The shockwaves caused by the UK’s decision to vote for Brexit in last June’s referendum have certainly reached the FinTech sector, with three questions in particular now troubling many:
It is important to stress that such concerns remain purely hypothetical given that negotiations over the terms of Brexit have not yet begun and are unclear. However, despite this uncertainty we have found the impact Brexit has had on early stage start-ups to be minimal at the moment. Jan-Michael Gorecki, CEO of KyoLab (a participant in the Startupbootcamp FinTech programme) said “Brexit has been more about speculation than actual impact for us”.
One of the key areas of speculation is whether London will remain the “FinTech capital of Europe” or be surpassed by cities such as Paris or Berlin. However, rather than seeing these cities as competition, there is a positive story to be told around increasing innovation across Europe.
Indeed, there are several countries now following the UK’s lead to reduce regulatory restraints and increase innovation in their countries. This is particularly coming from countries we wouldn’t necessarily associate immediately with FinTech. Lithuania, for example, is set to establish a new regulatory regime to ease the way for FinTech start-ups and is working with the FCA to ensure businesses that the UK regulator has approved get fast-track approval from the Lithuanian authorities. London-run Revolut and Contis have already secured passporting rights.
It’s also important to stress that London’s pre-eminence in the FinTech space is the result of a number of disparate factors, many of which are unaffected by Brexit. The UK has always encouraged innovation and Innovate Finance believe that “Critical to this has been a forward thinking, open and collaborative regulatory regime driven by the FCA”. The fact that London is home to such a large concentration of financial services businesses and technology companies, in close proximity to one another, is also a natural advantage.
In fact, the UK’s FinTech sector has continued to progress since the Brexit vote. Some examples include the London FinTech “bridges” forged with China, South Korea, Singapore, India and Australia. Japanese firm Softbank, meanwhile, has said the headquarters for its £80bn technology investment fund will be located in London, which is an encouraging sign for investment.
In short, while Brexit has given FinTech companies and the broader investment community pause for thought, progress has continued since the referendum. There will be uncertainty in Europe whilst negotiations develop in the years to come, but we will see continued support from the regulator to encourage innovation and even if we see loss of investment and talent from the European region, this can be compensated by other territories, such as Asia, coming to the UK. London will still remain a global capital of FinTech, but we my might see its growth compared to other regions slow down.
Managing Director, Startupbootcamp FinTech London, PwC United Kingdom
FinTech Consultant, PwC United Kingdom