BREXIT: Fintechs call for 'Brexit blueprint'

This is part of Out-Law's series of news and insights from Pinsent Masons experts on the impact of the UK's EU referendum. Watch our video on the issues facing businesses and sign up to receive our 'What next?' checklist.

Trade association Innovate Finance said it is important that "the development of the UK Brexit roadmap as it relates to fintech" is accelerated and that it, and its members, are on hand to hep "accelerate the planning and development of our fintech future".

Innovate Finance said its members want uncertainties surrounding the UK's future outside of the EU to be removed "through the delivery of a Brexit blueprint that includes single market access and financial services passporting".

The call from Innovate Finance comes after it surveyed its members in the aftermath of the result of the UK's EU referendum. Approximately 75 Innovate Finance members have participated in the survey to-date, it said.

"Exclusion from the single market of 500 million people will be a further barrier to UK fintech companies scaling to access a greater market," Innovate Finance said in its survey report.

Innovate Finance said jobs might be at risk in the UK financial services and fintech sectors if the UK loses access to the EU single market. It said if UK firms are unable to 'passport' their services easily across the EU from their base in the UK then it could force them to "relocate operations and employment into EU locations". Almost half of Innovate Finance members surveyed said they considering relocating jobs or expanding their team primarly outside of the UK in light of the referendum result, it said.

The trade body also warned that UK fintechs could lose out on talent if barriers on migration of people from the EU are put in place post-Brexit.

Financial technology companies are also concerned that they might have to set up operations in the EU to "get the benefits of payment data sharing" under the EU's Payment Services Directive (PSD2), and worry about the impact on cross-border trade if UK data protection rules deviate from the EU's General Data Protection Regulation, Innovate Finance said.

Innovate Finance said there is a need for the government to "deliver a vision for the UK in Europe as it relates to fintech" and to "deliver leadership through communicating this intention at the earliest possible opportunity".

It warned that venture capital funding of UK financial technology businesses had "showed signs of slowing" prior to the referendum and that the indications are that while venture capitalists remain "committed to UK fintech" they are "focusing on existing portfolio investments over new ones in the short term".

There is a risk that fintech start-ups in the UK could lose out on the capital they need to grow or run short of cash they require to operate on a day-to-day basis, it said.

"Uncertainty gives investors pause for consideration," Innovate Finance's survey summary said. "From anecdotal evidence of Brexit, clauses to VC/CVC investor appetite in UK fintech [is] softening, [and] investor confidence must be restored."

Expert in financial technology law Yvonne Dunn of Pinsent Masons, the law firm behind Out-Law.com, said: "It is important that the UK does not lose its position as the preferred location for fintech in Europe. Ongoing uncertainty will threaten this position and so having a clear plan for the future is important."

Dunn said recently that fintech companies should push for 'business as usual' regulation in the UK in the short term in light of the Brexit vote. She said, though, that there are reasons for fintech companies to be optimistic about the approach UK regulators will take to support innovation further into the future in light of the UK's vote to leave the EU.

Financial Conduct Authority chairman John Griffith-Jones has recommended that firms set out their vision for the best way forward for UK financial services and the economy more generally in an industry strategy following the referendum result.