The Brexit as Viewed from the European Continent
In the troubled post-Brexit context, many leaders in the UK traditional and alternative financial services are trying to reassure their market and even to present the Brexit vote as an opportunity for the UK. Their statements read like reactions of the French after a soccer game: claiming victory no matter whether they win or lose.
I asked the CEOs of leading crowdfunding platforms from Continent Europe about the impact of Brexit on their business and on the European crowdfunding market at large. Most see in Brexit a weakening of the UK’s leading position in crowdfunding, due, among others, to the loss of the European passport which enables a financial services firm licensed by the regulator of a European country to operate in every other country of the Single Market.
However, these reactions do not reflect a win-lose, the Continent against UK view of Brexit. Rather, many include regrets, rather than satisfaction, about not competing with the UK leading crowdfunding platforms on a level playing field and perhaps hindering the emergence of global leaders from Europe.
Here they are:
“A crushing blow for the UK. We are moving into uncharted territory”
Phil Dardier, CEO of Alternativa.fr, an equity crowdfunding platform and alternative exchange system. Member of the board, European Crowdfunding Network. France.
“From a Paris perspective, I am dumbfounded, saddened not only by the outcome, but also by the actual referendum itself through which 52% of voters have undone 43 years of representative democracy.
I hope that the UK will turn around and come back into the EU very quickly. Unfortunately, whatever happens next, I think the Brexit vote has dealt a crushing blow to the UK financial sector, FinTech and Alternative Finance included.
I fear that, unless significant concessions are made on a political level, the UK will lose its EU passport and its access to the single market. In many ways, this is a sad step backwards. My only hope is that it will be a catalyst for a better integrated, business-friendlier Eurozone, for a more effective Capital Markets Union and for a simpler EU single market ‒ so that Continental marketplaces can meet the growing demands from EU investors and SMEs that will follow from a UK downturn.
We are moving into uncharted territory.”
“Continental European startups will catch up with UK startups”
Ronald Kleverlaan, CEO of CrowdfundingHub, a European Expertise Centre for Alternative and Community Finance. The Netherlands.
“Brexit can dramatically change the future of the crowdfunding sector in Europe. Most international crowdfunding platforms planning to expand into Continental Europe in the next few years rely on passporting their MiFID license to operate abroad. Because most of these platforms hold an FCA license from the UK, they will not anymore be able to passport it to other countries and will lose their access to the European internal market.
Currently, the UK crowdfunding market is by far the largest market in Europe, but if its platforms cannot easily expand into other European countries, they will be caught up by their Continental European competitors who have access to a much bigger internal market of investors and entrepreneurs.”
“We can expect a flurry of acquisitions of Continental startups by UK firms.”
Cédric Teissier, co-founder and CEO of FinexKap, a provider of invoice financing for SMEs. France.
“In the past, British Fintech startups were able to raise much more significant amounts of financing than their Continental counterparts. It was assumed that they could achieve a dominant position in Europe, their relationships with risk-oriented VCs were closer, and their ambitions to change the status quo on the long run were greater.
With the Brexit and the expected loss of EU passport, these startups now have no other choice than to open shop on the Continent or acquire a Continental competitor in order to obtain the legal authorizations they need to operate in the European Union, and to keep executing according to the ambitions they have sold to their investors, i.e. rule Europe at large. We can expect a flurry of acquisitions to happen in the coming 24 months. For example, in the crowdlending sector we would expect companies such as Zopa and Ratesetter to acquire Continental startups.
Does it mean that Continental European FinTechs in Paris or Berlin will have it easier? To the extent that their UK rivals will not anymore be regarded a priori as the winners of the competitive race, definitely, yes.
However, at the end of the day what makes or breaks a startup is its ability to provide new, more useful, more user-friendly and more accessible services. And that won’t become easier for any startup after Brexit, on the contrary.”
“We do not expect Brexit to slow down the German market.”
Raffael Johnen, founder and CEO of auxmoney, a P2P lending platform. Germany.
“In times of consistently low-interest rates and as Brexit increases the level of uncertainty in financial markets, investments in stock market-independent P2P loans are getting even more attractive for institutional as well as private investors.”
In Germany, where auxmoney operates, we do not expect to see any economic slowdown as a result of the Brexit vote.”
“Anything that goes against European standards is bad news for FinTechs”
Joachim Dupont, Founder & CEO,Anaxago, an equity crowdfunding platform. France.
“Anaxago might not be directly impacted as we mainly invest in France, Belgium and Luxembourg, but Brexit is bad news for the UK platforms who were among the most active in Europe ‒ and especially for those who had already started expanding into various countries on the Continent.
The regulation of crowdfunding is still a work in progress. Any political decision that goes against establishing common standards among European countries is bad news for FinTech startups who are looking to go global.”
“The future of our efforts towards a pan-European regulation is very unclear”
Yoann Nesme, Founder and Managing Director of PPL, a rewards-based crowdfunding platform. Portugal. Member of the board of the European Crowdfunding Network.
“I don’t think that Brexit will have any impact on PPL as it is a local rewards-based crowdfunding platform which carries only Portuguese speaking projects. Backers from the UK will still be able to contribute.
In terms of crowdfunding at large, it is very unclear what will become of the joint efforts between the European Crowdfunding Network and the UK Crowdfunding Association to push for a new pan European regulation, or for an adaptation of current EU regulations such as the Prospectus Directive.
In any case, Brexit is a setback for the international expansion of British platforms.”
“An opportunity for Continental platforms licensed to operate across Europe”
Maurizio Sella, Founder & Chairman, Smartika, a social lending platform. Italy.
“After the initial shock, I would say Brexit could represent an opportunity to Smartika, a company authorized to operate across Europe.
Today we had our first British investor who asked whether he could invest in Smartika and in hard currency, as he thinks the (Not So) United Kingdom and the sterling are in a mess…”
“Not major impact because Crowdfunding was not EU harmonized anyway.”
Maarten de Jong, Managing Director of Oneplanetcrowd, a sustainable crowdfunding platform. The Netherlands.
“From a broad perspective, Brexit has a tremendously negative impact on the financial sector. It directly affects UK companies that used to benefit from the EU passport to operate across Europe with a single license, as well as the many EU expats working in the UK and UK expats working in the EU.
However, as far as I can see, Brexit may not have too many direct consequences for the crowdfunding market ‒ be it here on the mainland of Europe or in the UK ‒ because crowdfunding regulations were not harmonized within the EU. Hence, it seems that it will remain as difficult as before the Brexit vote for a platform from mainland Europe to start a crowdfunding business in the UK and, vice versa, for a UK platform to start in the EU. And let’s not forget the currency challenge that was already there…”
“We need the UK in the EU Market to compete with US and Chinese giants”
Damien Guermonprez, CEO of Lemon Way, a payment services provider for marketplaces. Belgium.
“The majority of European payment institutions were registered in the UK where the registration process is six times faster than in Continental Europe. They then used the European passport to operate in other EU countries.
Brexit may have a short-term positive impact on Lemon Way’s business since we may become a gateway to continental Europe for clients currently served by UK-based competitors who will lose their European passport.
But we were clearly not in favor of Brexit. We benefitted from the European Directives and, as market size matters in the payment sector, we need a European market with enough critical mass to compete with American and Chinese giants like PayPal, Apple Pay, Alipay and Wechatpay.
With the UK leaving the EU, other countries may follow and our ability to compete with global leaders will be even more diminished.”
Therese Torris is an entrepreneur and consultant in eFinance and eCommerce based in Paris. She has covered crowdfunding and P2P lending since the early days when Zopa was created in the United Kingdom. She was a director of research and consulting at Gartner Group Europe, Senior VP at Forrester Research and Content VP at Twenga. She publishes a French personal finance blog, Le Blog Finance Pratique.