London to retain fintech crown despite Brexit, per innumerable sources

By Ryan Weeks on Monday 16 October 2017

Alternative LendingDigital BankingSavings and Investment

Add Early Metrics’ analysis of 1,500 European startups to the pile of fintech Brexit insights.

Add Early Metrics’ analysis of 1,500 European startups to the pile of fintech Brexit insights.

Ten years ago, neither Brexit nor fintech existed. Today, they can barely seem to escape one another. Surveys and interviews featuring the two side-by-side, invariably with a view to analysing the impact of one upon the other, have come thick and fast in 2017.

Now Early Metrics, which describes itself as an international rating agency for startups and innovative small businesses, has offered up its own insights on the unlikely marriage.  

The agency has assessed 1,500 startups, of which 35 per cent are based in the UK. Of that 35 per cent, 40 per cent are fintech firms (stay with me). “Most” of these UK fintech firms were adjudged to be performing in the highest quartile of Early Metrics’ ratings system. This compares favourably with other fintech sectors in Europe.

More generally, 40 per cent of rated fintech startups sit within the first quartile of Early Metrics' best rated startups. Fintech firms earned the second highest average rating of the 15 sectors covered by the research, second only to retail and eCommerce.

Antoine Baschiera, CEO of Early Metrics, said that London remains an attractive hub for talent and financial institutions, despite the uncertainty of Brexit.

“London will maintain its fintech influence if this landscape does not change,” he said. “Positioned as the gateway between the US and Europe, the UK already possesses expertise in successful fintech ventures and the capability to continue this trend, demonstrated by the $564 million invested in fintech start-ups this year alone.”

Nevertheless, Early Metrics sees issues that are specific to fintech emerging from Brexit. Baschiera said that the UK is facing “its most serious challenge so far” as the fintech hub of Europe.

The possibility of the UK being excluded from the digital single market, single European payments area (SEPA) and overall banking regulation was earmarked as a cause for concern, especially for payments firms. Passporting rights may be affected, which could have a serious impact on the sector, given the prevalence of third party integrations in fintech. More than 75 per cent of the fintech firms rated by Early Metrics rely on external technology to integrate payment solutions or draw market information.

Early Metrics also highlighted Asia and Africa as fintech markets that may come to the fore to the detriment of the UK.

Baschiera summarised: “The UK has the infrastructure and capabilities to maintain its global fintech leadership position. However, the British government must negotiate the best outcome regarding free movement of talent, the Digital Single Market and SEPA.”

Baschiera’s comments echo those made by Funding Circle’s lead in the Netherlands, Jeroen Broekema, who recently told AltFi that London remains by far and away the hub for European fintech, irrespective of Brexit risk. 

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