Passporting loss a real challenge for many companies

Andrea Dunlop CEO of Acquiring and Card Solutions at Paysafe and Deputy Chair of the EPA Advisory Board

UK businesses are currently able to provide a wide range of financial services across the EU, from banking, insurance, investment and asset management, all under the rules of passporting across the EU while only having to follow one set of regulations. This also means that companies offering these services outside of the EU can establish an EU base in one location but have access across the whole of the EU 28 members, taking advantage of the cooperative regulatory framework.  There is no doubt that London has so far been an attractive base for many companies looking to expand into the other EU markets and the growing UK prominence in global fintech has contributed to the financial sectors growth which is now about 8% of the total UK economy.

However, the loss of passporting arising from Brexit will have a negative impact on the UK and businesses located here.  For many of the international banks and financial services companies, they already have licences out of more than one EU country, and in these cases then it’s likely that they will extend more services in EU locations outside of the UK.  For instance, we have already seen Bank of America announce Dublin as their EU base, and Citi bank is expanding their Frankfurt headquarters and staffing at the expense of London.  In my opinion this is a trend that will continue for many more international businesses.  Meanwhile, for smaller players, the cost may well be prohibitive and they may either narrow their focus to a UK-only model or move location for an EU-only model.  Either way, the loss of passporting isn’t good for Fintech in the UK and it will act as a brake and stifle growth and innovation here.

While the loss of passporting itself is a clear restriction there are many other related things to consider which will add more complexity.  For instance, taxation, the regulatory framework and the operational aspects of doing business in another jurisdiction are all additional challenges and which are costly to manage.  And finally, the lost opportunity costs this has on businesses that are having to prepare contingency plans make the whole situation on losing passporting a real downside aspect of Brexit.  In my view there are no upsides for anyone in the UK, whereas other financial centres in the EU will see this as a potential opportunity to secure investment, jobs and business for their economies.

Find out more at the Emerging Payments Association’s exclusive hot topic briefing ‘Passport to the Regulators’ on 3rd October at K&L Gates. This one-day event will consist of keynote presentations from EU regulators of six different countries – Cyprus, Denmark, Lithuania, Luxembourg, Malta and Spain. Limited seats available, book yours here.