The UK’s fintech sector overwhelmingly supported remaining in the EU in the runup to June’s referendum. And after the Brexit vote, many industry leaders expressed concerns about difficulties bringing in foreign talent and losing access to the single market, among others.
Now, as Brexit looms closer, France sees an opportunity to lure these concerned fintechs to its own shores by promoting advantages it believes the UK will lose following its exit, according to a report by Europlace, a French lobbying group, and Axelle Lemaire, France’s digital minister. Lemaire told Business Insider that “many” UK companies had already made inquiries about moving to or at least expanding into France.
Here are the reasons why France might prove attractive to UK fintechs, according to Lemaire and Europlace:
- Fintech-friendly regulation. Lemaire called attention to a new law that sets a threshold below which no authorization from regulators is needed to start a fintech business, and said that domestic regulators have also established a “one-stop shop” to fast track registration and authorization for foreign startups. In addition, France recently reformed its notoriously complex labor laws, making it easier for employers to fire employees and make negotiations with labor unions, which have historically held disproportionate influence. However, France’s labor laws are still some of Europe’s most convoluted, prompting several candidates in France’s presidential election to run on a platform to cut down the legislation dramatically. Also, French regulators have not yet been as active as the UK’s FCA in promoting fintech.
- Privileges for tech entrepreneurs. Lemaire says that 180 foreign entrepreneurs have applied for and were granted France’s “Tech Ticket” package. The program, launched in September 2016, includes a €45,000 ($47,000) grant, visa facilities, and fast-track administrative procedures. Although the package offers features that other European countries have long had in place, its newness is likely to attract the attention of UK fintechs worried specifically about tighter immigration controls and a closing of borders.
- A healthy investment climate. According to Lemaire, while investment in UK fintech dropped recently, it increased in France by 71% from January to September 2016. However, it’s worth noting that even though UK investment has slowed, none of the top 10 European fintech deals in Q3 2016 were made in France. Germany pulled ahead of France in this respect, with deals reaching a volume of $77 million, according to KPMG.
- Infrastructure. France has recently launched several incubators and financial services centers, including the 30,000 square meter Station F incubator and Finance Innovation, a hub for financial firms, which will likely prove attractive to startups, including those in the fintech sector. Moreover, in 2013, a €20 billion ($21 billion) program was launched to roll out super-fast internet across the whole of France. In the UK, the government has been making efforts to promote fintech in areas outside London: This suggests that some UK entrepreneurs are struggling with the high cost of living in the British capital. Given that office real estate in France is far cheaper than in the UK, a greater focus on building out tech infrastructure in the country could attract UK fintech talent.
- Tax benefits. Europlace emphasized that the corporation tax in France will soon be cut from more than 33% to 28%, and that the government will cut taxes for companies employing staff in France. In addition, it will reduce taxes for shares distributed by startups to their employees and allow angel investors to make tax-free investments in French startups. As a whole, these are attractive changes, but it is worth bearing in mind that the UK’s current corporation tax of 20% is lower than France’s will be even after it is cut. Moreover, the UK also allows tax-free investments in startups and charges lower taxes on startup shares for employees. Additionally, many other European countries also offer similar tax breaks.
Even with several caveats, the UK risks losing its lead as rival hubs successfully copy the model that made it a fintech leader. France is a prime example of this: It is rapidly mimicking the features that have most drawn startups to the UK, including friendly regulation and tax breaks. More importantly, it is combining these elements with advantages that the UK may lose, such as access to the EU market, or that it has never boasted, like easy visa procedures and affordable real estate. As such, as a hard Brexit looks increasingly likely, the UK cannot afford to be complacent about protecting its fintech lead.
We’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs.
No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new fintech revolution.
The battle already underway will create surprising winners and stunned losers among some of the most powerful names in the financial world: The most contentious conflicts (and partnerships) will be between startups that are completely reengineering decades-old practices, traditional power players who are furiously trying to adapt with their own innovations, and total disruption of established technology & processes:
- Traditional Retail Banks vs. Online-Only Banks: Traditional retail banks provide a valuable service, but online-only banks can offer many of the same services with higher rates and lower fees
- Traditional Lenders vs. Peer-to-Peer Marketplaces: P2P lending marketplaces are growing much faster than traditional lenders—only time will tell if the banks strategy of creating their own small loan networks will be successful
- Traditional Asset Managers vs. Robo Advisors: Robo advisors like Betterment offer lower fees, lower minimums and solid returns to investors, but the much larger traditional asset managers are creating their own robo-products while providing the kind of handholding that high net worth clients are willing to pay handsomely for.
As you can see, this very fluid environment is creating winners and losers before your eyes…and it’s also creating the potential for new cost savings or growth opportunities for both you and your company.
After months of researching and reporting this important trend, Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has put together an essential report on the fintech ecosystem that explains the new landscape, identifies the ripest areas for disruption, and highlights the some of the most exciting new companies. These new players have the potential to become the next Visa, Paypal or Charles Schwab because they have the potential to transform important areas of the financial services industry like:
- Retail banking
- Lending and Financing
- Payments and Transfers
- Wealth and Asset Management
- Markets and Exchanges
- Blockchain Transactions
If you work in any of these sectors, it’s important for you to understand how the fintech revolution will change your business and possibly even your career. And if you’re employed in any part of the digital economy, you’ll want to know how you can exploit these new technologies to make your employer more efficient, flexible and profitable.
Among the big picture insights you’ll get from The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry:
- Fintech investment continues to grow. After landing at $19 billion in total in 2015, global fintech funding had already reached $15 billion by mid-August 2016.
- The areas of fintech attracting media and investor attention are changing. Insurtech, robo advisors, and digital-only banks are only a few of the segments making waves. B2B fintechs are also playing an increasingly prominent role in the ecosystem.
- It’s not all good news for fintechs. Major hurdles, including customer acquisition and profitability, remain. As a result, many are becoming more willing to enter partnerships and adjust their business models.
- Incumbents are enacting strategies to ensure they remain relevant. Many financial firms have woken up to the threat posed by fintechs and are implementing innovation strategies to stave off disruption. The majority of these strategies involve some interaction with fintech firms.
- The relationship between incumbents and fintechs continues to evolve. Fintechs are no longer viewed exclusively as a threat, nor can they be ignored. They are increasingly viewed as partners, but that narrative alone is too simple — in reality, a more nuanced connection is taking hold.
This exclusive report also:
- Assesses the state of the fintech industry.
- Gives details on the drivers of its growth.
- Explains which areas of fintech are gaining traction.
- Outlines the range of current and potential models for fintech and incumbent interaction.
The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry is how you get the full story on the fintech revolution.
To get your copy of this invaluable guide to the fintech revolution, choose one of these options:
- Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
- Purchase the report and download it immediately from our research store. >> BUY THE REPORT
The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the fast-moving world of financial technology.