January 17, 2017
European FinTech hubs have traditionally been taking leading places among the hottest FinTech communities globally. Nonetheless, in recent years, European FinTech startups faced certain hardships due to political, economic and regulatory changes, affecting the startup community directly or indirectly.
Brexit, for one, created a situation of uncertainty whether London will remain a strategically beneficial location for startups to reside. The expected outflow of the talented workforce, for one, will certainly affect the expansion potential and create difficulties for companies yet to launch. International businesses could shift as many as 100,000 jobs away from London within two years of the UK officially starting a process to leave the EU because they risk losing their passporting rights. As for the financial services jobs, some estimations suggest that Brexit could cost between 70,000–100,000 jobs by 2020.
For financial technology companies operating a remittance business in the UK, the political uncertainty has also been associated with currency volatility. Tomas Likar, VP of Strategy at Hyperwallet, noted that Brexit means more currency volatility, different regulations and a totally different banking system for the UK. For companies doing business in the UK, this creates a lot of friction, on top of the other sovereign currencies that were already causing headaches (AUD, CAD, CNY, JPY) prior to the UK’s divorce from the EU.
Businesses now face an unpredictable payments ecosystem – the days of the GBP moving almost 1:1 with the EUR and having all payments, licensing and regulatory questions aligned between the UK and Eurozone are over. Leaving businesses with an unpredictable payments ecosystem to manage and yet another currency to hedge.
Among the opinions expressed by industry experts, Richard Lumb, Head of financial services at Accenture, emphasized that half of all European FinTech investment had been made in the UK. But, he added, these FinTech companies are footloose with a global mindset and fortress UK is not going to be so attractive now.