At Fintech Week this year, we heard from fintech industry strategist Devie Mohan on the subject of the future of fintech in post-Referendum London. She highlighted that we hear a lot about it but are not fully informed about what to expect, “there are a lot of questions and not enough answers,” Mohan said. This uncertainty is surrounded by anxiety within the financial industry as London may not retain its position as a fintech hub if many institutions decide to relocate.
Mohan presented a 3 step process for fintechs to follow which included assessing the immediate impact, avoiding hasty strategic decisions and maintaining an active communication strategy in the short term. In the mid term, Mohan explored that the UK could take on a model similar to Norway, Switzerland, Turkey or even the WTO Model which would separate the UK completely from the European Union. “Any model would take years and years of contract negotiations and it will not be an easy process.”
“London will remain a financial hub because of its strong banking industry and because it is a destination for investment and trading from all parts of the world,” Mohan explored. She continued to talk about how this does not mean that UK’s capital will stop being a fintech hub. This is because fintech is more closely associated with finance, rather than the technology industry, but Mohan did not rule out tech hubs such as Berlin and Stockholm as potential future fintech capitals.
A potential impact of the Brexit could be a decrease in fintech funding and early stage incubators could be affected, however investor anxiety before the Brexit did result in venture capital funding falling from $4.3 billion to $2.8 billion in Q2 2015 and 2016. Mohan advised mid-sized startups to reevaluate their strategies, establish their priorities and work out whether or not their investment model is going to change.
Passporting is a big issue that many financial institutions are concerned about because of the increased cost and this ties into the difficulties that immigration presents. Mohan iterated that 30% of the fintech talent is from overseas and if these people are not retained within the UK, incubator and accelerator programs will suffer.
Some positives can be gained from the decision to leave the European Union as this provides a chance for the UK to collaborate with countries like Australia and America, Mohan mentioned. Alongside this, UK fintechs Revolut and MarketInvoice have been valued highly and have gained investment since the referendum took place, so all is not lost.
However, some believe that the government should take action sooner rather than later in order to maintain confidence in the digital industries and to stop companies from relocating. According to the House of Commons’ report on The Digital Economy, the UK would not be the leading force in creating a Digital Single Market and would have to follow whatever the rest of Europe do.
“The decision to leave the European Union risks undermining the United Kingdom’s dominance in this policy area. We could have led on the Digital Single Market, but instead we will be having to follow. The government must address this situation, to stop investor confidence further draining away, with firms relocating into other countries in Europe to take advantage of the Digital Single Market,” the report read.
Committee chair Iain Wright made comment on the “digital strategy”. “We look forward to publication of the digital strategy and urge the government to set out how it plans to build on Britain’s digital success post-Brexit. This includes urgently addressing the concerns of tech companies who rely on the single market and high-skilled migrants from the EU,” according to CityAM.