With the British government just having triggered Article 50, the question around the impact of Brexit on the financial technology sector will undoubtedly come to the fore once more.
Of course, fintech is only part of the equation; there will be broader anxiety over how Brexit will impact business generally and its long-term effect on the British and European economies.
But the fintech sector has a lot of momentum to lose. Some European cities are already rubbing their hands in expectation of picking up business from London and the rest of the UK. Officials from Paris have already been visiting London in a bid to persuade some British fintechs to consider moving their operations to Gallic environs. The French have designs on their capital becoming a hotspot for start-ups of all flavours with an angle for dynamic fintechs.
Moreover, German cities like Berlin, Frankfurt, Hamburg and – current flavour of the month – Leipzig, are also eyeing opportunity. It is no coincidence that Copenhagen is the venue for the Money20/20 Europe event, the Danes having opened a fintech hub at the back end of 2016.
It is clear that London’s situation and the uncertainty around Brexit and how the UK will look, once it has finished negotiating, is encouraging others to explore ways they could pick up business. Europe has become the hub for fintech innovation and that is not likely to change because of the UK’s exit from the European Union. At the same time, the UK is highly dependent on foreign expertise when it comes to fintech – there are estimates that 30% of people working in the sector in London and other centres are from overseas.
Fintech investment certainly declined in 2016 and while geopolitics and regulation played their part, the UK saw an 85% drop in investment in fintechs, much of which can probably be attributed to the current political uncertainty.
In the end, fintech is about people. It’s dreamers, designers, engineers, lawyers, tax, operations people etc. that bring fintech ideas of whatever variety to life. Unless the UK works to push out the foreign contingent working in London two years hence, it’s hard to imagine the capital’s hegemonic position in Europe, and perhaps the world, changing quickly. It is London’s idiosyncratic melange of finance, art, capital, technology, education and, indeed, history that has made it the Fintech Mecca that it is.
Even if London were to loosen its grasp on the top spot, a worldwide fintech slowdown is surely a temporary blip, for the global momentum is such that major developments like blockchain, artificial intelligence and the ‘internet of things’ will carry it forward and build on what’s been achieved so far – whatever the outcome of Brexit.
One thing’s for sure: the UK will need to ensure that fintech becomes embedded in the business psyche and that young people should increase their exposure to a sector that is not only going to change the way we do business but will also provide significant future opportunities for the talent being nurtured in schools and universities today. The fintech industry should not be stymied by politics – it is in nobody’s interest for the UK to be marginalised. There is too much creativity and willingness to embrace new ideas for the country not to play a pivotal role in what is poised to become ‘the fourth industrial revolution’.
Above all, the current environment demands that we remain calm, inquisitive and solution-oriented. Politicians may be running around with their arms in the air and clumps of their own hair in their hands but business has to remain focused. The only thing clear about Brexit is that absolutely nothing is clear. Time for study, action, reaction – and agile response.