The United Kingdom remains at the top in terms of the number of fintech startups. However, many Brexit-related issues result in a loss of ground?
The research, issued in February 2021, emphasizes that Brexit’s legislative uncertainties and rising global competition might threaten the United Kingdom’s position as a worldwide leader in fintech if no action is done.
This evaluation, conducted by former Worldpay CEO Ron Kalifa, is one of many commissioned by the government to assist boost the UK’s position in the global banking and technology industries.
Currently, the United Kingdom is the leader in Europe in terms of the number of fintech firms and new fintech ventures.
However, issues emerging from Brexit may result in the United Kingdom losing momentum to Germany and France as one of the world’s preferred locations for launching a fintech enterprise.
Since the United Kingdom’s exit from the European Union at the start of 2021, both the finance and technology sectors have been under greater competitive pressure. However, Brexit could provide a little more freedom to make the country an even more attractive location for retaining and expanding the fintech industry.
With worldwide fintech revenue predicted to surpass $300 billion by 2022, there is enough rationale for the United Kingdom to prioritize its fintech sector as a crucial area for retaining firms and recruiting start-ups.
Let’s examine how the United Kingdom intends to capitalize on the expanding fintech business in the aftermath of Brexit.
Passport to financial technology.
The UK government will implement a visa program for fintech specialists in an effort to replace any workforce shortages that may arise as a consequence of Brexit and the loss of access to the EU’s considerable skills base.
The fintech sector, in which many businesses were anxious about access to talented individuals before the completion of the Brexit process, has already welcomed the decision.
According to a story in the Sunday Telegraph, chancellor Rishi Sunak will shortly outline a strategy to assist the UK fintech sector in retaining the talent it needs to maintain its position as the industry’s global leader.
It is envisaged that the fintech visa program would assist the United Kingdom in maintaining its position as a lucrative site for the growth of fintech startups.
After leaving the EU, the United Kingdom lost the automatic right to employ European experts.
During the same period, a significant number of talented European professionals departed the United Kingdom owing to the environment of uncertainty and pessimism caused by Brexit.
With worldwide rivalry for fintech talent in the industry, cities such as London face new competition from European locations such as Berlin, Barcelona, and Amsterdam, which are becoming more popular among EU-eligible fintech workers.
This exodus is precisely what the United Kingdom is attempting to avoid, and the threat presented by the scenario has been highlighted by Ricky Knox, CEO of fintech bank Tandem, who said, “Tech visas are a terrific thing and important if we are to maintain a competitive tech and fintech industry.”
Over fifty percent of our developers are non-British, and some have already departed because of Brexit.
Provide space for crypto.
The evaluation also recommended that the United Kingdom alter its approach to the regulation of crypto-assets in order to attract more fintech companies in the future.
Recent restrictive actions by UK authorities, including restrictions on the selling of crypto derivatives and an anti-money laundering registry, have created a relatively unfriendly climate for blockchain or decentralized financial fintech firms to establish a presence in London.
Other markets have been developing crypto-specific frameworks, such as the EU’s Markets in Crypto-Assets proposals, according to the analysis.
It also adds that the United Kingdom must move swiftly to alter its attitude on these issues before rivals grab the digital powerhouse.
The report states, “A bespoke regime for crypto assets should adopt a functional and technology-neutral approach, in line with the principles of the current regulatory framework and the concept of “same risk, same regulation,” while being tailored to the risks arising from crypto asset-related activities.”
It should also be adaptable enough to cope with future difficulties, such as how to manage decentralized finance (DeFi).
In addition, the assessment suggested that the United Kingdom continue its membership in the Global Financial Innovation Network, a working group of national regulators, and take the lead on crypto policy and regulation going ahead.
Decentralized finance, or DeFi, is one specific industry that might help the United Kingdom.
Fintech around DeFi applications based on cryptocurrency blockchains may be the key to sustainable development as technology continues to revolutionize the financial sector.
The increase in IPOs.
In addition, the government has highlighted public listings as a vital mechanism for fostering greater financial stability.
According to reports, Prime Minister Boris Johnson has already visited with executives from Deliveroo, Revolut, and other internet companies in an effort to persuade them to list on the London Stock Exchange.
Again, the recent report suggests a reduction in the proportion of shares held by public investors to avoid diluting the early backers of fintech startups, as well as “golden share” or dual-class share structures that could enable founders to better retain control of their companies and remain safe from hostile takeovers.
Deliveroo, Wise, and Darktrace are all rumored to arrive in 2021, making this proposal for a lasting change in London potentially timely.
Other companies, such as Revolut, OakNorth, and Checkout.com, have been the subject of IPO rumors as financial and technology sector values have increased in the aftermath of the Covid-19 outbreak.
This action may bring back major investment interest to London.
There are firms that enable people to participate in initial public offerings that would be unavailable to them otherwise, despite the fact that many IPOs nowadays are geared for institutional investors.
Freedom Holding Corp. (FRHC), a Nasdaq-listed business, operates a platform called Freedom24 via which anyone may seek to participate in initial public offerings (IPOs) of their choosing for a minimum investment of $2,000.
Traditional organizations, like Fidelity, also provide participation to the general public, albeit at a significantly larger barrier of $100,000 to $500,000 in household assets.
TD Ameritrade, a conventional platform owned by the colossal Charles Schwab Corporation (SCHW), lets some account holders participate in initial public offerings.
However, the threshold is rather high.
To be eligible to participate in initial public offerings, your account must be worth at least $250,000 or you must have executed 30 transactions in the preceding three months.
The underlying worth of these London-listed IPOs may lie in the United Kingdom’s post-Brexit aim to increase its attractiveness as a fintech haven.
With a persistent buzz around financial technology and more lenient laws, 2021 will be a pivotal year in the effort to prevent talent from leaving the United States for the allure of the European Union.