The UK’s vote to leave the European Union has led to speculation surrounding the future of London’s currently booming FinTech scene. Considered to be the “FinTech capital of Europe”, London has seen real benefits from the rise on FinTech, which has brought businesses, jobs, talent and investment into the country. However, Brexit has sparked worries that economic uncertainty may lead FinTech start-ups to leave the UK behind and set up elsewhere in Europe. Loss of access to the European market has been the major fear spearheading the “what-if” scenario, leading some to believe that British exit from the EU means a FinTech exit from the UK. In a series of interviews conducted this month, we spoke to London FinTech start-ups about their experience in London, how they view the challenge presented by the UK’s decision to leave the European Union and their take on the future of the London FinTech scene.

Brexit will make life harder

Founder and CEO of MoBILLity, Lukas Zoerner, admitted that Brexit is likely to have an impact, and has led some start-ups to rethink strategy. MoBILLity is a mobile platform which helps users save money on their reoccurring bills by putting them back in charge of their data and helping them understand their costs. Zoerner and his team started the company in May this year, choosing the UK’s capital as “the best place to be” for FinTech. However, Brexit has made this a less obvious assumption. Zoerner noted, that uncertainty is a main issue installed by the UK’s decision, as even the right of EU citizens to remain in the UK is under question. He said, “You don’t know what going to happen. You don’t even know if I as an Austrian will even need a Visa – and no one is able to tell me that.” Brexit has installed a number of worries about the economical, as well as political future collaboration between the UK and the rest of Europe. Not knowing how relations will progress certainly makes business planning and development difficult, while also having an adverse effect on investment.

The next issue: regulation of market access is of great concern

Tom Blomfield, Founder and CEO of Monzo Bank, a smartphone powered current account bank, spoke to us about the value of Europe-wide passporting and e-banking licences. FinTech start-ups such as TransferWise, GoCardless and Monzo Bank itself started in London because they knew they could operate across Europe. Blomfield said, “Someone starting the next TransferWise today would not start it in London. You’d go start it in Berlin where you could be certain of passporting.” The scale of the adverse effects Brexit will have on London FinTech start-ups hinges greatly on the decisions made by regulatory authorities over the ability to access the full European market. Lukas Zoerner from MoBILLity added, “I hope that the regulators across the EU will work together and find a way to minimize the impact on the financial system.”

Even businesses focusing solely on the UK market face challenges

Online mortgage advisor Trussle is trying to take advantage of the plentiful supply of and demand for property in London. “London is home to more properties than any other city in the UK”, says founder and CEO, Ishaan Malhi. Should Brexit have the long term adverse effect on the UK economy and London property market many analysts predicted, doing business could become more difficult in this sector. However, Trussle is staying positive: “Brexit was a shock to most Londoners, but until we know the details of what our new relationship with Europe will look like it’s too early to speculate with any degree of certainty. So far the property market has remained resilient.”

But although challenges may arise, FinTech start-ups are deciding to stay in London.

Although most businesses we talked to agreed that Brexit has made things more difficult for them, none of them would currently consider relocating. Even post-Brexit, London has still too much to offer to abandon the city and head to other European locations. For Zoerner and his team at MoBILLity, London remains as the location with the best access to global banks, as well as other businesses and regulators. The UK’s capital offers the unique advantage to have all involved agencies, businesses as well as the government in close proximity to each other and “the spirit of London”, as Lukas put it, is built on very friendly and open interaction between all to support and help each other along the way. Zoerner added, “Whenever you have a question for someone, they are just a tube ride away.” Tom Bloomfield from Monzo Bank draws a similar picture: “[London] offers great access. In the US, the government is in Washington, the banks are in New York and Tech is in Silicon Valley.” In Germany, which is often considered the next best alternative for European start-ups, the challenges are similar; the government is in Berlin, while the financial capital is considered to be on the other side of the country, in Frankfurt. The FinTech community, which has made itself at home in London, is unlikely to be able to build the same supportive and interactive ecosystem anywhere else in Europe at this point in time.

Its regulatory environment also speaks for the UK

The UK is in the FinTech world often considered as the “Singapore of Europe”, thanks to its adaptive financial system open to change and supportive of innovation. Founder and CEO of RiskSave, Dan Tammas-Hastings, named this one of the most important reasons FinTech will likely stay loyal to London. RiskSave is a new investment platform expected to open in January next year, which will tackle the current issue of investment platforms being prohibitively expensive for the average person. It aims to cut investment costs to its customers by 70 percent, and according to Tammas-Hastings, “Anything that saves investors’ money and is generally more efficient is supported [by the UK regulators].” It has been noted in many instances that the Financial Conduct Authority is a far more adaptive and flexible institution than many other European regulators, giving it the clear advantage to attract new and innovative FinTech start-ups. Proximity also plays a role here, as offices of the FCA are located close to, and in some cases even in the same building as London Tech hubs, giving start-ups the opportunity to reach out easily. While it has been noted that current regulations which have improved new start-ups ability to enter the market have come under the EU framework, many businesses are faithful that the FCA’s flexibility and support for new innovation will allow post Brexit regulations to be very accommodative of FinTech start-ups. Monzo Bank’s Blomfield said, “The FCA is more adaptive than the EU and could turn what looked like a disaster into an opportunity.”

Some businesses have even seen a bright side to the Brexit

Tom Blomfield noted that the fall in the pound has helped the company cut its cost base. Global Money Exchange App, Revolut, has seen sign up rates for its service shooting up to 2000 per day. With exchange rates offered by traditional institutions worsening after the Brexit, the service, which offers users interbank exchange rates is in even higher demand.

The verdict: FinTech is here to stay

At the end of the day, the spirit of FinTech start-ups is innovation and overcoming challenges. Considering the supportive environment London has to offer these businesses, we believe that the UK capital’s FinTech companies will rise to the challenge of Brexit, instead of fleeing abroad.

Katharina Fleiner 30/09/2016

Over the past year, the number of UK start-ups has been growing fast. In 1980 there were 700,00 small businesses – this had grown to 5.4 million by the beginning of 2016. According to the UK government, small businesses have created more than 15 million jobs and contributed £1.8 trillion to the UK economy. The government has done much to encourage entrepreneurial spirit within the UK, providing start-up loans and incentivising venture capital firms by lowering business regulations.

However, there have been a number of complications

2016 has not provided the best environment for new start-ups to enter the UK market, due to falling investment and a slow economic start to the year. By July, worries that the UK’s exit from the EU would prevent access to European markets reduced confidence further, bringing the UK’s start-up environment into question.

Berlin attempts to lure UK start-ups to the German capital

Berlin has been a strong challenger to the UK’s dominance in the start-up sector, overtaking the UK in terms of venture capital investment in 2014. In August the Berlin senate wrote to hundreds of UK start-ups with headquarters in London to incentivise them consider relocating to new start-up community in the German capital, which is expected to open its doors in September. Cornelia Yzer, Berlin’s senator for the economy, technology and development said: “We want to make sure that British start-ups and international talent feel welcome here. Brits already love Berlin – we see that from the number of people who travel here every weekend. We will continue to receive them with open arms.”

However, it appears London still has advantages.

Regulatory issues still hamper Germany’s ability to draw start-up businesses to its capital, especially since the process needed to open a business in Germany is still more difficult and lengthy than in the UK. The British government has vowed to improve conditions for small businesses in any way possible and provide the best possible start-up environment in the UK. Gerard Grech, chief executive of Tech City UK, the government body tasked with fostering East London’s tech scene, commented: “[I am] listening to the community and will be informing government on the policies that need to be put into action.” “We are confident that further initiatives and policies will continue to evolve to ensure London stays a global tech powerhouse.” Several British businesses have also weighed in on the debate, with an overwhelming majority set on staying in the UK. FinTech companies have vowed to stay true to the UK’s capital.

Katharina Fleiner 30/09/2016

Financial service provider APS launched a £5 million bond offering today, enabling investors to earn 7 percent fixed interest on a four-year investment.

The APS bond is suitable for investments of between £1,000 and £250,000, with interest paid twice yearly. The bonds will mature after four years, and will support the launch of new products and services for SMEs, and enhance APS financial’s digital assets and underlying technology to continue its aspiration to provide a best in class customer experience for banking services.

APS is a data-driven digital banking services pioneer, developing a full suite of digital banking products over the past ten years. The group’s aim is to provide better banking services and credit to small businesses and individuals, and became the first non-bank to leverage the over the counter Banking Services from the UK Post Office.

APS’s bank accounts take around eight minutes to open, allowing access to banking for SMEs far quicker than traditional high street banks. APS boasts 70,000 SMEs who choose to use its services, with 900,000 personal customers.

Rich Wagner, CEO, said that offering a bond was a “deliberate decision”, allowing them to “fund the next stages of our growth in a way that allowed our loyal customers and the general public to participate in our success.”

“The funds will enable us to enhance our suite of services loved by the thousands of small businesses and individuals in search of faster and smarter solutions. Our growth, track record and high levels of customer satisfaction have proven that you don’t need to be a bank to provide a trusted banking service”, he continued.

APS as a group have seen significant growth over the last four years, with a 29 percent increase in revenue and 69 percent hike in EBITDA CAGR. In the 12 months to March 31^st 2016, APS generated revenues of £25.3 million and EBITDA of £4.1 million.

27/09/2016