Will the UK Remain a Haven for Fintech Post-Brexit?

The UK is a haven for fintech. Whilst the EU market for fintech is worth only £4.5 billion, a figure that pales into insignificance when you learn that fintech was worth £27 billion in 2015, the UK holds an 80% share of the market.

Sympathetic UK Regulators

Right now, UK fintech is strong – and growing stronger by the day. UK regulators are very sympathetic to the booming fintech sector and the UK has become a hub for fintech startups. Indeed, tech giant Microsoft cited the willingness of the UK’s Financial Conduct Authority (FAC) to encourage rather than stifle innovation when it criticised the US Treasury’s failure to support US fintech.

UK a Major Hub for Fintech

In 2016, the UK topped a survey of the world’s most fintech jurisdictions. Other countries are equally welcoming to fintech, but the UK government specifically promotes competition and innovation via Project Innovate. One of the ways it does this is with a sandbox. This allows companies to test their products before they apply for full regulatory approval.

Some argue that adopting such a liberal position is opening the doors to organised crime, who use financial technology to perpetrate criminal activity. However, Chris Woolyard, the director of strategy and competition at the FCA, thinks differently. He says the FCA is trying hard to demystify regulation and bring tech firms inside a regulatory perimeter, which is better for consumers. He says fintech firms must adhere to the same strict regulations as anyone else.

Moving forward, however, there is a huge question mark hanging over the UK with regard to Brexit. Whilst the UK is currently very attractive to fintech entrepreneurs, it may not remain so once the UK leaves the EU. Many analysts from major forex trading platforms are concerned that a Hard Brexit could hamper economic growth, leading to higher unemployment and static wage increases. Unemployment is currently the lowest it has been for 42 years, but there are concerns it will not stay that way for long.

Will Fintech Stay Post Brexit?

Despite the concerns, the UK is ideally placed, mid-way between the U.S. and the Far East. London is one of the world’s top financial hubs and this is unlikely to change overnight. Fintech needs the backup of the City’s financial sector to continue developing innovative new products. The UK market is very receptive to new fintech innovation and this is unlikely to change after Brexit.

The main fly in the ointment is the potential loss of skilled workers if and when free movement between the UK and the EU ends. Three million people work in fintech, but 18.4% of them come from outside the UK. If the UK closes its borders, many of these workers could head home.

In November of this year, a key meeting took place in Tallinn, Estonia. Important players in the fintech market met to discuss the future of fintech post-Brexit. The main question on the table was whether it would be possible to leverage financial technology to create a single digital market, which would allow fintech startups to expand throughout Europe.

Will it be possible? We don’t know the answer yet.


Related posts

Hapi, the Sustainable Investment Platform for Parents Officially Launches

Francis Bignell

Modex Launches Smart Contract Marketplace

Manisha Patel

QED Makes First Investment in Africa With Backing For Nigerian Fintech

Tyler Pathe