On the second day of Fintech Week London, and the first with a live audience, Ron Kalifa OBE, chairman, Network International and author of the recent Kalifa Fintech Review, gave a keynote as part of the days open banking focus.
Harking back to his review, Kalifas speech revolved around why Open Banking is the foundation for the future of finance in the UK.
“I think fintech has been a growing phenomenon for some time, but despite that, it is still largely misunderstood. To many it’s about rapid startup growth caricatured here in the UK by app developers, to others it’s about digitising analogue content, digital current accounts provided by established incumbent financial institutions.
“But these versions of fintech underplay the impact technological disruption can have.”
He continued by making three key points, firstly by highlighting how on many occasions people are pushed into sub-optimal financial products or completely excluded altogether, because “the data isn’t stacked in their favour.”
He referenced how there are around 1 million UK citizens who cannot get access to a bank account, and said: “Open banking is providing that opportunity for businesses to get a much deeper understanding of their customer’s financial history, including loans, credit cards, investments and many more in a much more quick, simple, cost-effective efficient way, and is rapidly transforming mainstream access to finance.”
Secondly, Kalifa talked about how the exchange of customer data has levelled the playing field between incumbents and new entrants, increasing competition.
He said: “Since 2015 there has been a 65% increase in the number of startups in the Fintech space and scaleups based here in London. We now think there are over 3000 fintechs headquartered here in London -never mind the countless other new players which are based in the regional hubs up and down the UK.”
Thirdly, he advised how open banking has demanded a fundamental rethink of the traditional banking business, and has enabled banking to become much more customer-centric.
“We have a long way to go still,” he said. “It’s made the development of new financial products much easier and much faster.
Nearly 4 million consumers and businesses were using open banking enabled products now at the start of 2021. Improved access, wider availability and the consumer in the driver seat of a much more competitive market is what we’re seeing. That is the transformative nature of technology, not just start-ups or digitising the analogue, but completely changing the nature of provision and consumption in financial services.
“This is the version of fintech that I’m passionate about,” Kalifa continued, “and it is this version of fintech that has been helping for us here in the UK.”
Stating: “If we’re to truly see the transformative impact of fintech, we need to be more ambitious,” Kalifa then listed three potential opportunities that open banking presents for the UK. The first is Digital ID, as open banking infrastructure that’s already in place could be a possible means for providing identity verification.
“While there are many many political and regulatory issues that must be figured out,” said Kalifa, “the benefits are huge.”
The second opportunity is SME lending, as SMEs are an engine for growth for the UK economy, and they represent 50% of our GDP.
“Open banking can help SMEs become more resilient, productive and profitable from cloud accounting and sophisticated cash flow management.
“Open banking is allowing SME’s to shop around to ensure that their current financial provider is giving them the best deal.”
Finally, Kalifa touched on open finance, claiming it to be “the next stop on the open banking ladder” that allows your entire financial footprint to be opened up to trusted third party APIs, with the ultimate goal to improve consumers financial health, driven by market innovation and competition.
“These examples demonstrate how open banking, and indeed open finance, are the bedrock and the future of financial services,” Kalifa continued, “And what these examples also show and demonstrate is the importance of collaboration – not only between our public and private sectors but also between our traditional incumbent players and the new fintech entrants.”
The Kalifa Review
After his keynote speech, The Fintech Times sat down with Kalifa to discuss his fintech review that was released earlier this year.
The review was formally launched in July 2020 with objectives for supporting the growth and widespread adoption of UK fintech, with Kalifa being asked by the chancellor to lead the independent review to identify priority areas.
“I was keen to lead the review because I think fintech is still, in particular here in the UK, not yet fulfilling its transformational potential,” said Kalifa.
“It was a daunting task to try and think about a strategy and delivery model for a sector that we’re already leading the world in. It was a review that looked at the whole dimension of the sector. We looked at investment, we looked at skills, we looked at internationalisation – it was a very wide-reaching activity. However I think the outcome has been fantastic, it has been really well received, not just by the Fintech population and community, but also by the government who have implemented and progressing on so many of the recommendations, so I’m thrilled with the outcome.”
When asked if there was anything he found that surprised him, Kalifa said: “I did find it quite staggering how significant apart fintech is, and in many ways, it will be representing the future of financial services for the UK. We have a leadership position here in the UK and I think many didn’t realise how strong a player we really are. The amount of investment that’s coming into the UK is also very significant, and that was a pleasant surprise for many.”
Finally, in terms of whether future reviews of the UK fintech industry will be needed, Kalifa said: “The reality is that this work is hopefully the bedrock of our strategy for the sector on UK stage and a modern global stage. So I think it sets us up. Right now, there’s no need for another piece of work, if it is then it means we haven’t covered it properly, so I’d hope that we’ve covered it in the right way.”