The UK is at the forefront of global financial technology. Second only to the US, the UK has an estimated 1,600 active firms in the sector.  And it’s growing. By 2030 this number is set to double.

FinTech is not a sub-sector. It’s changing the way we bank.

Regulation and UK Fintech.

There is no single piece of UK legislation or regulation that applies to FinTech organisations and its services. As it stands, they are authorised and regulated by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA).

Once authorised under the relevant legislation, fintech organisations will be subject to detailed requirements by the FCA in a similar way to traditional financial services firms.

Whatever sector you work in though, staying on top of the regulatory frameworks that keep you legally compliant and ethical is critical.

Of course, this is more of a challenge for financial technology.  These progressive digital organisations have different challenges than those of legacy institutions.

This blog looks at how fintech regulation has changed over recent years and discusses the benefits of stringent regulation.  Does regulation actually help UK Fintech to thrive rather than stifle its growth?

Can an industry be both regulated and grow?

One of the challenges facing fintech is policy and regulation.  There needs to be a regulatory framework where businesses, technologies, and solutions can scale, grow, and compete while continuing to protect consumers.

The Kalifa report, 2021.

An independent report on the UK FinTech Sector was executed in 2021 by Ron Kalifa (then OBE). In 2022, Kalifa was included in the Queen’s Jubilee Birthday Honours List for services to financial services, technology and public service.

The Kalifa Review of UK Fintech was commissioned by the UK Treasury.  It was intended to offer a series of strategic recommendations on how to regulate and manage the sector whilst enabling it to remain the best place in the world to start and grow a fintech business.  One of the areas it addressed was regulation and policy.

Policy and Regulation.

With regard to policy and regulation, the report recommended the following.

A digital finance package.

The package would create a new regulatory framework for emerging technology that would bring together the various different stakeholders that currently have a say in steering fintech policy and regulation into a single body. This coordinated strategy would offer the industry clear objectives, actions, and timescales.

A bold and clear statement of direction would encourage growth and attract innovation to the UK.

However, we are still awaiting an overarching UK strategy and, in many areas, (such as the regulation of digital assets) there’s still a considerable degree of uncertainty as to the UK’s direction of travel.

Implement a “Scalebox”.

This would support firms focusing on scaling innovative technology through a package of measures to assist firms that are growing significantly. Enhancing the Regulatory Sandbox would introduce measures to give FinTech and RegTech additional support, particularly in their growth phases and/or in relation to the Priority Areas.

Its intention is to enable firms exploring the use of innovative technologies to do so within a more flexible regulatory environment (subject to appropriate protections).

Establish a Digital Economy Taskforce.

There are many departments and regulators that carry important fintech competencies and functions. The DET would collate this into a policy roadmap for tech and digital, and in particular the Digital Finance Package.  It would offer a ‘single customer view’ of the government’s regulatory strategy on tech and a single touchpoint for the private sector to engage.

Targeted policy areas.

The Kalifa Review drew on some targeted areas of policy reform.

AI Regulation.

The report also proposed that there should be more rigorous regulation of the use of AI and machine learning models in financial services.  It was also recommended that there should also be a more specific legal framework for AI further down the line.


Data was a prominent theme in the Kalifa Review. Since the review, the government has launched an ambitious policy framework on data, run a consultation on digital identities, and committed significant funding to data-related initiatives.

There has also been a consultation on reforms to the UK’s data protection regime. There is a direction toward making certain departures from GDPR in order to provide more tailored support and supervision of data-driven businesses. These reforms are intended to create a world-leading regime, which doesn’t threaten the UK-EU data relationship.


The report also called for a new regime for the regulation of cryptoassets. It should be created with the particular risks and opportunities of crypto in mind.

Payments regulation.

The report acknowledged that payments are a big part of fintech. It also highlighted that regulations were insufficient for both stimulating competition and protecting consumers.

Does regulation help UK fintech to thrive?

Regulation allows organisations to “succeed”.

One of the jobs of the regulator is to help innovators by setting firm foundations in place that will allow businesses to grow.

As fintechs grow, they will naturally find themselves moving towards more regulatory scrutiny and eventually, for example, applying for a banking licence. The sooner they can get a handle on the regulation, the sooner and faster they can scale.

To be able to understand the requirements requires clarity and transparency. This can only be achieved through legislation and clear regulatory boundaries.

In growth terms, more regulatory pressure is a great thing. It means you are achieving parameters of success.

Regulation means securing industry standards.

The authorisations gateway is where the UK can protect its market integrity.  The FCA has recently revealed that in the past year, they have turned away more firms than ever (fintech included) because they didn’t meet the standards that many authorised domestic and global firms have strived to attain.

Regulation facilitates investment.

High regulatory standards provide solid foundations on which investors can invest. The UK is the most attractive destination for financial technology investment in Europe. Globally, it is second only to the United States.

Without market confidence built on a robust set of regulation parameters, investors’ money is at risk. Investors need to know that the fintech they are investing in will stand up to scrutiny, and is ethical, legal, and financially sustainable.

Regulation facilitates emerging disruption.

Let’s take cryptoassets as an example. As a disruptive force, Crypto is a direct challenge to the existing rules and institutions.

The FCA has been working with crypto companies to make their fund flows more transparent.  Most of the crypto companies the FCA recently registered under anti-money laundering rules gained registration only after working with the FCA.

Many crypto firms that were established elsewhere have collapsed. Not only did they fail, but consumers weren’t protected and were last in the queue for getting their money back.

Regulation promotes innovation.

One emerging objective at the FCA is to promote growth among competitiveness.  The FCA offers sandboxes, pathways, sprints, and initiatives to young firms so they can grow and thrive in a way that is safe for consumers and markets and promotes competition.

In sum.

The Kalifa review concluded that positive and dynamic Fintech legislation should combine the best of government and policymaking with the flair of the people who have built and led UK fintech.

It suggested fostering public-private relationships that ensured a strategic focus with an official government mandate to pursue it.

Responding to the Kalifa Review recommendation for a coordinated approach, The Centre for Finance, Innovation and Technology (CFIT) was set up in 2021.  The CFIT is mandated and supported by the Government but led by the private sector. This coalition allows coordinated and targeted fintech policies that promote growth.

CFIT coalitions facilitate agility and allow a rapid response to the changes and challenges of this fast-paced industry. Bringing together the best minds from across the UK, it embodies the direction policy and regulation should travel; unblocking the barriers of growth for financial technology while enabling better outcomes for both consumers and growing Fintech.

Are you interested in Fintech and want to read more about financial technology here in the UK?

Here are some links to more of our articles you may find interesting.

Fintech app development tech stacks – 2023.

Plugging the Fintech skills gap.

What are the challenges facing Fintech in 2023?


About the author: As a founder of Ignite Digital Talent, I lead our brilliant team to ensure we deliver time and time again for our clients. I also stay closely networked with industry influencers to ensure we are well placed to understand the issues and challenges our clients face.

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