue among UK firms and other countries, and support the UK’s efforts in strengthening collaborative ties with other economies focussed on the inclusive, sustainable growth of the digital economy.
The UK fintech sector has the potential to grow to approximately £38billion in revenue by 2030, says the report, provided it can maintain its current market share. However, this leadership position cannot be taken for granted. The UK’s positive growth story has become a benchmark for overseas markets to emulate its approach. While London is still the top attractor of fintech venture capital investment, Berlin, Paris and Barcelona are fast catching up. In order to uphold its rank, the UK must continue to strengthen its inbound global investment, as well as looking to boost outbound growth, by addressing factors that may hinder its prospects in this regard. For example, regulatory hurdles can be a deterrent for businesses looking to enter the UK or expand internationally.
Support for crossborder expansion and easier access to updated information, including guidance on legal and regulatory requirements and market navigation, will allow fintech firms to expand overseas. In an effort to minimise regulatory barriers, the UK Government-supported ‘fintech bridges’ with other nations aim to bolster ties between governments, financial regulators and the industry. Optimum use of these agreements will provide assurances for sustained collaboration and growth in a post-Brexit environment. Entering into more ‘fintech bridge’ agreements will help the UK reap the benefits of international cooperation among other growing fintech hubs.
Early-stage companies encounter a variety of hurdles when trying to expand internationally, many of which have been highlighted in the review. These include the ability to build partnerships with established players, having a limited international profile and the absence of any mechanism to formally attest to their credibility. One of the biggest obstacles, however, is how to penetrate highly regulated markets confidently and cost effectively. Time and again, partnership has proven to be the most effective way to gain access to these markets.
Nium’s global financial infrastructure and partnership approach helps companies navigate the roadblocks. Our global portfolio of licences gives customers quick access to financial services in highly-regulated markets, and in new and often complex geographies such as Africa. We enable customers to bring suppliers, business partners and clients together in a single platform to send and receive funds through bank accounts, cards, and e-wallets, including real-time payments, to more than 65 countries. The recommendations of The Kalifa Review aim to propel the transformation and development of the fintech sector in the UK at a crucial moment. The UK must chart its course for the future by harnessing the high-growth potential of firms, and establish new international relationships, if it is to cement its position as a leader.
Into Africa: a checklist for new entrant
Nium announced its intention to expand into Africa at the end of 2020 and, by March of this year, had established in-bound payment corridors with partners on the ground in Ghana, Kenya, South Africa and Tanzania.
Partnership and early dialogue with regulators has been key to Nium’s strategy when entering one of the world’s most challenging payments markets, says Clara Wanjiku Odero, VP of partnerships and growth in the Middle East and Africa, based in Kenya. She urges any business entering the continent and, indeed, any African-born startup, not to make the mistake of thinking one size fits all here.
“If you come from a card-bearing country like Nigeria and are going to one that predominantly uses mobile money, the infrastructure is totally different. So what your profit looks like is going to be totally different, too,” she explains.
“As with all companies entering a new market, the key is to establish local relations. That’s also one of the key challenges in Africa – the fact that it’s such a diverse region. Having feet on the ground and also understanding the local payments environment is extremely important. Nium’s focus is to enable businesses to unlock new revenue opportunities and improve cash flow, and to efficiently navigate their crossborder operations, so we are constantly looking at partnerships and collaboration opportunities that allow us to do that.”
She counsels new entrants to start transparent and constructive conversations and work early on building relationships with local regulators, saying it’s ‘better to ask for permission, rather than for forgiveness’. “I’ve dealt with regulators in multiple countries and I’ve yet to meet one that wasn’t open to having a conversation,” she says.
The Kalifa Report highlights North and sub-Saharan Africa as key potential markets for UK fintech, with a focus on payments and remittances in the latter. In selecting the first four countries in which to launch its services, Nium was looking for markets with high remittance flows, as well as favourable regulatory environments and strong growth. Kenya, for example, hit a record US $3,094million in remittance inflows in 2020, making it an obvious choice. As in South Africa, its central bank has a progressive attitude to fintech innovation and interoperability, having established a special office to oversee emerging payments. South Africa Reserve Bank, similarly, set up a fintech innovation hub and sandbox.
“Africa has long been an untapped region for most fintechs,” says Odero. “Our expansion on the continent represents an important milestone as we continue to drive global growth and partnerships.”