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Is the inadequacy or unavailability of any plausible progress in achieving a fundamental agreement with the European Union before the conclusion of the transitional phase on December 31st, 2020, the primary challenge in the United Kingdom’s financial industry? Without a second thought, ever since Brexit, the pandemic caused by CoronaVirus has hindered the development and expansion of Financial technology in London, United Kingdom.
Out of all the European nations, London, which has long been a favourite for the formation of potential Financial technology unicorns, has continued to suffer the most.
Research and studies were conducted on recently authorised and operational payment systems and electronic money institutions (or EMI), small Application Programming Interfaces (or APIs), small EMIs, and Account information services (AIS). Payment initiation services (PIS) authorised institutions in the European Union (EU) from August 2017 up until August 2020 to learn more about what is currently taking shape in the industry.
A EUCLID database, or European Centralised Infrastructure for Supervisory Data, was used for the research. In the mentioned database, the strategy is for the platform to interpret data developed and utilised by the European Banking Authority (EBA) to collect and analyse various financial companies’ regulatory sets of information. It was therefore concluded that in 2017-2018 there were one thousand two hundred twenty-two (1,022 ) ultimately authorised enterprises; in 2018-2019, there were one thousand one hundred and eight (1,108) freshly certified corporations; and in 2019-2020, the number plummeted to five hundred and seventy-eight (578), a shocking forty-three percentage (43 %) decline for licenses and permits of financial technology in the European Union.
Summary of the data on the evaluation and approval of FinTech institutions in the United Kingdom and the European Union both before and after Brexit
Number of newly authorised/registered and operational PSPs in Europe
The pandemic brought by CoronaVirus caused a sharp decline in the Gross domestic product (GDP) across Europe, and the pressure on the payment systems industry with a number of emerging payment and electronic money institutions duly authorised historically in 2017 to 2019 were the leading causes of such a significant decrease in new authorisations in 2019 until 2020.
These figures on FinTech authorisations in Europe clearly show that the United Kingdom is the biggest loser. From 2019 to 2020, there were approximately fifty-four percent (54 %) fewer new authorisations in the United Kingdom than there were in the rest of the EU. It was observed that the UK’s share of new authorisations within the EU decreased from fifty-six (56 %) in 2017 to 2018 to thirty-four percent (34 %) in 2019-2020, when we started to look at the percentage of new payments and electronic money institutions legally authorised in 2018 to 2020. There is no absolute doubt that this was not due to CoronaVirus.
United Kingdom’s share of freshly authorised and active EU PSPs
Only after the UK represented approximately half, or about fifty percent (50%) of all payment and electronic money (and several other forms of PSP) institutions licensed in the country, however as of August 2020, the United Kingdom’s share is just 31.59% out of 3,843 authorised PSPs. There has been a definite trajectory of a decrease in the UK proportion of incoming licenses and permits of Financial technology institutions throughout Europe. In three years, London’s contribution has plummeted by a staggering thirty-nine percent (39 %).
With the unsatisfactory UK-EU trading negotiations findings, something off cliff Brexit is becoming increasingly likely with each passing day, and apart from the inevitable loss of foreign passporting rights, there are other essential aspects to consider:
It is apparent that significant financial technology enterprises both in the United Kingdom and European Union have already secured additional authorisations, whether in the EU or UK correspondingly. Unfortunately, most medium-sized and small-sized payment and electronic money institutions across the UK and EU countries have still not attained the off-the-cliff Brexit.
The timetable of the trade deal negotiations sounded ambitious back in the year 2017, and able to look back now from Covid – 19 toughest-hit European countries; it seems most unrealistic today. The sectors of the economy of the UK and the EU are so intertwined and dependent on one another that it seems impossible to dismantle what has been built over nearly fifty (50) years in an orderly fashion.
Payment and electronic money institutions in the UK and the EU should obtain the necessary rulings and regulatory authorisations in either the EU or the UK as an endorsement of the transitional phase beyond December 31st 2020, is highly improbable. This will help these institutions avoid political uncertainty and regulatory restrictions and maintain compliance throughout these challenging times for the industry.
You can schedule a free initial consultation with COREDO experts to get guidance on regulatory licenses and permits in either the EU or UK if you are a FinTech company beginning to wonder how to remain in business in either the EU or the UK (London) after Brexit while remaining compliant with the regulatory requirements.