Preparing your fintech to thrive despite Brexit uncertainty

Time is running out for the more than 1,600 British fintech companies to prepare for Brexit. Fintech is an industry which should pay particular attention to the potential changes Brexit may herald, especially regarding employee visas, market access and investment. However, while many fintech companies report feeling underprepared, it’s not too late to start planning ahead, and this article can offer a few suggestions on where to start.

The present state of affairs

The UK has a flourishing fintech sector, and it so far hasn’t been deterred by uncertainty around Brexit. From open banking to artificial intelligence, fintech companies continue to innovate and offer new products and services. That’s why, according to the government’s UK Fintech: State of the Nation report, UK fintech companies received more investment than anywhere else in Europe in 2019. The sector already employs over 75,000 people, and it’s set to surpass 100,000 by 2030.

Despite a positive outlook overall, research also finds that the fintech sector is underprepared for the potential of a no-deal Brexit. While slightly over half of businesses surveyed by Innovate Finance reported being prepared to leave the EU with a transition period, only 22% said they were ready for a no-deal Brexit.

We still aren’t certain what form Brexit will take. Fintechs which fail to prepare for the worst won’t fare well through market hiccups or be well-positioned to seize new opportunities. As Brexit approaches, here are some things your fintech should consider.

A robust talent pipeline

Considering that 42% of workers in UK fintech are from overseas, employee availability is perhaps the area Brexit is most likely to impact. Potential employees from continental Europe are less likely to pursue a future in the UK as it leaves the EU, and uncertainty can also discourage prospects from further afield. Non-EU members who may have been attracted by the prospect of frictionless travel to the continent, for instance, may look for options within the Schengen Area.

Don’t feel overwhelmed by fear, uncertainty and doubt; there are concrete steps fintechs can take today.

There are only so many smart, talented recruits out there, and if even some of them are deterred from the UK, it will make an already competitive market even tougher. Companies can prepare, even without knowing exactly which direction Brexit will take, by creating a compelling company for future employees. Offers like innovative share schemes can differentiate a business and help your fintech stand out against competitors.

It’s not all bad news when it comes to recruiting. The UK government recently reintroduced the popular two-year post-study work visa, which will attract a new talented pool of international graduates seeking a start in fintech. Fintechs that plan ahead in this area—by making contact with university recruiters, for example—will have the edge when it comes to attracting the next generation of talent.

Retention is just as important as recruiting when it comes to staying competitive, so don’t neglect the expert employees your company has developed. There are plenty of measures fintech companies can take when it comes to ensuring that the flow of talent doesn’t dry up, it’s just a matter of planning ahead.

Expansion into new markets

Under current EU rules, British financial institutions can operate throughout the bloc with a domestic banking license. That arrangement is likely to change once the UK leaves the EU.

UK fintechs will need to move quickly and stay on top of any new rules or regulations regarding providing service to the EU. These new regulations might appear on short notice, so it pays to be nimble.

That’s not to suggest there’s nothing companies can do in the meantime. At Soldo, we applied for an e-money license from the Central Bank of Ireland, and set up shop in Dublin. This will allow us to continue to offer services within the EEA no matter how Brexit goes. We encourage other fintech companies to consider similar measures so they can continue to serve Europe regardless of Brexit.

Expanding into remaining EEA areas offers benefits beyond simply avoiding disruption. Dublin is a rapidly developing tech hub with guaranteed access to great talent. According to the 2018 Ireland fintech census, 94% of fintechs in the country were looking to hire up to 50 employees in 2018.

Staying investment friendly

Brits adopt fintech at a rate 9% greater than the global average, so it’s no wonder that the industry garnered more than $3 billion in investment in 2018. However, while the effects of a potential no-deal Brexit remain unknown, UK fintechs need to focus on being as investor-friendly as possible.

Companies need to have constant access to their financial data to determine their cash position; otherwise, they’re adrift without a compass. Keeping track of money, both as it enters and exits your business, is crucial to attracting investment. While pitches often emphasize the money flowing in, often less attention is given to spending. Keeping track of spending data is imperative, and it’s easier than ever before with developments in spend management technology.

Similarly, improvements in data analytics can provide business owners and finance teams with the insights they need to sell to investors. While these sorts of capabilities aren’t new to large corporations, development in technology over the past decade has made these tools available to even the smallest companies. The importance of using this data can’t be overstated: a CEO who doesn’t know their numbers inside and out won’t attract investors and might be in trouble in the long term.

Seeking new opportunities

Enough on the potential for negative impacts, what about the upsides of Brexit? For one, it may bring new opportunities. As the Financial Conduct Authority’s (FCA) chairman Charles Randall put it: “Changes in the global context may also provide opportunities to make UK regulation smarter, focusing more on the outcomes we want to achieve.”

UK will remain a leader in policy and regulations for fintech in the near-term, and companies should continue to leverage the progressive rules here while the European market catches up. Britain is a fintech hub in large part because of policies such as the Tier 1 Exceptional Talent Visa for welcoming digital talent, a tax structure which encourages investment and incentives like the Enterprise Investment Scheme. The UK government will fight to remain on the forefront, and they’re already working on further incentives to start and grow fintech businesses over the next few years.

The popular perception is that Europe has an affection for red tape when it comes to fintech companies, but they’re working hard to shed that image. New initiatives like the Revised Payment Service Directive (PSD2) are intended to promote innovation and increase access for secure internet payments within the EEA. PSD2 is meant to create open banking within Europe, opening up a vast market for fintechs.

If it feels like there’s a lot going on in the regulatory world, that’s because there is. We’ve set up an internal Brexit committee which meets regularly to discuss the latest opportunities and potential challenges. We’ve found that this approach makes it much easier to ensure that everyone is abreast of the latest news, which in turn makes it more straightforward to adapt to the changes and plan for the future. We would recommend that other fintechs consider it to stay on top of the latest developments.

Remaining confident in uncertain times

Don’t feel overwhelmed by fear, uncertainty and doubt; there are concrete steps fintechs can take today to put them on the right path no matter how Brexit unfolds. Key steps that we’re taking are securing access to global talent, continuing to attract investment, and diversifying by expanding in the EEA and the UK simultaneously. Nobody knows precisely what the final outcome will look like, but one thing fintechs can be certain of is that adaptable, well-prepared companies will come out on top.

By Avril Mannion, CEO, Soldo Financial Services Ireland DAC