In 2015, skilled providers agency EY described the UK as essentially the most fintech-friendly nation, with business using over 61,000 individuals and producing £6.6bn in revenues. This 12 months, the UK fintech sector continues to be disruptive and decided as ever earlier than. However as we transfer into 2017, it’s necessary to know the foremost points and challenges going through the UK fintech market.
Threats of Brexit
Though Billions of have been invested in UK fintech in 2016, Brexit nonetheless stays a significant problem in UK fintech market. After Brexit, some Fintech executives predicted that many corporations would go away London. “After the referendum, UK Fintech would possibly relocate headquarters out of the country,” stated Philippe Gelis, CEO of Barcelona-based Kantox.
One of many biggest challenges to the enlargement of cross-border fintech is the dearth of uniformity between numerous regulatory environments. Variations in licensing, regulation, institutional oversight and compliances between international locations create prices and problem. At current, a lot of the regulation related to monetary know-how is contained in EU laws. If UK regulation decides to diverge from the remaining 27 EU states, cross-border exercise is perhaps impeded.
Passporting, a course of that allows UK-based companies to make use of their UK licenses to do enterprise within the different EU member states, is amongst the most significant issues facing UK fintech market within the context of Brexit. A lot of actions which are carried out by sure corporations require a regulatory licence in EU international locations: instance consists of retail lending and the availability of fee providers. If the nation loses its passporting rights, the UK fintech corporations wouldn’t be relying upon their UK licenses to conduct enterprise within the EU member states.
This may also have an effect on staffing, as many of the EU member employees working within the UK, would possibly relocate if their workplaces transfer.
Lack of Funds
In 2014, Package Malthouse, a former Deputy Mayor for Policing in London and for Enterprise and Enterprise within the capital, stated that London’s fintech start-ups have been held again by lack of buyers. Whiles talking on the launch of Startupbootcamp FinTech, a fintech accelerator in London, he stated: “Our fundamental drawback is entry to enterprise capital”. In response to the quarterly Enterprise Index by Smith & Williamson, solely 50 p.c of UK enterprise leaders really feel sufficient funding is accessible. Nick Travis, a associate in funding administration at Smith & Williamson, stated that for the reason that UK is already glorious at creating tech start-up, there’s a have to focus extra on scaling up companies.
This 12 months, UK start-ups have a more durable time getting funding, and it’s attainable that this development would possibly spill over into 2017. The variety of fintech funds altering fingers dropped by 26 p.c throughout Q3 of 2016. In response to Progressive Finance CEO Lawrence Wintermeyer, the UK has been experiencing a significant drop in investment, 12 months on 12 months.
One of the vital apparent challenges for UK fintech start-ups is to establish the units of laws that apply to them. Some fintech companies have no idea precisely which legislation, rulings or regulation require their compliance. Others are unaware of the regulatory company that governs them.
Though UK regulators have been praised as the most fintech friendly, the fintech neighborhood will want “sturdy steerage” to deal with the challenges of post-Brexit regulation. Altering regulation would possibly pose a severe menace to the expansion of the fintech sector. In response to a new report by the Affiliation of Chartered Licensed Accountants (ACCA), fintech companies would want “sturdy steerage in opposition to regulatory hurdles” with the intention to survive sooner or later.