What does Brexit mean for the European FINTECH and IT market?

While in London, at the epicenter of the Brexit- led discussions, we, at Wirex, decided to analyze the Fintech-implications of a British exit from the European Union. We present to your attention the material compiled on the basis of our forecasts, as well as the opinions of European colleagues.

The exit from the EU could be a disaster for the British FINTECH community and threaten the role of London as a European center for financial technology. The capital of Albion risks losing access to the promising European market and may lose its place at the forefront of reforming the financial technologies of the Old World. In this context, a potential referendum in Scotland will also have a negative impact on the financial technology sector.

As a member of the European Union, any technology business in the UK, relatively speaking, had a “passport” that allows it to operate within the entire European Economic Area. Brexit may limit the former freedom of entrepreneurs operating in the markets of the CES countries. For example, British technology companies are connected to the EU by a whole series of uniform standards regarding data protection.

Changing the legal framework will affect other areas. The exit of Great Britain from the European Union is fraught with difficulties that may arise on the basis of changes in trade legislation - the rules governing the sphere of imports and exports.
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Labor laws affecting the freedom of movement of labor will not remain unchanged. Problems may arise from technology companies located in the UK, but at the same time attracting developers from other EU countries, as well as from European companies employing employees from the UK.

For example, the Swedish e-commerce company Klarna has about 40 employees in the UK. At the same time, the company attracted about 20 developers and project managers to offices located in Sweden. Such personnel policies can become much more difficult to implement if the open border between the United Kingdom and the EU ceases to exist.

The above personnel questions Klarna do not seem so serious in comparison with the possible difficulties of other representatives of the payment industry. The results of the past referendum can provoke "resettlement" from the British Isles to the continental part of Europe, about 1000 employees of the American processing giant Visa.

In addition, according to the head of Klarna communications, Eric Engellau-Nilsson, due to the current uncertainty, many representatives of the Fintech market are thinking about moving from the UK to Germany.

This means that if the UK loses primacy in the fintech sector, its leadership in Europe can be taken by Germany. The British FINTECH community also believes that the negative consequences will affect not only global corporations, but also startups.

As a result of a survey conducted in June by Tech London Advocates, a London-based association of technology sector experts, three quarters of respondents said that the UK’s withdrawal from the EU would make the process of attracting investment more difficult because of the unwillingness of potential investors to take additional risks without receiving anything in return. In addition, Brexit will also complicate corporate mergers and acquisitions procedures.

In addition to the general pessimistic view of the Fintech community on the implications of Brexit, there are experts among those who see new opportunities in the current situation. In connection with Brexit, banks will slow down their innovation activity, focusing on the necessary procedures that accompany the process of leaving the UK from the EU, as well as leveling the effects of the devaluation of the pound and a sharp decline in economic activity. This means that a new window of opportunity appears for fintech companies to increase the pace of their work and make a technological leap forward. In addition, possible reductions in the UK banking sector may lead to a flooding of the Fintech market with professional staff.

Against the background of the loss of capitalization by UK banks, the value of digital currency Bitcoin increased by 7% - up to $ 655.

Market fluctuations are not so terrible for fintech platforms that are more stable in nature than banks, insurance companies, funds and other traditional businesses that are at risk of incurring serious and unforeseen losses. Fintech platforms providing crowdfunding, p2p-lending and social trading services, at least in the short term, benefit from economic turmoil.

Having become the flagship of the European Fintech for the last 8 years, London “pulled the air” out of other potential European Fintech hubs, such as Amsterdam, Stockholm, Frankfurt, Luxembourg, Zurich, Madrid, Dublin, Vienna, Paris and others. Brexit can change the balance of power and balance the European fintech community, making it more competitive.