Written by Ali Alani, CEO at Imperial FX
The UK, and London in particular, has long been a global hub for fintech businesses; it’s worth is reported to be £7 million, and it employs close to 60,000 individuals. Et, ever since the shock Brexit decision last June, businesses have been questioning how leaving the EU is going to affect their business.
There is anticipation with regards to the shortage of talent, the looming changes to data regulations and intellectual property law across the entire fintech sector, but as a remittance firm, there are further challenges to navigate through.
Brexit disrupted international transfers by almost immediately increasing the volatility of exchange rates because of the doubt that shrouded the UK’s ongoing relationships and trade associations with the European Union. For business making international transfers, it’s critical that they remain in control of their payments, as the rates fluctuate – it becomes difficult to maintain clear visibility.
The UK’s remittance market is being impacted as we are already experiencing a decrease in the amount of money being sent; again, the inconsistent exchange rates result in recipients receiving less. This is going to have an impact on the global economy – for 25 of the countries that are in receipt of the largest amount of remittance, this equates to 10% of the GDP.
SEPA compliance is also being pulled into question, once we leave the EU, there is every chance that the SEPA rules will no longer be applicable to remittance and money transfer firms based in the UK. This is undoubtedly going to impact these organisations who are using UK domiciled bank accounts to pay and collect funds and support money transfer corridors. The possible SEPA benefits that we could lose include paying fees at domestic rates and processing times. However, as the UK could remain as part of the EFTA or EEA, it’s possible that we could continue to be a part of the payments area and take advantage of its benefits.
Britain could also decide to opt into the Payment Service Directive (PSD2), which will open up the payments landscape across the EU member states and those within EEA or EFTA initiatives. This is on track for implementation in January 2018, and it’s likely that we will still be a part of the EU by then; the Government has committed its unwavering support for the UK fintech industry, wanting to maintain its global leader status, so I forecast that we will remain as part of the PSD2 initiative, because of the improvements it will make to customer experience of financial services.
Despite exiting the EU, trade will continue with its member states, and by seizing opportunities with other nations further afield, the need for efficient, cost-effective and secure international payment increases. This, in turn, creates further demand for transfer and payment platforms that are adept at handling multiple international payments. Those firms that have relied on passporting may need to consider opening EU operations to continue to retain their access rights; experts have forecasted that EU officials will use banking passporting as a bargaining chip in negotiations because of how integral it is to the continued success of our fintech sector.
Without any solid evidence on the changes to current legislation and regulation, it’s time to sit back, take stock of the current state of play and ensure business compliance is fully transparent to meet the new potential new wave of stringent regulation.