Saturday, 2 July 2016

Brexit and Fintech in Europe Beyond the Referendum Vote

The vote cast in the UK Referendum came as a surprise to many. Ramifications and consequences will be significant and potentially long lasting, but new opportunities will emerge in various sectors. Crowd Valley remains committed to serving its existing clients in the UK, its future clients in the UK and continental Europe, as well as around the world. The need for modernization in financial services is unchanged and more relevant than ever.

The clear and the (many) unclear aspects

As far as an unprecedented vote, this certainly is unique. It’s important to separate areas that we do not know and those that we in fact already have clear precedents and rule making for. For all of the unclear areas that will need new frameworks, such as movement of services, labor and international trade, there are several areas that are actually clear. One of those areas is financial services regulation.

In order to be able to offer financial services within the EU, domicile within the EU is needed. For countries with arrangements with the EU single market, such as Switzerland and Norway, its clear getting an exception of sorts to this rule, is still to this day unheard of. How financial services in the UK will be able to navigate this change remains to be seen, but the direct impact and repercussions of the referendum vote are material to doing business in the European market.

Is this a displacement of fintechs crown jewel?

The Financial Conduct Authority (FCA) in the UK has been a true pioneer of online lending and investing marketplace and in part because of its leadership, the ecosystem for fintech has emerged strong. London has even been touted as the “fintech capital of the world” in some circles and whatever you may think of that, it's a statement that will seem lighter for many faced with the new uncertainties of the market.

If there is a withdrawal of capital in the UK market, e.g. in real estate, where prices are already high, that could create a remodeling of how the accustomed value chains behave. Influx of foreign capital into UK private (and public) markets has always been a driver of growth, and whether or not these sources of capital see a discount on an otherwise healthy market in the medium term remains to be seen. Influx of capital in new online equity and debt markets may be directly linked to these trends, and turning that on its head does raise the question of where in Europe the new fintech innovators come from and more provocatively, can Europe as a whole compete with innovation in fintech from the US and Asia?

We believe the UK can overcome these challenges of uncertainty and pioneers will continue to emerge in financial services to continue to provide unrivaled services to their end clients. It will require perseverance and patience, yet the UK has and will continue to represent a pioneer ecosystem with the oversight of the FCA.

Faced with uncertainty, the need for modernization grows stronger

We at Crowd Valley are privileged to assist our clients in long term digital strategies, that are built on solid fundamental assessments of how new generations utilize services, access to new underserved market segments and asset classes. This does not change, but when faced with the uncertainty of the next few years, it's clear there are a lot of unanswered questions.

The UK is a global hub for finance and has dependencies into various foreign markets. Macro economics may provide an edge to certain geographies and hamper others. We expect various opportunities to present themselves in this regard, as we get more information on what changes actually manifest themselves and how.

Considerations for UK clients and those with UK operations.

As part of Crowd Valley’s partnership ecosystem, we are committed to mapping out and providing various options to UK clients for the immediate term as well as when more clarity arises. Two examples that are good to know about.

We will continue to work with our partners on establishing local data centers for holding consumer data with the right protections. AWS has for instance announced plans for a UK region in their infrastructure and we continue to work with them and our other partners on providing the most appropriate options.

Crowd Valley recently announced the collaboration with the Estonian Government around the innovative e-residency program for establishing access to the EU single market. This is available to our UK clients and whatever the impact of the referendum vote in the longer term, the e-residency program can establish a more streamlined and efficient access to the EU market, thus improving business efficiency coupled with a robust digital strategy.

Long term market commitment

As a company, Crowd Valley set out to help shape modern financial services. While we wait to get certainty on the current vote and its implications, nothing has changed in our world view and the need for more transparent, efficient and accessible ways of accessing financial services in various regards. We look forward to partnering with innovative leaders in their fields to show the way in how this perceived setback can be turned into a growth opportunity across different market segments.

Article originally published on Crowd Valley's blog on 06/27/2016.