London is often trumpeted as a global fintech centre, including by the UK government. But could Brexit threaten that reputation?
A recent survey of 58 London-based fintechs by the independent membership association, Innovate Finance, reported some stark findings.
- 17% of respondents are considering moving to a different jurisdiction
- 23% of respondents would appreciate additional information from government about trade
- 43% of respondents believe passporting, cross border transactions, and servicing EU clients will be the most affected areas by Brexit
- Only 22% are prepared to deal with a “no deal” Brexit on 31 October
With the goalposts on Brexit changing each day, it's easy to see why any company in any sector might find it difficult to make the right preparations. It's not clear if or when Brexit will happen, or if it does, whether there will be a deal or not.
But in an age of uncertainty, fintechs have some obvious advantages.
Fintechs are highly agile
Fintechs exist because they they are founded by, and employ, the kind of people who keep an eye out for gaps in markets, and are driven by a desire to do things better and more efficiently. You might say that rapid response is in their DNA.
Technology is a fast-moving business, so fintechs aren’t just comfortable working in an ambiguous and uncertain environment, they thrive in a culture of paying attention to changes that might impact their business and customers.
Alok Prasad – Deputy Chief Executive Officer (CEO) and Chief Operating Officer (COO) of OakNorth Bank – illustrates this mindset when he says, "We intend to very closely monitor the news, markets, social media and other information to be fully aware of potential impacts of a no-deal Brexit."
An adaptable customer base
So fintechs are agile, but they also have a customer base that is more willing to accept and support change. Their customers are largely, though not exclusively, drawn from digital natives and early adopters.
Many fintechs have reinforced their customer relationships by inviting them to be part of the tech revolution – to work with prototypes and provide feedback. Brexit could be another opportunity for fintechs to strengthen those relationships, by using their agility and tech expertise to help get customers through a time of crisis.
At OakNorth Bank, Prasad says, “We will be reviewing intra-day data to ensure we are fully abreast of how our customers are reacting and to adapt our approach in real-time. We are proactively adding capacity to support customer enquiries in case our customers want to talk to someone.”
Looking to the future
Despite Brexit uncertainty, UK FinTech continues to grow, with record levels of investment in 2019.
Luke Lang, Cofounder of Crowdcube says, “People are backing fintech firms in record numbers despite economic uncertainty and the political pantomime we’ve witnessed recently. In the last 12 months over 80,000 people have invested more than £65m in fintech firms, raising with Crowdcube.”
And yet with all these advantages, the Innovate Finance survey clearly shows many fintechs don’t feel well placed to weather the Brexit storm.
Charlotte Crosswell, CEO of Innovate Finance says, “At this time of rapid growth in the UK’s fintech sector – which is at the heart of the future prosperity of the UK economy and innovation – we would prefer our members to be focusing on their businesses – scaling up to conquer new markets, at home and internationally.”
While Innovate Finance is working hard to support its members, she says it’s down to businesses to make sure the UK fintech sector stays strong.
“Now is the time to avoid complacency, further strengthen our position and support the sector’s growth.”
Find out more about our Centre for Digital Banking and Finance