Britain's decision to leave the EU has signalled the end of London’s status as the cradle of financial technology (fintech), according to leading operators in the sector.
Within hours of the vote Jochen Siegert, chief operating officer of Frankfurt-based payments platform Traxpay, was tweeting that the UK capital had 'committed suicide as a leading fintech centre.' Siegert, one of the pioneers of Germany's digital finance scene, has already sought to capitalise on the moment by setting up a fintech relocation service.
Other financial centres also see Brexit as an opportunity to seize the initiative in a sector of the industry that has emerged in the last five years. Those jostling for position include Luxembourg, Amsterdam, Berlin, Frankfurt and Stockholm.
Even before the vote Reuters polled 10 London-based fintech companies and found that seven were considering relocating if Britain left the EU. 'I think there would be a bit of a reset of people, offices, HQs and activities if Britain were to leave Europe,' said Eileen Burbidge, a partner at venture capital firm Passion Capital.
Luxembourg has been widely cited as an attractive alternative to London because of its proximity to the UK capital, its highly skilled, multinational workforce and the success of fintech startups such as DigiCash and ScoreChain.
Berlin calling
Cornelia Yzer, Berlin's economics minister, says she has already received dozens of emails from companies based in London about a possible relocation. 'Berlin will exploit the opportunity provided by Brexit,' she told the Financial Times. 'These companies need to be in the heart of Europe, and where is better than the capital of Europe's strongest economy?'
'We offer reliability, and the security companies need for long-term planning. We are in the heart of the EU and we will stay there.'
Inward investment agency Berlin partner has echoed Yzer's sentiments, claiming that it took calls from five London-based fintech start-ups on the day after the referendum. 'They said their investors are forcing them to consider relocating,' director Stefan Franze told the FT.
TransferWise, a London-based money transfer company that has 100 of its 600 staff in the UK capital, is one of the companies that has publicly stated it is considering a move. Co-founder Taavet Hinrikus has tweeted that countries including Ireland and Switzerland were 'reaching out and tempting TransferWise to start/move operations there'.
Revolut, a global payments app that has attracted $4.8 mln from venture capitalists, is another company looking at either a move or setting up a subsidiary on the European mainland. 'The transfer side of our business relies on the single market, specifically directives such as Sepa [the single European payments area],' said chief executive Nikolay Storonsky.
The likelihood of the UK introducing tighter migration controls is another factor that is likely to count against London, as it will make it harder for firms to recruit IT staff from around the world. Crucially as well, fintech firms will no longer benefit from the ‘passporting’ system that currently gives London-based banks unrestricted access to the single market.
