FinTech startups in the U.K. are scrambling to create backup plans to avoid disruption to users as a no-deal Brexit appears increasingly probable, CNBC reported on Monday (Nov. 9).
The Dec. 31 deadline is closing in as the U.K. and the EU wrestle to come up with a trade agreement. During the interim, the U.K. has been able to have access to the market but that “passporting” right is likely going to disappear, leaving banks and FinTechs unable to operate throughout the bloc.
Sources told CNBC the situation is triggering “stress” and “nervousness” in the FinTech vertical.
New European outposts were created by some FinTechs to make sure they could continue to be the needs of their users in the area.
Some bigger banks have abandoned European locations to concentrate on local users but industry insiders think FinTechs will have to pivot to continue to service their EU clientele, per the report.
Payments-as-a-service platform Modulr recently procured a digital currency license from the Central Bank of Ireland, after previously “passporting” from U.K. regulators, Chief Executive Officer Myles Stephenson told CNBC.
“Since the Brexit announcement, we’ve been planning and thinking about what to do to continue on that journey. We decided that we just can’t deal with the level of uncertainty, so we need to be clear on what we can do, hence why we set up in Dublin,” Stephenson said.
Among the U.K.’s most valuable FinTechs, Revolut is hoping to get a digital currency license from Ireland’s central bank. It already holds a license in Lithuania, established in 2018.
“While that process is ongoing, to ensure that Brexit does not impact our Irish European customers, we will temporarily migrate their accounts to Revolut’s e-money licensed business in the EU, based in Lithuania,” a Revolut spokesperson told CNBC.
“Our plan is that once the business in Ireland is authorised by the CBI, we will migrate our Irish Revolut customers to the Irish entity and, in due course, many of our other Western European customers,” Revolut said.
In 2019, three years after the Brexit vote, foreign buyers announced $60 billion in deals for U.K. tech companies. At the time, international financial institutions in the U.K. scrambled to prepare for a no-deal Brexit.
Since January, hundreds of FinTechs have been migrating from the U.K. to the EU ahead of Brexit. Although the U.K. is no longer part of the EU since Jan. 31, it left with an 11-month transitional plan.
In August, EU’s securities markets regulator called to extend regulations to allow British fund managers to operate in the EU post-Brexit.
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