After Brexit segregated Britain from the rest of the EU, many industries, including financial and the rapidly expanding fintech market, were at a loss at how they could remain competitive in the nearly 130 billion pound finance sector. In order to face this hurdle, Britain’s government has reviewed its financial policies to perhaps better retool them in hopes to keep the fintech momentum going.
One proposed solution would be what has been dubbed the “Big Bang 2.0,” sequential to the original “Big Bang” back in 1980 referring to the liberalization of trading. It has yet to be determined how far, if any, deregulation would go in hopes of staying in line with the rest of the world’s standards. However, debates between UK finance and the Bank of England have left the decision at quite the standstill, as it’s undetermined if the best solution is to remain in line with the world or discard current rules which have left them in this predicament in the first place. Worries have risen that if they start letting rules go and more leniency with financial decisions, it could only lead to more destruction, lead to insurers holding incorrect amounts of capital, and could add to compliance costs.
Another option Britain is considering is using a strategy similar to New York fintech’s market, as New York has actually proven to pull ahead from Britain recently. In order to do this, Britain would begin allowing “dual class” shares and lower “free float” for a period of time to get back on track. Dual class shares are varying types of shares within the same company, essentially giving stockholders more specific options based on voting rights and the dividend payments they receive. These increased options for stockholders could easily attract more of them, raising the funds fintechs are able to accumulate. They are also intended to draw in fintech companies whose owners are known to enjoy keeping large amounts of company control to themselves.
Up till this point UK fintechs have been able to find their way into the EU market by using Lithuania to obtain licenses and use what have been dubbed “sandboxes” which are essentially methods for fintechs to test their products on actual customers with the aid of supervision. Although some of these methods only provide a brief increase in funds, and some giving up typical logic and taking on risk, they are necessary risks Britain must take to remain competitive in the financial sector after Brexit.