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 consequences of Britain leaving the European Union. We present to your attention material compiled on the basis of our forecasts, as well as the opinions of European colleagues.

    Exiting the EU could be a disaster for the British fintech community and jeopardize the role of London as the European center for financial technology. The capital of Foggy Albion risks losing access to a promising European market and may lose its place at the forefront of reforming the financial technology sphere 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, possessed a “passport”, allowing you to work within the entire European Economic Area. Brexit may limit the former freedom of entrepreneurs operating in the markets of the SES countries. For example, British technology companies associate with the EU a number of common rules regarding data protection.

    Changing the legal framework will affect other areas. Britain’s exit from the European Union is fraught with difficulties that may arise due to changes in trade laws - the rules governing the sphere of import and export.

    The labor legislation affecting the freedom of movement of labor will not remain unchanged. Problems can arise both for technology companies located in the UK, but at the same time attracting developers from other EU countries, as well as for European companies with UK employees.

    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 a personnel policy can become much more difficult to implement if the open border between the United Kingdom and the EU ceases to exist.

    The above-mentioned personnel issues of Klarna do not seem so serious in comparison with the possible difficulties of other representatives of the payment industry. The results of the referendum may provoke "relocation" of about 1000 employees of the American processing giant Visa from the British Isles to the continental part of Europe.

    In addition, according to Eric Engellau-Nilsson, Head of Communications at Klarna, many representatives of the fintech market are considering moving from the UK to Germany due to the uncertainty that has developed.

    This means that if the UK loses the lead in the fintech sector, Germany may take its lead in Europe. The British fintech community also believes that the negative consequences will affect not only global corporations, but also startups.

    As a result of a June survey by Tech London Advocates, a London-based association of technology sector experts, three-quarters of respondents said the UK’s withdrawal from the EU would make it harder to attract investment due to the reluctance of potential investors to take on additional risks without receiving anything in return. In addition, Brexit will also complicate corporate mergers and acquisitions.

    In addition to the general pessimistic view of the fintech community on the consequences of Brexit, there are also experts who see new opportunities in the current situation. In connection with Brexit, banks will slow down their innovative activity by concentrating on the necessary procedures that accompany the UK exit from the EU, as well as mitigating the effects of the pound devaluation and a sharp decline in economic activity. This means that a new window of opportunities 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 could lead to a flood of the fintech market with professional staff.

    Against the backdrop of the loss of capitalization by UK banks, the value of the 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 risk serious and unforeseen losses. Fintech platforms that provide services in the field of crowdfunding, p2p lending and social trading, at least in the short term, will benefit from economic turmoil.

    Having become the flagship of the European fintech over the past 8 years, London has “pulled the air” from 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.

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