Open development can save business payments post-Brexit
Brexit has finally happened, but what remains to be seen is how it will affect the U.K. economy. And a lot of that depends on whether a no-deal Brexit can be avoided. A potential no-deal Brexit could prove problematic for U.K. businesses that trade with the European Union from both a regulatory or licensing and financial perspective, but present a unique opportunity for fintechs in the region.
Without a deal in the making, the U.K. will lose its EU passporting rights, meaning banks and traditional financial institutions are likely to hit clients with international fees for every EU transaction. The U.K. government even predicts that credit card transaction fees will rise. Fintech companies, on the other hand, have essentially created a pseudo-open international market, enabling easy, quick cross-border financial transactions at a minimal cost. They will be key players in ensuring effortless trade between the U.K. and EU and will likely experience an upswing — particularly B2B payment companies.
Application programming interfaces in particular will be key for businesses post-Brexit, enabling U.K. financial institutions to connect with EU payment schemes and facilitating simple, automated, inexpensive cross-border financial transactions. Further, the U.K.’s regulatory environment already supports open banking, so it's primed for APIs.
Other fintech startups such as Revolut function as an alternative to APIs, offering simplified banking services while cutting out unnecessary cross-border and other transactional fees.
Brexit may also serve as a catalyst for the U.S. fintech industry, sparking further innovation across the pond to solve new challenges faced by U.K. businesses in a post-EU reality. With such motivation, it’s likely that by the time Brexit is completed, there will be more fintechs offering better and more tailored payments and financial options for UK businesses that trade with the EU.
Brexit may also drive partnerships between EU and U.K. fintechs to mitigate the need for EU licensing. This collaboration could play an important role in the online lending space to overcome the challenge of local licensing requirements. Partnerships are already in play on a global level in business lending, and it could be a tried-and-tested route for U.K. business lenders to follow.
With any big change comes both opportunities and challenges and fintechs that view Brexit as opportunistic, particularly in the space of B2B payments, banking services and API technologies, are most likely to succeed.