Interesting article in the Irish times re the potential impact of Brexit on Irelands Fintech sector.
Three issues of particular relevance for UK based Fintech entities which wish to continue to sell into the EU single market are:
1. Regulation- not all Fintech entities need to be licensed to carry on their business. Those Fintech entities which have to date relied on a license from the FSA to passport their services into the wider EU may well look to this side of the Irish sea to obtain the license they require to be able to continue their operations;
2. Data Protection- Following Brexit the UK will no longer be "on our side of the fence" for transfers of personal data. This raises significant issues for Fintech companies whose business is all about processing personal data. The UK will have a number of options as to how to put an acceptable DP regime in place- however, no such DP concerns arise on DP transfers from other member states to Ireland. Speaking as a lawyer who has earned a lot of money negotiating torturous DP transfer arrangements in large scale payment/processing deals, I would much prefer to be transferring my data to an Irish Fintech services provider, than to a UK services provider post Brexit;
3. Tax- Selling Fintech services on a Cross border basis is a tax sensitive business. Brexit may see changes in VAT treatment in particular, or the introduction of customs tariffs on business done with entities in the UK. Again- moving your Fintech business to Dublin may be a smart business risk mitigation play.
The above factors (and others) mean that there are real and compelling reasons why Ireland really should be considered as the base of operations for any Fintech business looking to sell its services across the EU.
Its good to see that the Irish government is taking steps to ensure that the Irish regulator is adequately resourced to be able to deal with this new reality.
The Central Bank has defended its preparedness with regard to the fintech sector pointing out its engagement in a number of different areas. In a statement it said the consequences of Brexit would only be known in the months ahead. “It is too early to speculate on potential implications such as increases in applications for authorisation,” it said. “If necessary, the Central Bank will deploy staff to deal with increases in the authorisation pipeline and will reprioritise workload, as appropriate.” What is certain is Ireland’s attractiveness in the sector. PwC’s recent financial services attractiveness indicator ranked Dublin as the second most attractive of the major European financial centres second to London. It was ranked for strength of legal rights, ease of doing business, and talent.