Despite potential issues, the FinTech sector is set to benefit from Brexit according to leading FinTech provider Trusek.
Trusek, which provides a FinTech software platform to give growth businesses a faster route to market, is highlighting the potential benefits of Brexit for the FinTech sector as the Prime Minister triggers Article 50 this week, formally starting the process of the UK’s withdrawal from the EU.
Co-Founder and Chief Executive of Trusek, Steve Hatton said: “As we enter the negotiations we do so with the understanding that, in all likelihood, it will be two years until Brexit is finalised and we have actually left.
“Much has been said about the impact of Brexit across all sectors, including financial services overall, and the FinTech space as well, but many focus on the negatives.
“Whilst passporting rules will be an important factor in the negotiations, and harm could be caused to the sector with the wrong deal, there are also many potential positive impacts of Brexit on the FinTech industry.”
He highlights six potential positive affects of Brexit:
Under the current relationship, with the UK being a full member of the EU, the financial services sector is required to comply with all EU regulations.
Not all regulations within this framework are favourable to FinTechs in the UK, and while it is likely that UK financial regulations will have to comply with the majority of EU-based legislation, Brexit will provide more freedom.
This will mean that, while bearing in mind that the UK would still want to trade with the EU, it will be able to choose which regulations to implement depending on the impacts they will have on the financial services and FinTech sectors in the UK.
While the UK is a member of the European Union, free movement of people means that anyone from any European country can choose to work in the UK without a visa.
It’s widely commented that one of the main reasons for the leave vote was to remove this freedom of movement and limit immigration into the UK.
It is, therefore, clear that one important red line for the Brexit negotiations will be immigration controls from the EU, and this will provide the UK with the ability to prioritise which migrants to allow into the country, depending on the sectors and skills they have.
While we still have a skills gap in the UK for workers in the FinTech industry, including developers, this will mean that migrants will continue to play an important role in the sector moving forward.
3) Investment and government support:
The British FinTech sector generated £6.6bn in revenues in 2015, so the industry is a vital part of the UK economy.
As the UK leaves the EU it is therefore in the interests of the treasury, as well as the economy as a whole, for the sector to succeed, so the government is likely to support FinTechs and the wider financial services industry so the impacts on the sector are as small as possible.
In the 2016 Autumn Statement, for example, Chancellor Philip Hammond announced plans to provide £400m into venture capital, to support UK businesses including the Fintech sector.
Additionally, with immigration being a key issue for the leave vote, and many workers in the FinTech sector being from Europe, the UK government will be under pressure to ensure the British education system produces the future coders for the British FinTech industry.
4) Partnerships with non-EU FfnTtch sectors:
Financial Technology is an industry with worldwide importance, and while the EU provides strategic partnerships and alliances between FinTech’s across the trading block, Brexit will offer the chance to strengthen global partnerships within the sector.
Countries like Israel, Singapore and the United States have strong FinTech sectors, so building partnerships with the financial services industries in these countries will benefit UK financial services and FinTech greatly.
5) Ease of doing business:
The UK is still seen as a very attractive place to start and run a business because of its strong infrastructure and incentives.
For example, talking after the Brexit vote, Warren Mead, global co-head of FinTech at KPMG said: “We could end up seeing tax breaks to encourage technology firms to be based here.”
Edan Yago, the founder of Blockchain powered SaaS Epiphyte, added: “If London differentiates itself with streamlined regulation, reduced tax burden for employees and support for innovation, it could become an even more attractive hub for FinTtch and start-ups.”
6) Capitalising on banks being distracted during the Brexit process:
Whilst the banks are busy planning for the potential impacts of Brexit, FinTech firms may spot an opening in the market that they can take advantage of.
As David Gyori, the founder and CEO of Banking Reports says, efforts to innovate within banks, especially the larger or international banks, will slow down as a result of Brexit.
He likens this window of opportunity for FinTechs to that of the financial crisis in 2008.
Steve added: “Above all else, it’s important to bear in mind that the negotiations are only just getting underway, so what may be a potential issue today may not be when the final deal is agreed.
“As the sector faces these challenges, businesses need to ensure their FinTech solution is proven and rigid enough to withstand any potential threats, but also flexible enough to respond to regulatory changes.”