Will London remain the fintech capital after Brexit

In light of the recent Brexit economic drawbacks, the UK financial sector wonders if London can continue holding its position as the world’s FinTech capital. While it seems in the short term one can expect Brexit to destabilize the UK FinTech position, however, in long term thanks to London’s strong financial and technological characteristics it can enjoy being the world FinTech hub if enough is being done to materialize its potentials. Based on Khalif’s report recommending Policy/Regulation, Skills, Investment, International and National connectivity for the UK to remain the world FinTech capital, one can better understand why and how London’s characteristics can help to hold its FinTech position. 

In addition to being the world’s most internationally connected city with a strong tradition of regulating the financial industry, London for a long time has been home to the largest financial institutions, tech companies and universities. Hirbod Assa, Senior Lecturer in Finance and Fintech at Kent Business School, University of Kent, argues how all the aforementioned aspects give London unique characteristics to maintain its world FinTech position. It is also discussed that to this end, the government needs to encourage quicker finance adoption of technology, investment needs to be injected into the industry and regulations need to be rightfully set. 

Brexit so far has been blamed for various short-term negative impacts on the UK economy, including labor shortage and drop in imports/exports. However, one wonders if Brexit can have a similar impact on losing London’s position as the world FinTech capital. 

While the answer might look pretty clear in the short term, everything depends on how policies will help to maintain this position. This is essentially thanks to London’s strong financial and technological characteristics that can still locate it as the top world FinTech hub. 

In a recent comprehensive report, Ron Khalif OBE, proposed a set of recommendations to keep the UK’s paramount position. Regarding Khalif’s report, we can summarise the strengths of London’s post-Brexit position and what must continue. 

Talent

As an emerging technology, Fintech is abundantly relying on talent. This is beyond the training and upskilling, which also play major roles in the FinTech market. Compared to competitors, London and the UK in general have an upper hand in this subject, as they are home to the world’s top universities. The UK’s universities have always hosted talents from all around the world that after Brexit can expand its reach beyond Europe to acquire the world’s sharpest FinTech minds. 

As a priority area, the UK must adopt measures to facilitate international students and scholars to be participating in the higher education sector and provide funding for specialized research in FinTech. Another area of priority is to fund projects that encourage the financial industry to benefit from London’s high position as the world scientific hub for quicker adoption of technology. 64% of FinTech adoption globally in 2019, compared with 16% in 2015 indicates the quick pace of change in the financial system. 

International connectivity

FinTech is known as a means to globalize financial services by substantially increasing financial inclusion. Financial inclusion is regarded as the future of the sector that can expand by virtual banking. Clearly FinTech can also be more inclusive by exploring emerging financial markets such as African and Asian, in a more international ecosystem. London’s international characteristic is a major substance that can materialize the international financial ecosystem needed to maintain its top FinTech position. 

Innovation

FinTech needs constant innovation by offering new services for generations who open their eyes to technology births. Exploring the new aspects of the technology and seeing how they can be adopted to develop better financial services is key to the FinTech innovations. For instance, in the last decade, Chinese WeChat users are benefiting from its online shopping mechanism, something that has barely happened for other social networks. Thanks to its diverse and talented minds, London can bridge these innovation gaps in financial services by offering new FinTech solutions.  

Technology

While FinTech is mainly regarded as a subject area in the financial sector, technology plays an existential role in its advancement. Just in 2021, $500 billion has been spent by financial services companies on IT infrastructure. As the world’s greatest higher education hub, London always has been a very attractive landscape for tech companies. The strong presence of giant tech companies, including Google and Amazon, is a great opportunity to maintain and develop London’s technological stronghold. This needs to be further backed by encouraging and attracting tech entrepreneurs and start-ups, which will ultimately feed the larger technological sector. 

Investment

Investment in FinTech surpassed $100 billion in 2019. The major London FinTech competitors, especially ones from East Asia and the US, have massively invested in FinTech and as a result have witnessed substantial changes in their businesses. London needs to at least keep a similar investment growth rate to be competitive in the market. That essentially includes investment from the incumbent banks, insurances, and other financial institutions. This is one of London’s major strong points as for centuries it always has been home to the world’s largest financial institutions. 

Pioneering role

London’s international connectivity is a major asset to secure its pioneering FinTech position. Like other new technologies, the development of FinTech needs a very strong futuristic view. This does not only include foreseeing and keeping track of the emerging technologies but also being mindful of the disruptive technologies that can revolutionize the field. Being a FinTech pioneer necessitates a futuristic view about world competitors and how to address upcoming technological issues. 

Regulation

Without a doubt, we are and will continue to witness growing discussions on FinTech regulations. London traditionally is positioned among the pioneering financial capitals to propose regulations for the financial industry.  London is home to the headquarters of some of the oldest and largest banks and insurances in the world, which have a great influence in setting international financial regulations. 

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Conclusions

London’s long standing position in the financial industry and its strong characteristics in other areas including technology, higher education, international connectivity and regulation, give it a unique identity which makes its FinTech position unaffected post-Brexit, , if enough attention is paid to materializing its potentials. 

London is in the best position it can be to ensure it remains the world capital of FinTech post-Brexit, but it must still strive as it always has to continue this. As FinTech’s very nature demonstrates; the world changes. London must be prepared. 

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