The people of Britain have decided to vote for a Brexit, or a British exit from the European Union in a historic referendum this week. Since London has been the world’s leading Fintech centre for a very long time, it is important to ask ourselves: what will happen next?
Advantages of Brexit
Some people such as the Eurosceptic MP Boris Johnson hail Brexit as a great opportunity. According to Tudor AW, leader of technology field at KPMG UK, the country has first class universities, great infrastructures, and facilities, the ecosystem of advisors that satisfy the need of tech firms and appropriate fiscal incentives that will see UK Fintech continue to grow despite the challenges of the referendum results.
Another positive factor for Fintech firms is the Financial Conduct Authority’s progressive approach to the industry, which also attracts a lot of Fintech startups. In addition, according to Yvonne Dunn, Financial services and technology law specialist, the referendum will allow Fintech providers based in London to gain market authorizations to operate across a wider market easily and quickly.
The UK has stable financial, legal and political systems which make it a suitable place to do business. Since now the UK has a new freedom, the country might start courting the world’s large startups and enterprises to come and set up their headquarters in the UK.
Brexit will give the UK more freedom to strengthen alliances outside of the European Union. It is possible UK might strengthen her relationship with countries such as Israel, a burgeoning Fintech hub.
Disadvantages of Brexit
There is uncertainty over what the Britain exit holds for Fintech in the UK because the country has to make new trade agreements with other countries. Most likely, foreign Fintech firms that have been operating in the UK might relocate their headquarters.
Some Fintech executives said a Brexit vote means many companies might have to leave London. “After the referendum, UK Fintech might relocate headquarters in another country,” said Philippe Gelis, CEO of Barcelona-based Kantox.
Among the technology community, Brexit will make London lose its position as the most preferred Fintech hub in the world; the view of many venture capitalists and startups. There are three reasons for this. First, many Fintech firms rely on rolling out services and products across Europe. Second, many technology firms rely on inventors from all over the EU. Lastly, there is fear that uncertainty will stop investments coming into the capital’s tech scene.
Right now, Fintech firms are not certain about the legal and regulatory framework that will govern the UK industry in the future. The industry will no longer be governed by EU laws. Adjustments to the rules may affect how people do business in the country.
There are more than 500 Fintech firms in the UK. Players in the Fintech firms predict that most likely leaders in Fintech would be cities like Dublin and Amsterdam which already boast of progressive tax advantage, regulatory environment and developing technology clusters.
In conclusion, the future of Fintech in the UK is still shrouded in uncertainties. The Brexit has both advantages and disadvantages depending on the new changes and regulatory body the country will create.