• Neil Mathieson

UK FinTexit? Welcome to Estonia

Updated: Jun 22, 2018

We have blogged previously about why Estonia is a great location for FinTech. In the post-Brexit world UK FinTech's can leverage Estonia's highly competitive digital skills and environment to their advantage.


Brexit Blues

Despite political and industry messages to the contrary, Brexit is a huge setback for the UK FinTech and Financial Services industries.


Loss of passporting rights will make it more difficult for regulated FinTech’s to use the UK as base for pan-European business. Yes, the UK can seek to be recognised as ‘equivalent’ by the EU, but given long standing differences over regulation and infrastructure this is not guaranteed, indeed a fight for valuable business such as the European Banking Authority is more likely.


Post-Brexit the UK will also 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 and more expensive, as it will be to attract global talent.


The UK has many durable fundamentals such as market size and expertise and can be expected to defend its share in segments such as Insurance and Asset Management, it may yet undercut and outperform the EU in certain areas, however FinTech is a dynamic, trust business. Uncertainty alone changes the game.


Estonia, Secret IT Superpower

In our previous post we identified the pillars of Estonia’s FinTech success as expertise in Cyber, Digital ID, Cashless society and a supportive e-Government.


To this we now add Blockchain, emerging infrastructure which is set to transform many aspects of Financial Services (and other industries) in coming years. Estonia developed its own decentralised, distributed system in the 1990’s and has used Blockchain since 2008. One one of the world’s largest Blockchain providers, Guardtime, was born in Estonia, NASDAQ conduct innovation in Tallinn and successful Blockchain startups such as Funderbeam emerge.


​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, Barclays have recently ranked Estonia #1 globally in their Digital Development Index.


Best Fit

Numerous opportunities exist but payments stands out as the most obvious and immediate area of interest. Estonia has excellent skills in the field, operating a cashless society where most payments are real-time and often part of fully automated processes. Estonian payments companies such as Fortumo leverage this expertise globally.


Not A Zero Sum Game

Competition makes you better but so does collaboration, with 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 development and client service operation 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 that both countries can benefit from market access continuity, operational efficiencies and even new capabilities.


If you would like to know more about FinTech in Estonia please contact us for market data and research.


Neil Mathieson 13.07.2016

#fintech #brexit #estonia

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