IoD is full of confidence for FinTech’s future
Global news & events The Institute of Directors is there to reassure and support businesses and it has no fears that the FinTech sector will thrive following the EU Referendum.
The Institute of Directors (IoD) is well placed to help FinTech companies through uncertain times following the Brexit vote. The business support organisation was awarded a Royal Charter in 1906 and part of its mission is to promote entrepreneurial activity and wealth creation.
“During more than 100 years the IoD has been helping businesses through economic ups and downs, and there are great opportunities for Britain’s FinTech sector to grow following the EU referendum,” says head of external affairs Jimmy McLoughlin.
He says Britain is leading the way in many areas, including crowd funding platforms, peer to peer lending and payment systems, with clusters of FinTech companies increasingly engaging consumers and businesses.
“British business is resilient and entrepreneurs will always look for opportunities,” he says. “Technology and financial services are two of the UK’s most dynamic industries with traditional City institutions sitting alongside Tech City in London. “Consumers are being more proactive too and enjoying the new experiences and simplicity that FinTech products provide.”
McLoughlin likes to refer to the Hype Cycle developed by researcher Gartner to represent the maturity and market acceptance of different FinTech technologies.
The Hype Cycle shows how all new technology goes through five phases. First there is the early media interest in a concept, then more publicity following success stories and failures, before a trough of disillusionment as interest wanes. New technology then benefits from what Gartner calls a ‘slope of enlightenment’ as more businesses see the benefits, before finally there is mainstream adoption.
“Fintech has followed this path if you look at the initial rise in the digital economy, the dot.com crash in 2000 and its rise back to where we are today.”
The IoD is busy providing members with advice following the Brexit vote.
Its research reveals that 83% of its membership has a commercial link with the EU, and that figure is higher for the FinTech sector.
The IoD will help businesses cope with the short-term consequences from the disruption to financial markets and ensure they are prepared for the longer-term opportunities.
The Institute’s advice to businesses is to have conversations early with suppliers, clients and customers in the EU to avoid any contractual confusion following the referendum result.
Many members are reporting a recruitment freeze which is something FinTech companies can ill afford. Many FinTech firms employ developers from countries such as Poland and Portugal and there is a fear that Brexit might make recruitment more expensive.
Longer-term, revamped UK migration controls could help firms recruit the FinTech specialists they need from outside the EU, including from the Far East and the USA.
“There will be challenges and opportunities from Brexit, and FinTech companies need to get into the right mind-set now and look at the whole world and not just Europe,” says McLoughlin. “The government has some ambitious export targets and FinTech can be a major player in achieving these.”
He adds that London remains a global centre for creative disruption, and this should be embraced and not feared by policy makers.
The IoD has called on the government to do more to promote the Enterprise Investment Scheme and Seed Enterprise Investment Scheme to make it easier for more people to invest in new and growing FinTech businesses.
McLoughlin says these schemes have the potential to unlock billions of pounds in business investment. “With Britain leading the European alternative finance market, entrepreneurs in the UK can raise funds in more ways than ever before.
“As traditional bank finance dried up, businesses in search of capital and investors hungry for returns looked elsewhere, and avenues like crowdfunding and peer-to-peer lending boomed. Now is the time to open up the nascent ‘equity economy’ beyond the wealthy so investors across the country can benefit from these focused incentives.”