82% of British financial technology companies want the United Kingdom to stay in the European Union, according to recent a poll by the industry association. EurActiv’s partner La Tribune reports.
London’s financial technology (FinTech) startups were invited to debate the consequences of a Brexit on their business on Tuesday (26 April), as part of the weekly Fintech Tuesday Meetup.
With less than two months to go before the 23 June referendum on the United Kingdom’s membership of the EU, the subject is becoming increasingly charged.
Britain’s FinTech startups have already picked their sides for the coming battle: 82% support the UK’s continued membership of the 28-country bloc, according to the Innovate Finance, the association of FinTech companies.
A Brexit would jeopardise London’s ambition of cementing its position as the global hub for the FinTech sector. With £6.6 billion (€8.5 billion) of revenue in 2015, London’s FinTech startups outperformed their competitors in New York (£5.6 billion) and California (£4.7 billion).
So it should come as no surprise that Mark Boleat, the president of the City of London Corporation’s political committee recently urged Britain’s FinTech companies to throw their weight behind the ‘Remain’ campaign for the up-coming referendum.
The “European passport”
For all these companies, and particularly those concerned with payment services, a Brexit would complicate their regulatory compliance and could slow their international expansion.
Under the European Directive on Payment Services, any service provider that is accredited in one EU country is automatically accredited in all the other member states, thanks to the “European passport”.
This simplified access to the EU’s 500 million consumers is a considerable asset, bearing in mind the importance of volume for a business where individual transactions can be small.
“Brexit would mean more regulatory and legal work: at the moment we are certified by the British Financial Conduct Authority (FCA) and we carry this licence over to the other European countries. But tomorrow (in the event of a Brexit) we would have to obtain a licence from a country inside the EU, like France or Germany. That would add absolutely no value for our customers because we would expend lots of time and energy recreating what already exists,” said Octave Auger, the European director of GoCardless, a British FinTech company specialised in SEPA direct debit payments.
Arnaud Pince from the legal firm De Pardieu Brocas Maffei adopted a reassuring tone. “It all depends on what status the United Kingdom negotiates with Brussels. In the event of a free trade deal like the one concluded with Norway, which is integrated in the European Economic Area, the European passport will be valid,” he said.
Another unanswered question for the British FinTech startups is whether they will still be able to attract the best talent from around Europe if the UK leaves the EU, with the implications this might have for the freedom of movement.
This is important because almost a quarter of Innovate Finance members are managed by Continental Europeans, like Taavet Hinrikus and Kristo Käärmann, the young Estonians behind TransferWise.
“Access to talent is the main concern of all technology entrepreneurs. London is creating jobs faster than home-grown talent can fill them,” Russ Shaw, the founder of the entrepreneurs’ network Tech London Advocates, wrote in an editorial published on techcityinsider.net.
“London attracts a great deal of people from around the world, which is a major benefit for recruitment, particularly when it comes to international development. Brexit would complicate the task of recruiting and keeping talent, which would represent one of the major challenges for a startup,” Auger added.
“Lots of Indians, Australians and Americans work in FinTech in London. But these nationalities have special links with the United Kingdom,” said Jeremy Grant, an associate at De Pardieu Brocas Maffei.
Auger would not rule out opening a second headquarters in continental Europe, but said that it would be a “long-term” project. According to a Reuters study, seven out of ten British FinTech companies would do the same. “Maybe in Dublin or Luxembourg, for linguistic simplicity,” Grant suggested, adding that Paris and Frankfurt would be unlikely choices.