23 March 2018


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Brexit good for UK FinTech

03 May 2016  |  11828 views  |  10

Behind closed doors in a small office, off an nondescript corridor, in a rather large building on Rue Wiertz in Brussels, Belgium a hushed conversation took place last month. Shortly afterwards a piece of European Parliament legislation was quietly shelved. It carried the rather dull title of "Directive 2009/125/EC" and it was one of the most dangerous documents in Europe!

What was so dangerous about Directive 2009/125/EC, or to give it its full title, "Establishing a framework for the setting of ecodesign requirements for energy-related products"? Directive 2009/125/EC was planning to ban high-powered kettles across Europe to reduce carbon emissions. At the last minute the rulers in Europe realised that banning high powered kettles from the British, the world's greatest tea drinkers, would cause a literal storm in a tea cup. Not helpful at a time when the UK people are about to vote on whether to leave the European Union!

The Referendum

That's right. On 23 June 2016 the 50m people of voting age in the United Kingdom (including myself!) will all collectively be asked one simple question...

Should the United Kingdom remain a memeber of the European Union of leave the European Union? 

The stakes couldn't be higher. The outcome will not only decide Britain's future but Europe's too and, as the world's 5th largest economy, the fallout will be felt around the globe. 

It's a historic occasion too, being the first time we've been given a choice on Europe since the 1975 EEC referendum. Back then it was a vote on a European Economic Community, an economic and trading integration of the member states. It has since evolved into a political, and for some EU states monetary, union. It's this political union and the ever closer integration part that has got some people upset, so much so that UK Prime Minister David Cameron deemed it necessary to promise the UK people a referendum on the matter to help secure the last election. 

It's going to be an interesting few months with campaigns hard fought on both sides over the usual issues of immigration, economy, trade, sovereignty & welfare. There will be facts, made-up facts, fear mongering, finger-pointing, vested interests, sleaze and all the the other window-dressing you'd expect from such a high stakes process. At the end of the day the UK is a democracy and it's up every UK citizen to make their own minds up on 23rd June.

From my perspective and given my role as a top global FinTech influencer, I've been asked many times recently about the impact on the blossoming UK FinTech (Financial Technology) industry should the UK vote to leave the EU. So let's look specifically at what a brexit would mean for #FinTech...

What would a Brexit mean for UK FinTech?

If there's one thing we in the UK are rather good at (other than drinking tea!) it is Banking. London has always been a global financial centre for historical, cultural and geographical reasons and according to an independent report published last month the UK is now the world's leading #FinTech centre too! What would happen to UK #FinTech should we leave the EU?

Let's start by looking at a more relevant EU Directive 2014/49/EU which came into place on 1st January this year. Up until this point the UK's Financial Services Compensation Scheme (FSCS) protected individuals'  bank deposits up £85,000. On 1st January 2016 the FSCS limit was slashed from £85k to £75k to adhere to directive 2014/49/EU European Union Deposit Guarantee Schemes Directive (EDGSD) which harmonised the deposit protection to limit to €100,000 (or the equivalent) across Europe. Long story short - UK depositors are less protected because of an EU rule overriding a UK rule. 

Let's look at another EU Directive 2015/2366/EU, the amended Payment Services Directive or "PSD2" as it's fondly referred to in banking circles. This was formally adopted last November and gives EU banks until 13th January 2018 to basically get onboard with APIs, with the view to making banking more transparent/competitive/open. For incumbent banks, PSD2 is a pain in the bum but for the wider FinTech industry and consumers it is generally viewed as a positive force. So here we have an example of a EU doing something the UK Financial Services regulators really should have put in place themselves.

PSD2, EDGSD, GDPR, etc etc etc - the list of directives goes on. Some are good for the UK, some are bad. Some overrule existing UK laws, some create new ones. Some are generally viewed as sensible and some seem like downright interference. On rare occasions EU member states manage to negotiate opt-outs on directives (the UK has 4 opt-outs in place right now) but they are hard fought. It all comes down to sovereignty, the right to govern oneself. Whether the directives are good or bad for the UK the fact of the matter is that it is no longer the UK parliament that gets to make the rules. If the UK is to continue to lead the world in #FinTech the loss of sovereignty is quite frankly a liability.

It's not just the endless stream of directives lobbed across the English Channel that is concerning, it's the opacity of the whole organisation.  According to a study commissioned by the European Parliament and released last month,the EU has a corruption problem that could cost it up to €990 billion a year. The EU's accounts consistently don't add up with more than €133.6 billion of European Union budget payments last year “affected by material error”. The European Central Bank (ECB) said last October that Greece’s banks need more than €14bn in fresh capital, the latest in a long string of bailouts seen by many as an exercise in saving-face and keeping the European single currency dream alive rather than helping Greeks. Throw into the mix the European Financial Transaction Tax (FTT)- a clear and present danger to London's dominance as a global trading hub. The whole situation is best summed up by this verse from Coolio's 1995 Gangsta's Paradise:

Power and the money, money and the power 
Minute after minute, hour after hour 
Everybody's running, but half of them ain't looking 
What's going on in the kitchen, but I don't know what's cooking

Brussels is the kitchen and I don't know exactly what is being cooked up but from what I can see it stinks! 

On the most part I think we in the UK are rather good at critical thinking. Perhaps its a natural cynicism but when characters like Obama come over and tell us we should stay in the EU something doesn't feel right. There have been a string of influential business and political leaders who have come out recently and recommended staying in the EU but these people all have vested interests in maintaining the status quo. I'm also deeply worried by rumours of gagging of experts. For example John Longworth, Chief of British Chambers of Commerce left his position last month, citing need to ‘express my own views freely’ on the EU referendum debate. Whether John is for/against a Brexit I don't know but either way at times like this we need experts such as John to be free to tell us what they think.

What would a Brexit look like?

The simple answer is that nobody knows for sure. There are plenty of phrases in the English language to sum up fear of change.

  • Better the devil you know.
  • Out of the frying pan and into the Fire.
  • The Grass isn't always greener on the other side.

What they all mean is that it's easier to stick with something you know, even if not ideal, than to try changing the situation and risk making it worse. It's exactly this fear of the unknown which sums up the arguments of the "Stay' campaigners. It's easier to calculate the costs/benefits of being in the EU than to quantify the risks of leaving. 

I fear we have got ourselves into a boiling frog situation. The 1975 EEC referendum was a vote for a trade union and since then, through regulation after regulation, treaty after treaty, directive after directive, the EU has expanded its remit to become a beast. The argument could be flipped around - if the EU is a burning platform or a sinking ship at what point should you jump off?

We have some other phrases in the English language:

  • Nothing ventured nothing gained
  • Who dares, wins
  • You have to speculate to accumulate

I believe it is time we started treating a Brexit as an opportunity, not just for UK FinTech but for the UK as a whole. It's like a choice myself and a good few people in the London FinTech scene have made - do you continue working for a large incumbent organisation or quit and join a startup. Well I believe it's time the UK started acting more like a startup and less like an employee of Europe. 

An Exit Strategy

If we wake up on 24th June on an EU exit trajectory here is what I propose happens.

1. A Directive Buffet

An immediate audit is conducted of all the EU rules/directives, sorting them into 3 piles - Keep, Drop, Change. E.g for PSD2 our FCA may well decide to continue the pressure on the big UK banks to open up APIs.

2. Put a bouncer on the Door

Immigration has been a huge part of the wider Brexit debate but I'm not one for bricking up the channel tunnel and pulling up the draw-bridge. Immigration is good. As far as FinTech/Banking is concerned I suggest we immediately identify key talents/skills we need in the UK and put measures in place to fast-track entry. 

3. Become the new "offshore"

The UK has a stable political, legal and financial system which makes it a good place to do business. With the new-found freedom the UK should take this to the extreme and begin courting the world's large enterprises and startups to come set up HQ in the UK. It's good timing too given scandals like the Panama Papers! We can start by reducing business rates. 

4. Forge new alliances

The EU is not the only club the UK is a member of right now and and the EU is not the only place we trade with. Leaving the EU gives the UK more political freedom to strengthen alliances outside of the EU, e.g. with Israel and their burgeoning FinTech hub in Tel Aviv and rekindle historical relationships, e.g. with India. At the same time we should be helping other dissatisfied EU members, e.g. Denmark, should they wish to make similar exit plays and providing a 'life boat' to those citizens that 'want out'

5. Play to win

Time for a mindset change. Instead of squabbling for the scraps from the EU table the UK has the opportunity to reinvent itself like a startup`. We're the 5th largest economy in the world in-spite of being in the EU, not because of it. Given the freedom from EU red tape the UK should put in place measures to target 4th place by the end of the decade. We can start by taking our £23,000,000/day EU membership fee and investing it in UK enterprise!


The world is a very different place to when the EEC was set up in 1975. The EU was formed to solve the problems of the last century, but it has overstepped its mark and lost its way. The 21st century challenges are more digital. Things like individual freedom/privacy, security/influence, cyber crime/warfare, resource scarcity/allocation, knowledge economies, sharing economies. These issues are being decided online, by individuals and big corporations, not in the EU Parliament buildings. We are lucky in the UK to have an education system that encourages creative thinking over rote learning. It has spawned some of the great thinkers and doers throughout history and fuelled the British Empire. Those days are gone but who's to say we can't turn the UK into a Digital Empire - starting with #FinTech/Banking and expanding to other industries. 

The EU is a burning platform and it's time the UK got off - for the sake of UK FinTech and the UK in general I believe now is the right time to leave the EU.


Follow Chris on Twitter at @cgledhill

Image Attribution : Immigration (modified image) Strasberg Parliament BuildingEU Corruption Cartoon from Cagle.com, Change Meme from Quebec Meme


TagsRisk & regulationStart upsBrexit

Comments: (10)

A Finextra member
A Finextra member | 05 May, 2016, 07:59

I think this is just a political diatribe of wothless merit.

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A Finextra member
A Finextra member | 05 May, 2016, 09:17

And - just out of curiosity - what will happen to all of the Fintechs who currently enjoy setting up in the UK given the (good) flexibility and easier regulations offered by the FCA, and the fact that this gives them a passport to operate in Europe?

That passport will disappear... and being registered with the FCA will no longer be the attraction it was.

Fintechs will look for somewhere else to set up.

Sadly for someone who is a supposed "thought leader" in the world of Fintech, the article's content is very lacking in any serious analysis.

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A Finextra member
A Finextra member | 05 May, 2016, 12:22

This is a dreadful blog post that doesn't add anything and merits only the briefest of comment.

It might also have more credibility if the writer could spell "Strasberg" (Strasbourg) correctly.


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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 05 May, 2016, 17:30

As a bystander with no vested interest either way, I thought this post was quite balanced. After reading the previous comments, I'm beginning to believe the "rumours of gagging of experts." Why does it need anonymity to point out a typo, that too in the footnote? Just asking.

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A Finextra member
A Finextra member | 06 May, 2016, 09:24

Given it was me who made the comment about the typo, let me explain. The reason this post is anonymous is that a public post would name my employer. As they have not made a public announcement on what they think - and are unlikely to - I can't bring them into the post.

Your point about the gagging of experts is a common falsehood put about by Brexiteers: somehow there are lots of experts who want to say how good Brexit will be but are being kept silent.

The author quotes the incident about the former of the British Chamber of Commerce as an example. He went not because of his own views - which he is perfectly entitled to express - but because the BCC had decided to remain neutral and he had spoken in favour of Brexit whilst representing the BCC.

What is odd about the "silent experts" hypothesis is that when anyone who understand politics, economics and government suggest that Brexit is a bad idea, brexiteers denounce them as having vested interests. 

The quality of debate so far has been poor: the most common complaint of the neutral is there has been no serious discussion.

In the end this is a view of how Britain sees itself in the world. It will come as no suprise that I think we are better off in a Europe we can be part of - and are geographically tied to in any case - than not.

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Jean-Bernard Tanqueray
Jean-Bernard Tanqueray - Money-peasy.com ltd - London | 11 June, 2016, 23:42 This post is full of stereotypes about the EU and fails to understand what Brexit means in terms of promoting financial services across the world's biggest single market. One other detail pointing to lack of critical thinking are (1) the UK's rank as a world economic power. The U.K. Reached that rank in 2012, 39 years after joining the then EEC as Europe's sick man. Therefore the UK benefited a lot from its EU membership. Or at least the EU was no burden as it helped resurrect an old colonial economy into a modern one. The City would have never thrives had the UK remained isolated (2) immigration: on one hand he does not want to brick the Channel Tunnel as if it were the only route of immigration, but also opts for a system controlled by the State. Quite inconsistent with the view of digital expressed earlier. This means we would not let individuals decide (thus killing the individual benefit of digitalisation the author underlined a few paragraphs earlier). The state would decide as if it would know better than the market participants. Could anyone agree this is an anti efficient approach: bunch of civil servants aggregating demand instead of picking up freely from a 500 million citizen bloc with all the talents needed, able to come it and out at will. This State control system the author promise are precisely what most US start-ups hate, feeling the pinch of not being able to recruit from anywhere. (3) with regards to corruption, since the EU is ruled by its cohort of democratically elected governments, one could first question their own government at letting such corruption happens, if it happens (4) if the Brits believe they cannot turn around the EU into something more competitive as Mr Cameron promised, how then could they hope to be listened to partners far far remote than those continental guys ?! How then can we be assured that they would be able to negotiate trade deals that would favour our international expansion? (5) Blaming regulation for whatever thing whose goals is to avoid the "rob thy neighbour" policy is anti entrepreneurial. Conversely, if leaving offers opportunities, so do staying. Believing otherwise is an equally cruel lack of imagination. So I must confess that I find this post of a narcissist self-reassurance only exercise. What statisticians would call over fitting. And quite insulting to its European partners. * 6th eco power right behind the UK is unreformed France, breathing right behind their neck. Since long term growth is related to productivity, the UK is faced by a major challenge to retain its 5th rank, let alone moving to take over Germany (current 4th eco power). The only way the UK manages to mitigate that is via its open door policy. Making this more complex and daunting will necessarily have an adverse impact to the UK long term growth prospects. ** one should look at an economy from a systemic point of view any supply chain illustrates. As the UK carries a trade deficit from the EU, it means the UK economy depends on the European input to keep working. Any Brexit would pinch the households wallets (less competitive trade conditions) creating economic uncertainties. How could this make any environment stable enough to attract and scale capital? Unless you already own it, thus creating an inefficient barrier to entry for non wealthy entrepreneurs
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Jean-Bernard Tanqueray
Jean-Bernard Tanqueray - Money-peasy.com ltd - London | 11 June, 2016, 23:53 And just one last comment: most UK Fintech start ups are founded by non-British EU citizens (like for many front office jobs in the City). The most poignant example is the unicorn TransferWise as it has been founded by what the pro-Brexit press despicably coins as "social services draining Eastern European EU migrants"... #foodforthought
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Daniel Smith
Daniel Smith - CHOICE Financial Solutions - New York | 12 June, 2016, 02:53 Sadly - trying to have a reasonable and intelligent conversation on this question is a little bit like "mission impossible" .,. To the point I'm not sure it's even worth trying to have a balanced and sensible discussion with anyone who has not live and worked overseas... Would love to know how many opinions here are actually based on real work experience overseas - as opposed to bigoted opinions and ideas
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Jean-Bernard Tanqueray
Jean-Bernard Tanqueray - Money-peasy.com ltd - London | 12 June, 2016, 11:13 Dear Daniel Do i fit the requirement as a UK based continental entrepreneur who spent his life living, studying and working in the Uk, France, Holland, Germany and, some time ago, even non EU Mexico (and also studied EU law as part of my undergrads) Indeed I am a big fan of free move and regret that people are too careless to understand what the EU is about and instead prefers the easy games: (a) blame and judge the EU in a way that is inconsistent with the way it works (it is a body working on what democratically elected governments tell them what to work on for hopefully coordination and cooperation efficiency purposes -then, as an example, the low energy electric gear directives to reach the carbon emission cut targets all European governments agreed to, commonly). Something both the European and national governments vote on as well. Indeed a special beast called a political innovation unseen anywhere else (b) despise their neighbours, not only by deeming them as uninterested for not growing fast enough as a reason to leave but also by letting a political party (the UK conservatives) take a whole region as a hostage of its party infighting (Cameron tried to calm his dissenters) (c) pay no attention to the heart of the project (peaceful Europe) and the benefits of joining forces together by preferring to leave instead of taking up responsibility and lead (d) a lot of implicit nationalism and racism especially towards Eastern Europeans and those in the Balkans, neglecting their contribution the founders of TransferWise beautifully embody. As a matter of facts, a substantial number of UK tech startups have at least one non British EU national as a cofounder because the then mayor of London wanted to turn London into Europe's tech start up capital... Yes there is a lot of emotions in this debate. As if it were the closing chapter of the 1066 Hasting Battle Yes there is a lot of imperfection in the EU as there is in any human construct. Is the UK really voiceless in there not to be able to help it turn around? I now stop as I could carry on further, boring everyone else. Sorry for the passion !!
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Richard Crookston
Richard Crookston - R Crookston - Lampeter | 12 June, 2016, 14:21

About posting anonymosly, sorry, I did not intend to.

I still think this [article] is just a political diatribe of worthless merit.

And it seems like nobody in the know supports it.

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