Paris has become an attractive hub for fintech companies in Europe to consider relocating to, post-Brexit. It has all the right ingredients to support a thriving entrepreneurial ecosystem.
Strong, world-class French banks such as BNP Paribas and Société Générale are already acquiring fintech companies, like Compte-Nickel and Lumo, to show the world that France wants to attract startups.
Drawing on a prestigious financial tradition and countless cohorts of innovative upstarts that took advantage of its globally centralized and connected position, London got its title as the “Fintech capital of the world” for a good reason.
But now, with some of London’s global connections - 27, to be precise - under threat due to Brexit , many fintech firms located in the UK may lose their prized access to the EU market.
To guide these firms in the UK on how to tackle challenges that will be faced during this uncertain transition period, I spoke to fellow leaders in this space from PwC France and Gide.
Fintech companies in the UK should keep calm, consider relocating to neighboring capitals and seriously look into Paris as an option.
Keep Calm and Carry On
Despite concerns about the impending Brexit, it is safe to say that the fintech-friendly atmosphere that the FCA created in London will not disappear so quickly.
Jimmy Zou, a Partner at PwC France, who is the go-to-expert on all things to do with Brexit, told me that we are unlikely to see immediate changes with London’s fintech industry.
“During the last decade, the innovation-friendly atmosphere created by the FCA, the close ties with the US, the number of investors, and the comparative ease in attracting and retaining talent means that London’s position will not disappear overnight,” he said.
After all, despite months of fear-mongering, endless reports, and return flights across the channel, the British government has still yet to decide on a final deal for Britain’s exit from the EU, and whether or not the country will remain a part of the European Economic Area, which ensures certain rights - and restrictions - to providing services.
Karim Sabba, COO at Woorton
Franck Guiader, Head of Innovation & FinTech at major French law firm Gide 255, was quick to point out that it is unclear, “whether London fintechs companies will benefit from a unique, well-proportionate, EU regulatory framework, or to what extent the UK rules that apply to them will match with those in Europe.” For London-based fintech firms, the future is no longer so certain.
But Paris has long been looming in London’s shadow. France has a deep culture of finance & financial services, combining traditional world-class players like banks and insurance companies with a workforce skilled in engineering and data science.
Combining a strong technical infrastructure with innovative regulation has set up Paris well to reap the rewards of offering stability: over $1 trillion of balance sheet assets have already been moved out of London, in preparation for whatever comes.
Regulation vs. Relocation
Post-Brexit, London might slowly lose its charm and attractiveness if adhering to regulatory frameworks in both the UK and the EU start to stifle innovation.
Zou noted that “a hard Brexit could mean the loss of the precious European passport for Fintechs located in the UK.”
If this is the case, he said, UK-based companies wishing to operate in the EU will have two options: to relocate, and/or to apply for European licenses.
However, Zou adds that both these processes may be time-consuming and expensive.
Instead, fintech companies should consider moving to existing fintech hubs in European capitals: Dublin, Brussels, Frankfurt - or Paris.
While many banks retain a presence in the City of London, a number of American banks have already started to relocate their head offices into Europe. HSBC is re-allocating ownership of its European entities to HSBC France, with hundreds of staff, or jobs, expected to follow.
Pauline Adam-Kalfon, Partner Blockchain & Financial Services at PwC France, shared with me her thoughts on why Paris, over any other European city, offers an environment in which fintech startups can flourish.
“Paris is known for its ability to accommodate InsurTechs, RegTechs and Neo-banks. There are also many investors, angels and leading financial institutions present in Paris. Five out of the 15 European banks are French, which gives startups an incredible opportunity,” she said.
Guiader was keen to agree. “When there is a fierce competition, innovative project holders immediately need to build trust and to earn market shares. That begins with legal protection. In Paris, regulation and guidance stemming from public institutions, meet entrepreneurs' expectations,” he said.
In an industry that relies on the established system just as much for its foundations as an example to rebel against, there is an incredible number of opportunities available to fintechs that choose to base themselves in France.
A Fintech Hub for the Long Term
The draw of France’s capital goes beyond its institutional framework to ensure sustainable long term growth.
France is the European champion in business creation. According to the INSEE, in 2016, 554,000 companies were created in France.
It is relatively easy to start a start-up in France, thanks to a combination of a flexible regulatory environment, simplified statutory provisions, and tax deductions for investing in SMEs.
As well as its favorable conditions for entrepreneurs starting out, Paris has more to offer in the long-term such as a more stable immigration structure for hiring EU talent, or the recently-introduced ‘French Tech Visa.’ If immigration rules post-Brexit remain unclarified, it will be tough for London to recruit talent from Europe, or further afield.
Parisian regulators have long been held up as examples of legislation done well, with Guiader enthusing that “the recently-passed PACTE bill will introduce a new regulatory regime that is likely to bring clarity as well as regulatory label to the crypto ecosystem.”
That’s not to mention the French government’s focus on business-friendly tax policy means businesses can build for long-term growth in the city of lights.
Talent and investment are the core of London’s selling points. Without these, and without that ticket to the financial infrastructure of the European Union, it’s little wonder that the financial behemoth will falter in the ensuing uncertainty.
So while the parliament of Great Britain bats the Brexit bill to and fro, in Paris, we’re simply getting on with business as usual building a regulatory and entrepreneurial environment that will support the next generation of economy-redefining fintechs — investing in talented individuals and businesses, to give them the freedom to innovate, and organising events to unite the community and ignite further action. Whatever deal the UK has to work with, Paris will remain open for business.
Karim Sabba is the COO at Woorton and the co-founder and co-host of the Paris Blockchain Week Summit.
