Fintech firms are worried Brexit could see the UK lose passporting benefits and access to talent, says TransferWise CEO Taavet Hinrikus.
London’s status as a global financial technology hub could be undermined if Brexit complicates the ability of companies to operate across Europe and access to talent becomes difficult, the co-founder of an international online money transfer platform warned Tuesday.
Brexit talks kicked off last week between the U. K. and the European Union, following an election that saw Prime Minister Theresa May’s Conservative Party lose parliamentary majority.
Taavet Hinrikus, CEO of London-based unicorn TransferWise told CNBC on the sidelines of the World Economic Forum’s annual June meeting in Dalian that a couple of factors in particular were important to financial technology companies such as his.
“It’s really two things which are important to TransferWise and all of the high-growing companies in tech and fintech, ” said Hinrikus.
First is a concept called passporting that enables a firm authorized in an European Economic Area (EEA) state to carry on permitted activities in any other EEA state by either exercising the right of establishment or providing cross-border services.
In the case of TransferWise, and fintech companies more broadly, this means a license given by a regulator in one of the countries in the region can be used in other EEA areas. “One regulator gives you access to 500 million people all over Europe, ” said Hinrikus. “With Brexit, (the) U. K. will most likely lose passporting.”
This implies a firm like TransferWise may have to apply for separate licenses in Europe and the U. K.
The other concern among firms is the ability to hire talented workers. Hinrikus explained that one of the reasons why London is a fintech hub is because of the great number of skilled people who have come to the city from all over the world.
“If it’s not possible to get people to come to London, and if existing people start moving for some reason, I think the position of London is somewhat in danger, ” he said.
Some banks including Goldman Sachs have previously confirmed they will shift jobs away from London while bulking up their European presence. Earlier this year, a Reuters report said TransferWise will move its European headquarters from London to mainland Europe by March 2019 so that it can access the single market after Brexit. The report added TransferWise’s global headquarters would remain in London.
“We have never thought about setting up a new headquarters. If we need to do something, and we need to do it in order to keep on serving our customers in Europe, what we would do is set up an office in Europe. That’s something which we are exploring, ” Hinrikus said.
He added, “We have a great team in London, with 150 people. There’s no point in moving these people but we need to make sure we can keep on servicing our customers in mainland Europe.”
TransferWise is a regulated business in 37 countries, including Singapore, Brazil and the United States. But it has yet to set up operations in China, where fintech is thriving, but Hinrikus said the company does send money into the mainland. “We’re seeing pretty good growth on that corridor already, ” he said.
Though he declined to disclose a timeline for when the company might set up a business in China, Hinrikus said they are exploring the market.
” We do believe there are lots of money being sent from China to the rest of the world. If we go kind of a five, ten-year horizon, I think that’s going to be a very interesting market for what we do, ” he said.
