Financial Services Bill Amendments: Fintech Strategic Review Recommendations

Today (10 March 2021) on day 6 of committee stage of the Financial Services Bill I have tabled amendments that seek to implement recommendations from the Fintech Strategic Review.

Ron Kalifa’s review for the government is a fine piece of work, engaging hundreds of experts across FinTech and financial services. It has excellent chapter heads and it sets out a clear, achievable roadmap for the UK to further lead in this most important sector.

Many of the recommendations in the review are not in need of additional primary legislation or regulations and the government can – and I hope they will – just crack on with them. Others, however, do and my question for the government in our committee deliberations is simply this, if not this financial services legislation then what? If not now, then when?

The three amendments I am proposing that are connected to the Kalifa Review recommendations are the need for:

a report on the financial technology strategic review,

a scale up review and

a UK Centre for Applied Innovation in Financial Services. Full text of the amendments are set out below:

Insert the following new Clause—
“Report on financial technology strategic review
Within three months of the passing of this Act, the Secretary of State must report to Parliament on the implications of the financial technology strategic review for the regulation of financial services.”
Amendment 136B, Lord Holmes of Richmond, Committee Stage Day 6, Financial Services Bill, House of Lords, 10 March 2021

Insert the following new Clause—
“Scale up review
(1) The Secretary of State must, within 3 months of the passing of this Act, report to Parliament on what action the Government intends to take to reduce any scale up gaps in the UK financial services sector.
(2) The report must include—
(a) consideration of regulatory barriers to the patient capital market in the United Kingdom; (b) full identification of the current scale up gap in the financial services sector, and each constituent element of that gap; (c) other comparative jurisdictions’ approach to scale up gaps in the financial services sector; (d) consideration of the factors impacting place-based growth in the financial services sector; and (e) consideration of the relevant recommendations of the Financial Technology Strategic Review.
(3) In this section— “patient capital” means long-term equity or debt whose providers do not aim to capture benefits in the short term; “place-based growth” means a broad array of interventions under which a place or area is identified as the main entry point, instead of a sector or target group; “scale up company” means a company in a specific phase of development, defined as growth or direction; “scale up gap” means the barriers to scale up businesses accessing finance for growth.”
Amendment 136D, Lord Holmes of Richmond, Committee Stage Day 6, Financial Services Bill, House of Lords, 10 March 2021

Insert the following new Clause—
“UK Centre for Applied Innovation in Financial Services
(1) The Secretary of State must, within 3 months of this Act being passed, prepare, publish and lay before Parliament a detailed plan for the establishment, funding, governance and accountabilities of the UK Centre for Applied Innovation in Financial Services (“the Centre”).
(2) In preparing the plan for the Centre the Secretary of State must have regard to— (a) the recommendations and conclusions of the FinTech Strategic Review; 16 Financial Services Bill After Clause 40 – continued (b) similar existing facilities in jurisdictions outside the United Kingdom and the adoption and adaptation to the United Kingdom of best practice; (c) the capacity of the UK financial services sector (including financial technology) to contribute to the delivery of wider government policy objectives; and (d) developing a framework wherein government and other public sector agencies can collaborate with the financial services sector in a flexible and innovative way without the constraints of government procurement procedures.
(3) The purpose and activities of the Centre must include, but not be limited to, practical pilot and other experimental innovative work on— (a) the development of standards for security, confidentiality and privacy of data relating to financial transactions, including the identity and authorisation of transactors to enable those data, identities and authorities to be safely reused in other areas, including the delivery of government services, at the request of the owner of that data; (b) collection, aggregation and reporting of financial data to third parties in support of the Second Payment Services Directive and open banking; and (c) applications for new technology, including distributed ledgers, artificial intelligence, internet of things and smart contracts, to leverage the capability of the financial services sector and its contribution to wider policy delivery.
(4) In this section— “open banking” refers to— (a) the use of open APIs that enable third-party developers to build applications and services around the financial institution; (b) greater financial transparency options for account holders ranging from open data to private data; and (c) the use of open source technology to achieve the above.”
Amendment 125, Lord Holmes of Richmond, Committee Stage Day 6, Financial Services Bill, House of Lords, 10 March 2021

Financial services, like every sector of our economy, indeed like so many areas of our lives, has the chance to face forward and consider the alchemy that is created with the right mix of talent and technology. I hope the government will consider my amendments and be bold in leading the way and supporting these efforts to mobilise talent and technology in financial services.

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