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Grexit, Brexit and Fintech

Grexit - Greece exiting the EU or Brexit - Britain exiting EU post the 2015 elections will most likely have an impact on London's financial services market and subsequently on FinTech. While politicians and key stakeholders across the EU will be toiling hard to stop both of these from happening, I just wanted to think through what the possible ramifications of these would have on
FinTech. 2012 was when the Euro crisis was at its peak, and I think, 2015 would be a volatile year for the Euro. The Greece saga, followed by elections in Britain and Spain, the Russian-Ukrainian
conflict and deflation are a few macro-economic, geopolitical events that would continue hurting the Euro.
When I researched and analysed the effect of these risks, but particularly that of Grexit and Brexit on FinTech, I could come up with a few factors to consider. Free trade, Sharing capital, markets, talent and allowing easy migration across borders were the key principles behind EU. Grexit or Brexit would impact most, if not all of these.
Capital Flow: Fintech in UK has thrived on capital flows from within the country and the continent. UK got 53% of Fntech investments in Europe in 2013. That capital was not all from UK based
investors. Also, there might be a liquidity crisis due to loss of confidence.
Talent: Talent from Europe is critical to Britain doing well in Fintech. If the Euro gets affected causing a contagion and a collapse of the EU, that could potentially affect the talent flowing into Fintech
Confidence in Public markets: The contagion and the crisis that would result post a Grexit/Brexit would reduce confidence in public markets. This would mean lesser companies opting for IPOs leading to lesser exits for investors. This is prone to affect Fintech.
Founder's inertia: One trend noticeable within Fintech is that, many founders are from a banking background. But as markets get into a stress scenario, and capital to do business dries up, even bankers may get into a mode of inertia before launching into Fintech start ups.
While these are potential issues, what are the risks with a Greek exit? Most EU countries and firms have reduced their exposures to Greece. so a Grexit might not have as big as it would have had three years ago. But Grexit would showcase the fact that EU membership is reversible, and there may be a flight of capital from the usual suspects such as Portugal and Spain. This is prone to affect markets and the banking industry.
Brexit is more of a possibility today than it was a year ago. But it would only be a lose-lose proposition if it happened in the terms that Brexit is currently understood as. Purely from a tangible monetary perspective, Britain might save a few billion pounds per year by exiting EU. But the intangible benefits to Britain in staying in the EU are huge. Britain does half of its trade with Europe. But there is still a possibility for Britain to exit, rather stay in the EU on re-negotiated terms. If Grexit happened, Britain's negotiation powers with EU would most definitely increase, which would increase the chance of a Brexit.
A Grexit might still prove costly for the EU and have potential ramifications across EU and UK's Financial services and Fintech firms.
- Arun
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