Fintexit? Welcome to Estonia!
We have written previously about why Estonia is a great location for FinTech.
Post-Brexit this is more pertinent than ever.
Despite messages to the contrary, Brexit is a huge setback for UK FinTech.
Loss of passporting rights will make it more difficult and expensive for regulated FinTech’s to use the UK as base. Yes, the UK can seek to be recognised as ‘equivalent’ by the EU, but given long standing differences over regulation and infrastructure this will take time.
Post-Brexit the UK will lose its safe data status under the Data Protection Directive, making it more difficult for personal data to move between the UK and EU (Article 25 restrictions). Again the UK can apply to be considered ‘adequate’ but this requires time.
Access to large scale EU projects such as PSD2 and the Single Digital Market just became more difficult, as it will be to secure global talent.
The UK has many durable fundamentals and will defend its share, it may yet undercut and outperform the EU in certain areas, however FinTech is a dynamic, trust business. Uncertainty alone changes the game.
Estonia, The Secret Superpower
In our previous post we identified the pillars of Estonia’s FinTech success as expertise in Cyber, Digital ID, Cashless society and e-Government.
This remains true and to the list we now add Market Infrastructure, with Funderbeam and NASDAQ active in the space with revolutionary solutions.
The government too has introduced great new initiatives. e-Residency is now helping UK companies maintain continuity in the EU. Real Time Economy will soon make the existing digital ecosystem networked and real-time.
It is therefore no surprise that the Estonian FinTech sector has grown, matured and is going global.
Don’t take our word for it, the new eTrade for All initiative between UNCTAD, The World Bank, WTO, ADB and IITFC leverages Estonian e-Residency to develop e-commerce business in emerging markets. That market was worth USD 22.1 trillion in 2015 alone!
Crowd Valley, a US digital back office provider, will integrate e-Residency to allow clients to securely authenticate themselves and digital sign in their private securities platforms.
Barclays have recently ranked Estonia #1 globally in their Digital Development Index.
Not A Zero Sum
Competition makes you better but so does collaboration, with added leverage. This should be the UK-Estonian model. The UK can contribute decades of expertise and access to global markets, Estonia reciprocate with world class innovation, IT skills and EU market access.
That model is nascent, TransferWise win awards in the UK while operating a large office in Estonia. The UK and Estonia are founding members of the Digital 5 initiative to promote IT skills, market access and connectivity. The UK ambassador to Estonia was even voted Estonian start-up supporter of the year 2015!
By focusing on respective strengths we believe both parties will benefit from market access continuity, improved client service, new efficiencies and capabilities.
As we signed off last time, why not jump on a plane and visit us in our Digital time machine...