EU ministers to discuss post-Brexit future of fintech
Image credit: Dreamstime
This week, EU finance ministers will discuss plans to attract financial technology (fintech) companies to the bloc, prompted by concerns about the post-Brexit future of the European fintech market.
The UK is the largest constituent of Europe’s modest fintech market, which is overshadowed by rapidly growing fintech sectors in the US and China. Once the UK departs the bloc in March 2019, the EU risks being left with a severely weakened fintech sector.
Fintech is a catch-all term referring to technology competing with traditional practices in financial services, such as mobile banking apps and the automation of trading and risk management. The basis of the financial sector on data rather than goods renders many jobs in the sector highly vulnerable to automation.
The global fintech industry is small but rapidly expanding, with a twelvefold increase in investment between 2008 and 2014.
Currently, China is the clear world leader in fintech, with a market worth $102 billion (£77 billion) in 2015, followed by the US with a $36 billion (£27 billion) market, according to a report by Brussels think-tank Bruegel commissioned for the meeting.
The EU market is worth just $6 billion (£4.5 billion), and is failing to achieve the same growth as global rivals. Given that more than 80 per cent of its fintech market is based in the UK, there is a impetus to discuss the post-Brexit future of the EU’s market.
Ministers will conduct a debate on fintech at meeting at end of the week in Tallinn, Estonia. According to Reuters, ministers will discuss how the EU could adapt rules and strategy to attract fintech start-ups and other companies, and encourage the expansion of existing companies – which are focused on national markets – across the breadth of the continent.
The Bruegel paper has recommended coordinated, proportional and flexible regulations to favour start-ups and alternative businesses and in order “to prevent regulatory and supervisory arbitrage” in the sector.
It also warns that traditional financial companies could be badly affected if fintech start-ups begin to collaborate with data-rich tech giants such as Amazon and Google, which have far more extensive information on borrowing and lending than individual banks.
In June this year, Amazon opened its own lending service for small businesses, which has already provided $3 billion (£2.3 billion) in loans.
Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.