The UK votes to leave the EU – What’s everyone saying about fintech?

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Since the news broke of Brexit becoming a reality in the early hours of June 24th sending global markets into a spin and taking many by surprise, key players have been issuing statements in response. With so much uncertainty over what a UK outside the EU will look like, it’s difficult to predict what the ramifications will be, but the overwhelming sentiment in business and fintech was initially negative. That’s not surprising, with many of the country’s biggest firms plus the country’s rich ecosystem of fintech and tech startups uniting to warn off Brexit ahead of the vote. After the shock began to wear off, however, more and more figures are urging businesses and entrepreneurs to think pragmatically about the new world order and how their companies will operate inside it. 

We’ve been collecting reactions across the industry and will be updating this page throughout the day with more reactions. 

“UK tech to withstand the immediate challenges of Brexit” – Tudor Aw, head of technology sector at KPMG UK

“A poll of TechUK members prior to the EU referendum showed that some 70% were in favour of remain. Today’s result is therefore disappointing for the industry.  That said, I remain optimistic and confident over the future of UK Tech.

“My view is that the core attributes that make the UK Tech sector so strong and attractive remain in place, including an amazing talent base that has a long track record of creativity such as Alan Turing’s first working computer to Tim Berners-Lee’s World Wide Web. Add to that the great infrastructure and facilities; first class universities, a stable legal system; appropriate fiscal incentives; and an ecosystem of advisors that support the needs of tech companies. Technology is a sector that will only increase in importance and works without borders, I therefore continue to see the UK Tech sector as one that will not only withstand the immediate challenges of the referendum result, but one that will continue to grow and thrive.”

“We must work together to ensure that any damage to our global leadership position is minimised” – Tony Craddock, director general of the Emerging Payments Association

Next week we’ll be reporting from the Emerging Payments Association Pay360 Digital Payments event in Liverpool, where sessions will explore the likely impact of Brexit on UK PayTech. We asked the trade body’s director general Tony Craddock for his reaction to the result.

What’s your reaction?
Professional pragmatism. Change happens, and as Darwin said, those most able to adapt to change survive. We have to get on with the cards we are dealt.

What’s the likely impact on UK PayTech?
My personal views are that Brexit will mean for the PayTech industry:
1. Less talent – some from across the EU will be dissuaded from coming here
2. Less investment – many investors use the UK as a ‘soft landing’ that gives them access to the 500m market of the EU. The size of the potential prize, at least in the short term, will be seen to be smaller and has less profit potential the short term, so the volume of investment is likely to drop back until the larger opportunity is factored in
3. Less local market opportunity – demand in the UK is likely to drop off, at least in the short term
4. Less simplicity – even if we are in the EEA, like Norway, we will still be outside the Customs Union, so export of goods and services to the EU will  be administratively more complex and costly. The export of financial services is also less likely to be included in an EEA arrangement, requiring us to set up different trade agreements for all 27 remaining EU members. Without a level playing field on which to compete across Europe, passporting may no longer be possible

On the other hand:

1. More market opportunity: We will be able to set up special trade agreements with countries housing the other 6.5bn people around the world. Payments is a scale business that can be exported, so the size of the potential markets available to us is much greater than at present.

2. More price competitive: With a sterling lower, it will cost other countries less to purchase our services, so we will be more competitive and therefore more able to export outside the EU

3. More motivated workforces, because we are now an independent country, and this will release the hitherto constrained enterprise culture

How can UK FinTech/payments sustain momentum?

In a word: collaborate. We must speak with a common voice to ensure the right aspects of international relations are preserved. We must work together to ensure that any damage to our global leadership position is minimised. We must lobby the government, FCA and PRA, as well as the EU in Brussels, as a collective. We must set out to ensure that the UK continues to be the best place to home a payments technology company, and looks back on the vote to leave the EU as being nothing other than a temporary pause on our upward growth curve.

“The British public decided to leave the EU despite advice and guidance”

We also asked Tom Hay, head of payments at Icon Solutions and former head of architecture at Vocalink about his reaction to the result:

What’s your reaction to the referendum result?

Surprise that the British public decided to leave the EU despite advice and guidance by majority of the business community. Sterling’s reaction was predictable given warnings from the Treasury re Brexit.

What’s the impact on UK fintech/payments?

“The impact on UK Payments is not dramatic, since Britain was never part of the Euro, hence never fully participating in SEPA. The innovation and leadership of the UK fintech community will continue, but like other businesses it may be more difficult to co-operate with mainland European partners. A repetition of the Norwegian experience is likely, where they enact legislation and regulation compatible with the EU, even though not officially a member.”

How can UK fintech/payments sustain momentum?

“The trend towards globalisation means payments are already a global business, so UK Fintech will continue to innovate and co-operate with other countries around the globe. One of the possible benefits however, is that it should make it easier to attract talent from outside the EU to work in the UK Fintech community.”

“We’re very disappointed” – Michael Kent – co-founder Azimo, Tandem

“We’re very disappointed that the British electorate has decided that the UK should leave the European Union. Here at Azimo we passionately believe that time and again its been proven that the world needs less borders not more. People should come together not be kept apart. As both Marta (Krupinska, co-founder Azimo & general manager) and I have said many times before, this will be a major blow to London’s financial services industry: many companies here depend on both EU market access and the ability and legal right to passport their services to the rest of Europe. I anticipate that we’ll see many finance players moving some, or potentially all, operations to elsewhere in Europe. Frankfurt, Amsterdam and Dublin are all obvious candidates. The most difficult part about this entire process has been the massive uncertainty it has created. Even now that we know that the final decision is to “Leave” the European Union, we do not know how this is going to evolve in the next few months and it could take years.

“We’re not too worried about our business. We’re in a unique position as a well funded start-up with a talented and international team. We are able to respond to changing market conditions quickly and easily. But we are worried about the long terms impact of the EU, the UK and the FinTech sector.

“I guess the good news is that the FinTech industry is now thriving across the whole of Europe at the moment should London’s position as the heart of the sector now change. But what a shame if that is what happens. In the meantime, we’ll continue to focus on doing what we do best: delivering better faster and lower-cost money transfers to help our hardworking customers create a better life for themselves and the world around them.”

“UK government needs to negotiate new passporting deal” – Financial services and technology law specialist Yvonne Dunn, Pinsent Masons

“A range of factors have contributed to the UK, and London in particular, having developed into a centre for fintech innovation. The FCA is widely recognised as leading the world in terms of a progressive approach to fintech regulation and in engaging with fintech startups eager to operate in the UK market. It is one of the main reasons why fintechs looking to set up in Europe choose to base themselves in London and not other financial centres.

“However, other important factors include the fact that, through the EU’s passporting regime, which provides mutual recognition of regulatory authorisations across EU countries, fintech providers based in London can gain market authorisations to operate across the European market quickly and easily. In addition, the EU’s rules on the free movement of workers across the trading bloc means fintech companies have been able to attract talent from a larger pool of people than is available within the UK alone.

“There is now a need for the UK government to quickly negotiate and agree a system that replicates the benefits of passporting and free movement of workers, before other financial centres in Europe look to exploit any lingering uncertainty about the environment in which UK-based fintechs will be operating in.”

No plans to relocate HQ from London – Meniga CEO Georg Ludviksson 

Ludviksson is originally Icelandic, but the company is headquartered in London with offices in Iceland and Sweden. He says he started Meniga as a response to the Icelandic economic crisis of 2008, realising people were panicking about finances for the first time and needed tools to manage better. He says the firm has no plans to relocate.

“Being part of the EU was a reason for us to be in the UK, but it wasn’t the only one. We are part of a vibrant London fintech scene, and have benefitted from London’s talent pool, transport links and of course access to the financial system. As long as these things remain intact, we and other UK growth companies will be fine. Policymakers will now have to focus on protecting the landscape that has enabled tech and especially fintech startups to thrive in the UK. We are confident they will do so and have no plans to leave London.”

UK trade body for fintech Innovate Finance

“We respect the vote of the people of Britain to leave the European Union. Although this creates uncertainty about the future we believe that the economic, political and social foundations of our country are strong and we will continue to be a driving force for FinTech. London remains the world’s largest financial services hub and home to all the major global banks, insurers and financial markets.

“Since 2008, the FinTech sector has emerged as a powerful, borderless, global movement and the UK has been at the heart of its growth and influence. We will work closely with our members, the UK government, the City of London, EU policy makers, and our strategic partners to ensure that we sustain our position as a dominant force in global FinTech.”

Excerpts from the Prime Minister’s speech outside 10 Downing Street:

I would reassure those markets and investors that Britain’s economy is fundamentally strong and I would also reassure Britons living in European countries and European citizens living here there will be no immediate changes in your circumstances. There will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold.

We must now prepare for a negotiation with the European Union. This will need to involve the full engagement of the Scottish, Welsh and Northern Ireland governments to ensure that the interests of all parts of our United Kingdom are protected and advanced. But above all this will require strong, determined and committed leadership. I’m very proud and very honoured to have been Prime Minister of this country for six years.

I will do everything I can as Prime Minister to steady the ship over the coming weeks and months but I do not think it would be right for me to try to be the captain that steers our country to its next destination. This is not a decision I’ve taken lightly but I do believe it’s in the national interest to have a period of stability and then the new leadership required. There is no need for a precise timetable today but in my view we should aim to have a new prime minister in place by the start of the Conservative Party conference in October.

Mark Carney, governor of the Bank of England:

“It will take some time for the UK to establish a new relationship with Europe and the rest of the world. So some market and economic volatility can be expected as this process unfolds, but we are well prepared for this.

“Her Majesty’s Treasury and the BoE have engaged in extensive contingency planning and the chancellor and I have remained in close contact including through the night and this morning. The BoE will not hesitate to take additional measure as required, as markets adjust.

“The capital requirements of our largest banks are now 10 times higher than before the financial crisis. The BoE has stress-tested those banks against scenarios far more severe than our country currently faces. As a result of these actions UK banks have raised over a £130bn of new capital and now have more than £600bn of high quality liquid assets. That substantial capital and huge liquidity gives banks the flexibility they need to continue to lend to UK businesses and households even during challenging times.

“Moreover as a backstop to support the functioning of the markets the BoE stands ready to provide more than £250bn of additional funds through its normal market operations. The BoE is also able to provide substantial liquidity in foreign currency if requires. We expect institutions to draw on this funding if and when appropriate.”

European Council President Donald Tusk, European Parliament President Martin Schulz, EU council President Mark Rutte and Commission Pressident Jean-Claude Juncker’s joint statement:

This is an unprecedented situation but we are united in our response. We will stand strong and uphold the EU’s core values of promoting peace and the well-being of its peoples. The Union of 27 Member States will continue… We now expect the United Kingdom government to give effect to this decision of the British people as soon as possible, however painful that process may be. Any delay would unnecessarily prolong uncertainty. We stand ready to launch negotiations swiftly with the United Kingdom regarding the terms and conditions of its withdrawal from the European Union. Until this process of negotiations is over, the United Kingdom remains a member of the European Union, with all the rights and obligations that derive from this.”

 

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