The surprising referendum decision to pull Britain out of the EU has vast implications for swathes of international fintech entrepreneurs who have set their sights on British shores, dazzled as they are by the financial titans that call London home.
One such entrepreneur is Brazilian Felipe Almeida, Co- Founder and Chief Marketing Officer of Uberlāndia based Zup Innovation, a company that specialises in digital transformation for financial service giants. Founded in 2011, Zup’s customers include Santander, MasterCard and telecoms giant Telefónica, and have raised financing from prolific Latin American investors Kaszek Ventures, based in Buenos Aires.
As you’d imagine from a fintech entrepreneur, Almeida has a lot to say about the evolving relationship between fintech and banks.
“I think we will see two scenarios, the first where fintech will attempt to replace redundant technology completely.”
“We are seeing this in Brazil with NuBank, and in the UK with Atom Bank and others. On the other side, I think that established banks will increasingly open themselves and their technology up to third party developers who will be able to plug their technology into the bank’s infrastructure and sell their products and services; I can sell credit, but with Santander managing my back-end. In the second scenario you will find smaller companies serving a highly specific customer base, but powered by a huge and secure engine.”
Brazil have been experiencing something tantamount to socio-political turmoil in recent years. In March of this year, the world’s seventh largest economy slipped into an economic depression, with GDP hitting a 25 year low. Hot on the tail of the nation’s economic woes is a political corruption scandal that has battered the Brazilian government from all angles, leaving current president Dilma Rousse facing impeachment. Brazil’s currency, the real, has devalued dramatically, leaving most Brazilian companies with little choice but to look internationally for US dollar, euro and pound denominated sales. For Almeida and Zup, the Brexit vote could cause international entrepreneurs to think twice about choosing London as their European base.
“Every time entrepreneurs think about coming to Europe, the first place they think about is the UK. Traditionally, London is where they’ll establish an office and from there they will move and expand across Europe. Brexit could force international entrepreneurs to re-think their decision, particularly with emerging start up hubs in places like Italy, Spain and Germany.”
Despite uncertainties over Britain’s post-EU economic future, London is still regarded as the financial epicentre of Europe for as long as the major financial institutions call it home. But entrepreneurs are remaining cautious over key decisions concerning the long-term location of their European headquarters, and admit that if favourable deals between the UK and the EU countries aren’t struck, they will be forced to consider settling down somewhere with access to the European open market.
“For Zup, as a fintech company, London is still the place as long as our potential customers remain here. I don’t foresee a mass exodus of financial service firms from London, so Brexit won’t have an immediate impact on our expansion from a short-term strategic perspective. Perhaps in the long term we will have to relocate our European office to somewhere where we have access to the whole EU market, but for now London remains our priority.”
Zup’s European expansion into the UK remains very much full steam ahead, and the company maintain lofty ambitions of generating 50% of their revenues from international business by 2018. Partnerships are key to Zup’s UK market penetration, particularly with Accenture, who already sell technology solutions like SAP on a global scale. “Accenture recently created their digital branch, Accenture Digital, and our products allow them to speed up the digital transformation of their biggest clients,” says Almeida. When asked why Almeida remained so optimistic about Zup’s British venture, the entrepreneur quoted perhaps the most famous Brazilian entrepreneur in recent years.
“It’s like Jorge Paulo Lemann says, I prefer to be an optimist, because I’ve never met a successful pessimist.”