The German political party FDP gained a lot of attention when, following the Brexit vote in June, they sent a fleet of vans around East London urging tech entrepreneurs to ‘keep calm and move to Berlin.’
In many ways it was a back-handed compliment, highlighting that the thriving tech sector in Silicon Roundabout is the envy of even a manufacturing powerhouse as Germany.
Yet it was also a sharp reminder that the qualities which have fuelled the UK’s tech boom are fragile in the post-Brexit age. As a new ACCA (Association of Chartered Certified Accountants) report highlights, the attractions of Berlin (and other European cities) should be of grave concern for anyone involved in the global FinTech boom.
FinTech – transforming finance shows, the impact of financial technology over the past decade has already being hugely significant for financial services, and the best is yet to come. According to Accenture, investment in the sector in 2015 was worth $22.3bn and start-ups such as TransferWise, Zopa and Scalable Capital are revolutionising areas such as lending, international payments and even financial advice.
The scale of innovation is likely to accelerate even further, as big banks and governments pour investment and resources into the sector. When Metro Bank launched in the UK in 2010, it required the issuing of a banking licence for the first time in a century. Our report predicts that the launch of new online-only banks such as Tandem and Fidor are becoming the norm, and already challenging established retail banking names.
This is good news for customers and businesses, of course, who can enjoy the benefits of bespoke services and competitive alternatives in an industry which tends towards conservatism for the everyday consumer. Alongside burgeoning RegTech (regulation) and InsurTech (insurance) sectors, there are now a range of fast-evolving and low-cost intelligent business solutions which can streamline previously onerous tasks around compliance, reporting and audit.
It is also good news for professional accountants who, rather than being replaced by technology, will find their strategic insights and expert insight increasingly important to firms who are attempting to exploit the range of opportunities and challenges afforded through innovation. As we have found, FinTech’s impact goes far beyond challenging incumbent banks, but opening up new avenues for doing business internationally. Understanding the intricacies of global best practices and adapting them for varying national contexts will require the very human input of highly skilled accountants if FinTech hubs are to thrive.
Little wonder that the race is on between financial centres in the US, Europe and Asia Pacific to exploit this blossoming market. Yet while the combined power of Silicon Valley and Wall Street inevitably gives America a head-start, legal and regulatory challenges have checked some of its progress. Similarly, the potential for the likes of Singapore, India and China runs against the challenges of digital access in many still-emerging markets.
It is London which has proven to be remarkably successful as a home for FinTech. The existing strengths of its financial services sector as a hub of global finance, alongside the unique aspect of hosting its financial, commercial and technology centres together in one world-leading city, has ensured it has an enormous platform to nurture innovation. It has also benefited from the remarkably supportive regulatory framework, under the auspices of the Financial Conduct Authority, which has enabled a fast-evolving sector to flourish as a global FinTech hub.
Yet, as the FDP knew, Brexit poses an enormous challenge. FinTech employs 66,000 people in the UK, with a third of those coming from Europe. In a dynamic and globally-focused sector, the ability to attract and retain highly skilled technology and finance professionals could be seriously hampered by the addition of restrictions on freedom of movement. Similarly, the loss of ‘passporting’ rights for British-based banks will reduce much of London’s advantage, especially if it provokes a movement of headquarters to EU rivals. In those circumstances it is difficult to see the distance between Frankfurt and Berlin, or perhaps even between Parisian arrondissements, discouraging business as it presently does.
Of course, it is not a straightforward choice between ‘doom’ and ‘bloom’: there is a long way to go before negotiations even begin, and we should not underestimate the UK’s attractiveness for tech and finance regardless of the outcome over many years.
Yet what is clear from our report is that finding ways of preserving both the current world-class status of UK FinTech, and ensuring business has the strong support and guidance as it adapts to the coming innovations, needs to be a major priority for over the coming years.
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