Home Economy Brexit threat to UK’s global FinTech boom, says ACCA Scotland
‘FinTech – transforming finance’ report suggests advantages of Brexit to the UK’s FinTech industry could be offset by business uncertainty and loss of passporting rights
The UK has positioned itself as a world-leading hub in emerging FinTech (financial technology) but the potential regulatory and business challenges posed by Brexit risks ceding ground to America and Asia Pacific rivals, says a new report from ACCA (the Association of Chartered Certified Accountants).
The report, ‘FinTech – transforming finance’, finds that while FinTech’s impact on finance and banking is proving to be as revolutionary to the sector as the internet has been for other areas of the economy, the advantages offered to the UK’s FinTech sector through supportive regulation and geographical location could be off-set through loss of passporting rights and business uncertainty through the Brexit negotiations.
Craig Vickery, head of ACCA Scotland, argues that the Scottish economy is in a good position to benefit from the UK’s support for FinTech: “While Silicon Valley has helped the US lead the way in technology, the regulatory challenges have checked some of its progress with the likes of India, China and Singapore competing hard for this rapidly-evolving industry.
“In the UK, the Financial Conduct Authority has provided a model for regulation which has been conducive to nurturing innovative technologies. Yet with the exorbitant costs of living and operating in London, Scotland’s historic strengths as a home for global finance and the growing cultural status of Edinburgh, Glasgow and beyond makes it an increasingly attractive location as a technology hub.”
Yet Vickery warns that the potential impacts of Brexit could challenge the UK’s promising status: “The UK’s FinTech sector currently employs more than 66,000 people, with approximately a third coming from Europe. Inevitably the potential burdens of securing work permits for highly skilled individuals in a dynamic industry creates significant uncertainty, as does the regulatory headache which would be created by the loss of passporting rights for UK-based banks operating in the EU.
“While some of London’s strengths indicate it can be resilient to these issues, the potential of FinTech to transform finance as well as offering opportunities to the Scottish economy means that preserving the UK’s status and providing the infrastructure to attract FinTech investment in Scotland must be a priority in future negotiations.”
Overall Vickery thinks that the rise of FinTech is good news for industry innovation and consumer choice: “The impact of FinTech over the past decade across the traditional functions of finance has already been significant and this report highlights that there is much more to come. Major banking institutions are already responding through large-scale research and investment in the face of competition from start-up challengers.
“This is good news for consumers and firms, as the explosion of choice in a traditionally conservative industry offers a range of new possibilities of doing business based around their bespoke needs.”
Yet Vickery argues that the regulatory challenges posed by the speed of innovation places tough new demands on business operating in a fast-evolving, global landscape: “While FinTech opens a range of possibilities for business, from new banks to streamlining payments and lending, exploiting these opportunities will require adaptation from firms as well. For instance, we are already seeing a rise of a blossoming ‘RegTech’ (Regulation Technology) sector which can use automation and data-analysis to provide intelligent, low-cost solutions to streamline this process.”
Vickery adds that it is professional accountants who will be best placed to navigate these obstacles: “While the rise of FinTech will reduce the labour time of much contemporary finance work, it would be a mistake for business to assume this could spell the end of accountancy. The fast-evolving nature of technology adoption will also necessitate transformations in tax compliance, audit and reporting processes.
“This will in fact place greater emphasis on the importance of having forward-thinking professional accountants equipped with a strong digital understanding and global vision to guide firms through the opportunities and challenges ahead.’
“Understanding the intricacies of global best practices and adapting them for varying national contexts can set aspiring FinTech hubs on a course for success.”