Brexit and Fintech: What Now for the Financial Technology Industry in Europe?

Gibraltar voted overwhelmingly to remain part of Europe and is one of the great unknowns of the Brexit.

This article was written by Jose Peral, COO of EasyPaymentGateway.

The decision of the UK population to leave the European Union has triggered many uncertainties and it’s clear that so much depends on the British government’s exit negotiations over the next two years, and whether it can retain access to the single market and a degree of cross-border movement.

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Jose Peral
Jose Peral

For the fintech industry, we believe that suppliers have to continue to see the industry as one whole, because the needs of EU financial institutions and UK institutions are the same. They have been the same for the last few years, and should remain so. The Brexit must not change our view on this.

But of course, the Brexit will throw up hurdles, the most obvious being increased regulation, but even this negative impact will depend a lot on what service you are providing in the fintech space. For example, with the UK outside the EU, the Payment Service Directive will no longer be valid for UK institutions. And meanwhile, laws in the EU that regulate the securities between the banks will no longer be in place.

This will mean that companies that want to engage in this kind of business will have to invest time and resources in changing their processes and obtaining licenses in other territories, and so on. But changes in regulation will not affect many service providers that never touch client funds and therefore don’t need to be regulated.

One concern, however, is that restrictions on the free movement of people will naturally make it harder to attract top talent. Limited cross-border activity could also be a major problem for Gibraltar and its online gambling industry.

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Gibraltar voted overwhelmingly to remain part of Europe, with some 95.5 percent opting to stay in. But now, through no fault of its own, it finds itself contemplating leaving the EU. Much of the workforce of its online gambling and financial services industries lives across the border in Spain and without freedom of cross-border movement, the industry is at risk.

Gibraltar’s fate is one of the great unknowns of Brexit and again much depends on negotiations. It will need to develop a workable relationship with Spain, and to reach an agreement with the European Commission on licensing for its operators within EU member states. It will probably also need to introduce even greater tax benefits in order to prevent the flight of its licensees to Malta.

Of course, moving forward, it’s likely that the FX and binary options industries will face increased regulation, so it may be that only the brands that really know what they are doing will survive, but we do see volume for the sector continuing to grow.

Likewise, despite the uncertainty in Gibraltar, we believe that the online gambling industry, which has already experienced a period of increased regulation and taxation, and has now weathered that storm, will see continued growth. We also see a large increase in volume from territories like France and Spain.

Ultimately, the UK government will seek to protect their commercial agreements with the EU, and in order to do this they will be forced to accept cross-border movement of people. We expect then that the UK will move toward something similar to the Norwegian model in the coming years.



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