By Mark Tate, Managing Director UK and Ann Wong, Director Corporate Communications & Investor Relations at Opportunity Network
Like it or not, Brexit is a history-defining event that will change the landscape of our financial market and bring lasting impact to the world economy. While some individuals and companies are still stuck in shock and disbelief, many are already proactively carrying out a series of post-Brexit initiatives. Certain banks are now considering moving their European hub out of the United Kingdom; European cities are prowling for the opportunity to replace London as the Fintech capital of the world; UK businesses are hastily exploring how to retain access to the EU market and talents. While no one has the crystal ball on what lies ahead, we know for sure that sit-and-wait is not the right strategy for banks that are searching for growth and profitability.
Many banks have now embarked on the journey of digitization; for banks that are in the process of evaluating Fintech partnerships in or outside of the UK, it is important to understand the implication of Brexit to their Fintech partners’ business operations, corporate structure, tax and regulatory environment. Many Fintech companies based in the UK have a business model dependent on the benefit they gain from being in the EU, the rights to “passport” their products and services across the European Economic Area subject only to the UK regulation. The UK is for sure an important financial market that should not be abandoned, but Fintech companies should also equip themselves with the capability to expand into the EU and internationally post-Brexit. It is therefore desirable for banks to partner with Fintech companies that have the option and flexibility to co-locate or relocate business activities to a continuing EU country, which will ensure business continuity whichever way the regulatory regime evolves.
Secondly, banks should also ask themselves: “will this Fintech partner help me achieve digital simplicity and create new growth frontiers?” Brexit is adding complexity and burden to banks and their clients’ businesses, the share of mind and wallet that clients can offer to digital products will definitely be compromised although their appetite for that will not change. The geopolitical uncertainties are also causing many to retrench their business operations and put their expansion plans to a halt. In such turbulent times, it is especially important for banks to deliver digital offerings that are simple to use, enabling their employees to serve different client segments effectively, improve salesforce productivity and originate new business with speed and scale.
Last but not least, think global. As the old saying goes, “don’t put all your eggs in one basket”. Brexit has now triggered the reshaping of the entire international trade framework; banks will have to look for even more solutions to connect British companies with the rest of the world. Brexit also makes it necessary for banks to recalibrate their business risks, adjust their revenue models and diversify the systematic risk pertaining to different markets, be it within or outside of the EU. The event was inevitably a shock to the system, but we are convinced that it will not change the course of the global digital banking evolution. Banks should now seize this timely opportunity to take advantage of the adaptive nature of Fintech companies to grow the banks’ business footprint and to strengthen underserved client segments, transforming the Brexit challenge into an aggressive play opportunity.