London Fintech Status Under Threat From EU Passporting
European Commission launches fintech consultation process as it considers regulatory changes
The European Commission (EC) has launched a three-month consultation into the EU’s fintech sector, as it considers introducing regulatory changes designed to foster the industry’s continuing growth and development while also protecting consumers.
Specifically, the Commission could introduce EU passporting and lower regulatory requirements for financial technology firms, as EC vice president Valdis Dombrovskis explained this week.
However, while they would be positive for the industry as a whole, these changes could also impact London’s current position as a fintech leader as Britain starts the convoluted process of leaving the EU.
Fintech future
“We need to be cautious in our approach, ensuring that this new industry has a space to grow,” Dombrovskis said at a news conference in Brussels, before going on to explain how new rules would give fintech companies rights to operate anywhere within the EU’s single market.
The bad news for London is that when Britain completes its separation from the EU, businesses based there would likely lose their passporting rights, threatening the UK capital’s status as a leading European fintech hub and favouring rival EU cities such as Berlin.
Customised licenses could also be granted under the new rules, which would reduce costs for fintech firms by lowering the capital requirements for those providing services that are deemed to be less risky.
Fintech has been one of Europe’s fastest growing technology sectors over the last couple of years, thanks to the emergence of a new generation of innovative startups offering services such as payments, credit and wealth management more cheaply than traditional banks.
A prime example of the UK’s proficiency in the sector is London-based VocaLink, which was acquired by MasterCard for £700 million in 2016.
Visa also recently opened an innovation centre at its Paddington headquarters in London to work with financial institutions, merchants and partners in developing the next generation of payment services.
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