The United Kingdom’s vote to leave the European Union in June 2016 has generated upheaval and uncertainty in practically every industry in the United Kingdom today. There are a number of critical problems that must be resolved swiftly if economic harm is to be minimized, including Ireland’s future relationship with the EU27. Business books have dedicated hundreds of pages to warning about the knock-on effect of leaving the EU on the UK’s competitiveness. Are these fears well-founded or exaggerated?
The initial reaction
When it comes to some businesses, such as fin-tech, participation in the EU’s single market is vital because of Britain’s technical skills gap. Without a sufficient post-Brexit single market agreement, the UK’s FinTech industry and financial services as a whole might be severely harmed if it loses this independence as well as the passporting of services to other EU markets.
Because of Brexit, many FinTech businesses and investors are taking a breather. After Brexit, many FinTech companies wonder if London will continue to be the ‘FinTech capital of Europe’ or if it will be overtaken by cities like Paris or Berlin, which have strong FinTech businesses of their own, and burgeoning capital markets which are suited to supporting them.
The impact of Brexit on FinTech in Europe will be significant. A partner at Mason Hayes & Curran thinks London’s position as Europe’s FinTech hub may be in jeopardy. In the near term, however, the city’s position in the financial services sector, as well as its well-established legal infrastructure and talent pool, as well as its cultural cache and access to investment, will likely keep it at the vanguard of Europe’s and the world’s FinTech industries.
Early Metrics conducted a study of 1500 European FinTech businesses and concluded that the UK is still rated favorably for the time being. Baschiera said that the UK is presently facing its most significant threat as Europe’s FinTech hub. Companies are already evaluating the consequences of fundraising, talent acquisition, and talent retention despite the fact that it is too early to draw any clear conclusions about the impact of Brexit. In addition to that, one of the main parts of the financial markets – the Forex marketplace, becomes more advanced after Brexit.
In order to be successful in financial markets, like it’s typical of businesses, people need to have a strategy. Usually, it’s usual for newcomer investors to search for popular trading strategies, however, you should always keep in mind that popular strategies aren’t always the key to success. In addition to that people search for strategies like one minute Forex strategy, Forex strategy for beginners, and so forth. Through the strategy traders, investors and people who are involved in Fintech companies can define exact things to do and increase the chances of being successful. It is also worth noting that many FinTech companies rely on rapidly evolving technology in order to stay competitive. An organization has to be agile and have the ability to hire the right personnel from across the world. As long as there is no clear path to a Brexit deal in sight, London remains an appealing location for talent and financial institutions.
Financial services director Nick Chouksey, who focuses on fintech at PwC, had similar thoughts. Fintech firms, he added, are not yet being negatively impacted. He said that there were two reasons for this. According to him, this was due to two factors: first, since the actual impact of Brexit has yet to be determined; and two, due to “the demand for newer, more tech-enabled solutions in the financial services industry.” –
The UK, he said, has not felt any impact, but the worldwide fintech environment had changed as a result of the UK’s decision to exit the EU. Many European cities began aggressively competing for new fintechs to set up shop in their cities rather than the UK shortly after the Brexit referendum took place in 2016. Among them were Berlin, Paris, and Amsterdam.”
Fintechs in the UK have continued to grow despite the fact that it was more tempting to set up in one of these locations rather than London and therefore be in the EU. London also has plenty of draws which isn’t matched in the continental capitals such as its hordes of financial advisers and asset to offshore financial markets. But instead of improving the European fintech environment, it may have helped close gaps between major European financial services hubs,” he said in a statement.
As for the future, Chouksey said there may be some problems for the UK when its exit from the European Union is finalized in the near future. ‘Banks, asset managers, and insurers have been contemplating proposals to form EU-regulated companies since 2016,’ Chouksey added.
In addition, he urged fintechs to be flexible and sensitive to this new climate. Financial technology companies must first ensure that they satisfy their regulatory responsibilities under the new EU legislation. Being outside of the EU regulatory regime has lead many to wonder if the UK will shift regulation in favour of home-grown businesses. Whilst this could give an advantage to start-ups in the finance sector, this will likely trigger a protectionist reaction from the other side which could spell disaster for the smooth rollout of products across multiple territories.
While meeting new regulators’ compliance standards may be important, it is also important to ensure that the new operational model has been implemented by the time Britain exits EU.”
Acuris’ and Revolut’s viewpoint
Cerqueiro of Acuris and Revolut’s representative both expressed the same worry. In the case of a hard Brexit, UK firms may be required to obtain a second EU license, according to the experts. For access to EU markets after Brexit, both companies suggested they may need to open an office in Europe. The fact that TransferWise, a UK-based online money transfer business launched in January 2011, has already filed for a license in Belgium indicates that UK enterprises are ready to take on this task, according to Cerqueiro.
Revolut’s spokesperson claimed the company was also prepared for a harsh Brexit. While the fintech business already has a working electronic money license in the UK, it sought for and was granted one in Europe last year, according to the company’s spokesman. In the case of a hard Brexit, Revolut will activate this feature. As the spokesperson said, “it is a little annoying, but we have to comply with whatever requirements are needed by various regulatory agencies following a hard Brexit”.
An office in Europe is already planned for the firm, according to Revolut’s spokesperson. There is also a technical office planned for Berlin. “Our company will continue as usual and our clients will not be harmed by a hard Brexit”, the spokesman added. Revolut’s spokesperson claimed there will be no impact on existing clients. Although there may be small modifications to the terms and conditions, clients may have to consent to them via the app, according to the source.
Most people wonder if investors would still be interested in British fintech firms even if there is a Brexit. In spite of the fact that the fintech industry may suffer some negative effects as a result of Brexit negotiations, he stated that the overall outlook was optimistic, especially in terms of the UK as an attractive investment location. As financial services shift into a digital, cloud-based sector, fintechs will play a key role in technological development and innovation. Given that the number of UK fintech unicorns is a very short list, we will all hope that the business world can quickly move past this seismic change.
The return on investment margins, on the other hand, he added, might influence investment decisions. In a post-EU scenario, he said investors would look to see if alternative asset classes offered higher value compared to fintech businesses.