The vote for Brexit may not have led to the economic meltdown we were told to fear, but it certainly gave rise to a feeling of disbelief, as the political models and expert commentators many had put their faith in were proven to be way off the mark.
Bankers and fintech entrepreneurs alike looked on with horror on the morning of the result, and all were concerned about the future of passporting, investment and access to talent. These critical issues haven’t gone away. But nearly two months after the event, the outlook is brighter and some entrepreneurs are starting to see some brass in the muck.
First, we must confront the brutal facts. Tech startups will likely see a drop in investment in the short term. We will also most likely see a squeeze on immigration and the possible loss of passporting, which will make it a lot more difficult to access European markets.
But the resulting instability will not lead to an exodus of talent from the sector. Entrepreneurs are attracted to the fintech sector because of its informality, freedom and sense of possibility. If they were interested in security, they would be working in finance for a guaranteed salary and a prestigious job. So the uncertainty of Brexit will not turn away these mavericks, and the loss of London banking jobs may even attract a few more bright young minds to fintech, just like in 2008 when the financial crash led to the sector’s creation.
The EU comfort zone is gone. Stripping this away will mean the loss of easy exporting and undoubtedly the loss of a few startups. But it will also force London’s fintech firms to adopt a new mindset, becoming global in their outlook from inception. At a time when the world’s growth is concentrated in emerging markets on the other side of the world, this could be just the shake-up that the sector needs.
We enjoy the world’s best regulatory framework in the UK, and the FCA’s expertise in working with the sector is what led to the creation of passporting in the first place. In the medium term, Britain may well continue with a similar relationship with the EU than at present. This will allow fintech companies to continue to service European markets while being left in no doubt that they need to go global and look at new markets as a priority.
Many, for example, may start to examine the opportunity that exists for the “next billion” internet users, concentrated in developing markets. These consumers are different from those in Europe and the West, as they will operate exclusively on mobile devices and many will never own a bank account. A fintech sector that is reliant on Europe will not see the opportunities that exist in these markets, whether it is offering microfinance for small businesses or university funding for gifted students.
Political instability is at its highest level in our lifetimes. But for every investor buying up tinned food for their bunker, there is another using it as a litmus test for which startups are willing to explore new opportunities as they present themselves. Customer bases dwarfing those of the European Union are opening up across the globe. These are harder to reach, but offer more potential in the long run.
London is the global capital of fintech, and the jewel in the crown of UK technology. This has as much to do with the city’s culture and history as it does with its universities and investors. The things that make London great did not disappear when the country voted to leave the European Union. The easier export opportunities for London fintechs will probably go, but no companies ever became great by the availing of easy opportunities.
None of this will be easy, and things are not bound to improve as a result of Brexit. Making a success of this new environment will require an enormous effort from a group of highly intelligent and single-minded entrepreneurs. It will require those with safe options to take risks. And we will need to lobby hard to ensure that the shortfall in talent from the EU is made up elsewhere. This means championing the sector internationally through trade missions and recruiting from emerging markets that would benefit the most from our fintech products.
But entrepreneurs love a challenge and anything is possible. After all, in less than a decade, London has created the world’s top fintech hub from scratch, becoming a true urban rival to Silicon Valley.