If New Zealand and the UK collaborated on fintech projects, what kinds of challenges would we face and how could regulations shape our activities?
Those were some of the questions raised by a recent breakfast discussion as part of London Fintech Week, which concluded last week.
The discussion, held by fintech experts from Fieldfisher's Tech, FMP, Competition, Regulatory teams, included guests from a New Zealand Trade and Enterprise delegation. It was led by partners John Cassels and James Walsh, Director Chris Eastham and Associates George McLellan (New Zealand-qualified) and Simon Lafferty.
Discussion topics included GDPR, Brexit, the UK's regulatory sandbox, and open banking.
The challenges and opportunities for UK and New Zealand Fintechs represented by the EU's General Data Protection Regulation (GDPR)
New Zealand has ‘adequacy status' under the GDPR, something that the government is looking to preserve by updating its own data protection laws. The discussion says that Kiwi fintechs are in an ‘advantageous position' because they don't have to deal with as much red tape when trying to do business in Europe.
Fintech firms aren't necessarily held back by legacy data systems that are becoming problematic for traditional financial institutions.
Fintech firms may also find it easier to comply with and benefit from GDPR provisions because their technology is flexible.
Data portability may also help Fintech companies to challenge major banks.
How Brexit might help or hinder the foreign investment in British Fintech
The Brexit saga is ongoing, but businesses in New Zealand and UK are interested in what kinds of opportunities might arise from it.
It may well be easier for Asia Pacific companies to set up shop in London thanks to a local talent pool, data network infrastructures and English as the global business language.
From a ‘robust, evidence-based approach', the participants say it's clear that there is a battle for business in the professional services markets, with other EU countries eager to entice foreign Fintechs into their own jurisdictions.
In Fieldfisher's experience, tech companies still want to be based in London so for these businesses it is about setting up a Plan B – to help them retain a base in London while ensuring they have a presence in Europe.
"It is important to remember that Brexit is a mix of politics, economics and law and different things are in the ascendancy at different times – so advice does and will change over time.
How the UK's regulatory sandbox is proving a popular test-bed for evolving Fintech services
The United Kingdom Financial Conduct Authority offers a regulatory sandbox as a ‘safe' testing environment for disruptive technologies.
According to the experts, the sandbox is built to reduce the time and cost of bringing innovation to market, improve access to finance, enable more product testing and marketing, and identify relevant consumer protections.
“The sandbox is currently focused on businesses with operations in the UK focused on serving the UK market, so New Zealand Fintechs can in theory participate on a branch basis (as an alternative to setting up a UK entity); but there are also discussions underway about potentially establishing a "global sandbox" with the cooperation of regulatory authorities from around the world, with whom the FCA has bilateral cooperation arrangements such that firms sandbox tests could span two or more jurisdictions.
Will Open Banking and PSD2 change the way we bank?
As open banking gets set to transform the use of money through legislation (the second Payment Services Directive, or PSD2), the UK's biggest banks may open up their data.
This may allow challenger banks from both the UK and abroad to offer better and cheaper services to consumers.
“Several different Fintech business models are starting to emerge as a result of PSD2 and it will be exciting to see how this sub-sector of the Fintech space develops and how its growth in the UK sets the pace for Fintech hubs like New Zealand to follow.