By Yael Warman

There is little doubt that having been aided by the UK governmental initiatives, the UK has been at the forefront of the fintech revolution. Financial technology is assisting in reforming the lending, money transfer, and banking markets, and is the fastest growing area within the financial industry. Nonetheless, with the EU referendum in June resulting in a victory for Brexit and a date set for the process to begin, the burgeoning industry’s future could perhaps be under threat in the UK. Here we discuss the potential ramifications of Brexit, and the two sides of the argument regarding the future for this industry.

Without doubt, the majority of fintech firms are nervous as to what Brexit might mean for their future in the UK. In the months following the vote to leave, two major issues were highlighted by a number of company executives which had the potential to cause havoc within the industry. The first concerned continued access to the single market, and the second regarded the possible cessation of the freedom of movement as the biggest threat to the industry.

Single Market

Edan Yago, who founded Epiphyte, a firm which assists transactions by using blockchain, was reported as saying in the immediate aftermath of the vote: “I hope that the UK and EU continue to operate as a single market which is to everyone’s advantage. If the UK truly does disengage from Europe, we may need to consider relocating.”

With around half of European fintech investments being made in the UK, companies are particularly vulnerable to the UK leaving the single market, which aids UK-based companies, who are able to ‘passport’ their UK authorisation to continue providing regulated financial services within other member states. Without the advantages of passporting, UK-based companies will suffer from a lack of access to EU markets, as companies could well need to become authorised in each individual company.

In addition, companies are far less likely to be attractive to potential investors, who could baulk at the need for multiple authorisations.

Free Movement

Kathryn Parsons, chief executive of Decoded, explained, “The general worry is a brain drain of talent and skills. Some of the best tech talent is from overseas.” A number of other fintech companies have said that they worry about recruitment, with a number saying that the best recruits come from overseas.

This could mean that other European countries decide to mount a raid of the UK’s position as the European capital, with the benefits that they are able to offer.

Positive News

There are a minority of analysts who have welcomed the decision to leave the EU, noting that the opportunity now exists for the UK government to make itself a real alternative to Europe by cutting taxes and regulations. This was best summarised by Edan Yago, who said, “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 fintech and start-ups.”

Only time will tell whether London will remain Europe’s financial capital of the world, but one thing is certain; if Brexit causes the UK to lose its footing, the financial burden to be carried by brokerages choosing to relocate or adapt their businesses will be enormous, which added to the increased competition and pressures from regulators, can put more than one FX broker out of the game. Given the uncertainty, choosing a broker that is regulated, reputable and has a strong track record of operation is crucial.

About the Author:

Yael Warman is a creative writer with a strong background in marketing and advertising. Yael has been a writer for over 10 years and has worked for clients in various industries as well as her own companies and is currently the Content Manager at Leverate.