Despite it being close to a year since the result of the referendum was announced, mention “Brexit,” and you are still likely to spark a debate because of the long-lasting, unalterable consequences it will have on a number of industries.
Those within the foreign exchange and remittance industry had to consider both the threats and opportunities that arose as a result of the referendum.
Businesses now have two years before any new arrangement comes into play; and in that time, they have to consider the potential changes. To begin with – the fintech industry is the cornerstone of the modern banking and financial industry, the tech sector showed overwhelming opposition to Brexit.
The main gripe when it comes to the UK’s technology industry is the impact it is going to have on organisations ability to recruit and retain talent, it could also impact mentoring, partnerships and community within the industry, as international businesses will be deterred from coming to the UK. Of course, raising capital could also become inherently more difficult as some of the largest investors in UK venture capital firms are based EU member states, it’s likely they will stop investing.
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The is discontent in the camps when it comes to data, the tech industry runs on data and currently, the way it is used here in the UK is governed by European regulation with the new GDPR legislation coming into play in March next year.
Once the UK leaves the EU, there is every chance that the regulation will remain the same; there could be an adequacy decisions that ensures personal data can be transferred to the UK from the EU. An example of this is the way that Switzerland has implemented data protection laws that mimic the EUs, meaning data can easily flow between countries. The other option, is that new legal legislation surrounding data will be drafted, meaning that the tech industry will need to comply with two sets of data regulations, you can only how burdensome this will become.
The protection of intellectual property also comes into question, currently trademarks, designs and patents are held in a comprehensive EU register and protected across the EU. Once we leave, it’s likely this will end for British businesses; you have to be an EU member state. Registering twice will be a very costly exercise for start-ups and young businesses with limited capital.
And for international remittance? It’s yet unclear how far reaching the implications will be; UK remittance from migrant workers totalled around £18 billion, leading to the UK being the 4th largest source of remittance in the world.
>See also: How Brexit will affect UK app developers and consumers
Already, remittance companies are seeing less money being sent back home, as sterling shrinks against the Euro and the Dollar. These exchange rates mean for some countries, those receiving the money, are receiving less. People rarely see beyond the act of sending money, but 25 of the countries that receive remittance, it provides in excess of 10% of their GDP.
There is uncertainty with regards to cross-border financial services with regards to the licences held by remittance firms. The money transfer corridors used from firm to firm, based on connections and partnerships, if firms are using EU bank accounts to support these corridors, then problems may arise. Although, this ‘banking passporting’ will most likely remain stable in order to maintain permanence in the entire financial services market.
So how can remittance firms prepare? Applying for the appropriate licenses is best practice – the two key licences used between the UK and the EU are SPI and API licenses and holding both UK and EU bank accounts to support remittance corridors.
It’s imperative for tech companies to ensure that they are fully compliant; there is evidence that points to EU regulators are going to become rigid to reduce risk with regards to financial transactions. If you want to apply to an EU bank account or API licenses, it’s critical that your compliance is fully transparent. The UK banking regulators are also far more stringent since 2007, this has resulted in money transfer organisation based in the UK, losing their UK bank accounts – in order to acquire one, your compliance must be aligned with your circumstances.
>See also: How will Brexit impact Google’s ‘Right to be Forgotten’?
Businesses can’t predict the outcomes of the ongoing negotiations, but of course, there will be change. While the volatile changes in sterling could reduce the transaction outflow, there could be the opportunities of bi-direction money transfer.
Thinking back to the banking crisis of 2007; the remittance industry was not at negatively affected as other financial services, and in order to limit the impact from Brexit, modern technology could also be adopted. Agile, and compliant platforms will enable remittance firms to capitalise on sending opportunities that present themselves.
The remittance industry has a long wait ahead of it, but like technology firms, preparation will be the key to maintaining a competitive edge.
Sourced by Ali Alani, CEO at Imperial FX
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