London seeks to retain Europe’s fintech crown despite Brexit
From digital bank Revolut to money transfer group Wise and payments company Checkout, London is Europe’s fintech champion and intends to retain the krona despite Brexit fallout and falling investment.
“Before Brexit, the UK was a great place” for the fintech-developing sector, Revolut’s global head of government affairs, Adam Gagen, told UK Fintech Week, which ended on Friday.
He put this down to “fantastic regulation… great talent” and 300-400 million customers that could be reached directly across Europe.
— That is no longer the case.
Britain’s exit from the EU without an EU-London agreement on financial services has complicated access to the giant market and talent.
In addition to Fintech Week, junior finance minister Andrew Griffith insisted the sector was “vital to the economy”.
Revolut, which made its first annual profit in 2021, has an EU banking license and is seeking the same for the UK, which would allow it to operate at the same level as on the continent.
“The UK is still probably one of the best places to start and grow a fintech anywhere in the world,” Gagen said.
“I think one thing that we probably have to double down on in the UK is really finding a way to get better regulatory access” overseas through bilateral deals after Brexit, he added.
– Falling investments –
The fintech sector has recently been rocked by the failure of Silicon Valley Bank in the US and wider global economic turmoil, which has dried up investment and eaten into company valuations.
Britain last year saw injections of funds into fintechs fall by 56 percent to just over $17 billion.
This was sharper than a global drop of 31 percent to around $164 billion, according to a study by accountants KPMG.
“Despite the fall in the overall number of UK deals, the country remains the center of European fintech investment,” the report noted.
In terms of venture capital, or funding for young companies, the UK sector attracted $11 billion last year, behind only the US at $33 billion and ahead of India’s $6.3 billion, according to Dealroom.
“While other European markets may have growing fintech sectors, it is difficult to compete with London for the top spot given its established financial ecosystem and history of innovation and technological progress,” EY fintech expert Anita Kimber told AFP.
The UK has 2,500 fintech companies, two-thirds of which are in London.
“From about 2012-2014 onwards you see this explosive growth in fintech, but at the same time you see political support for the regulators to support innovation and greater competition as well,” said Peter Cunnane of Innovate Finance.
– “Historical strength” –
The UK rose to the top, at least in Europe, thanks to its leadership in innovative banking.
This has been with a view to testing the technology and pushing forward “open banking”, which gives the customer greater control over managing their finances online.
“We have to realize that it was a historical strength. How we keep it a strength in the future is now kind of a challenge,” Gagen said.
Britain and Singapore announced in November a deal to remove barriers affecting fintech, and further benefits could be included in London’s post-Brexit deal with the EU on financial services.
To stay ahead, London also needs to stay involved in regulatory changes, particularly regarding rapid developments in artificial intelligence – and keep fintech companies tempted to launch IPOs on Wall Street.
Britain’s financial regulator has played its part, relaxing rules on how many shares fintechs must make available to the public, keeping more control for the founders.
And the government recently launched the Center for Finance, Innovation and Technology, in collaboration with London’s financial district “City”, which aims to further develop the British fintech industry.
Amid Britain’s cost-of-living crisis while inflation remains high, “people are shopping around and trying to use fintech apps to find better ways” to save money, CFIT head Charlotte Crosswell told AFP.
“What we’re seeing is more money-saving apps coming up as well.”
ode-bcp/phz/rl
