Companies in United Kingdom are planning to go an alternative way to meet their customers in the European Union Nations in a bid to navigate a 'no deal' Brexit.
The recent one being a money transfer company TransferWise, whose headquarter is in London.
According to Techcrunch report, TransferWise is applying for a new licence in Brussels, in a bid to navigate a possible “no deal” Brexit as the U.K. prepares to leave membership of the European Union on March 29 this year.
The report adds that, One of the definite plusses of EU membership, and something that has undoubtedly benefited U.K. fintech startups, is so-called “passporting” of financial services.
This sees a certain level of financial regulatory harmony across the EU and means that companies authorised in any EU (or EEA) state can offer their services freely in any other, and with minimal additional authorisation.
See also: Brexit phase 2: European leaders want Theresa May to spell future EU obligations for Britain
Furthermore, these “passports” are the foundation of the EU single market for financial services. Therefore, if the U.K. leaves the single market, with a no deal Brexit and other likely forms of Brexit will result in, then fintech companies in the U.K. that trade in the EU/EEA or have plans to do so, will need to obtain new licenses from an EU/EAA country.
TransferWise said the plan is to open a small, additional satellite office in Brussels, with the company applying to the Belgium regulator, The National Bank of Belgium, for a “Payment Institutions Licence”.
Techcruch adds that the plan is not such a big deal for a large company like TransferWise: the money transfer service already has 9 offices, employs 1,400 people globally, with 230 posted to its HQ in London.
However, for much smaller startups, the loss of passporting could be prohibitively expensive to mitigate, depending on what stage of growth a company is at and how much runway it still has left.
For new companies, it makes setting up shop in London’s fintech much less attractive, as regulatory authorisation will need to be duplicated for EU trading.
Meanwhile, TransferWise has chosen to apply to be regulated in Belgium, and not somewhere else.