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A guide on making Brexit profitable for fintech and ecommerce

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No matter what happens, someone finds a way to turn a profit. The trick is being that someone. So much focus has been on the negatives of Brexit that we think there’s a danger of opportunities being missed. Here’s our guide to having a good Brexit.

E-commerce and cross-border lead generation

The exchange rate for sterling has fallen so low that the pound is almost at parity with the euro. It has turned Britain into a massive bargain store for e-shoppers. With minimal effort at promotion, UK merchants can attract price-conscious EU consumers. Due to this, SMEs saw international sales rise by 34 per cent in the last six months of 2016, three times the increase in the first half of the year.

If ever there was a time to feature the Union Jack accompanied by the words (suitably localised) “Brexit bargains”, in your promotions, it’s now. That’s great, as far as it goes. Everyone wants extra trade even while effectively selling at a discount. But this guide notes that it’s not sustainable and its continuation cannot be taken for granted. At some point the pound will rebound or bargain hunters will revert to their previous shopping habits.

So Brexit guide, what to do then?

Turn today’s cross-border bargain hunters into repeat shoppers. Invest in data collection, strategic planning and customer experience improvements. Use the collected data to engage them and migrate them to a localised version of your site. For now, keep them coming back with price-led promotions. Over the next year, learn their purchase motivators and give them reasons other than price to return.

There is no sign of the Eurozone recovery slowing down; it’s the opposite, with the Eurozone economy growing twice as fast as the UK in recent months. There are already signs, particularly from the automotive sector, that this is releasing pent-up demand. In theory, there’s no reason why UK retailers can’t benefit by servicing this pent-up demand. Successfully doing so is going to take nerve, commitment and impeccable customer focus. But it is possible.

Fintech, the City, and a country that loves to borrow, spend and invest

Brexit threatens a sizable chunk of the UK financial-services industry. Much of the business conducted by UK financial services, most obviously the Euro-clearing markets, relies on access to the EU. That’s a fact. We can’t wish it away. But neither Brexit nor the EU are everything. To note a couple of examples in this guide, London trades nearly twice as much foreign currency as New York, its nearest rival.

This trade does not depend on EU markets. Around 60 per cent of the world’s Eurobonds are traded in London. Despite the name, these have nothing to do with the EU and the trade is not fundamentally threatened by Brexit. Similarly, the £60 billion-a-year London market for commercial insurance draws a third of its clients from North America, a third from the UK and Ireland.

The UK fintech scene has the world’s biggest financial centre at its disposal. And if Brexit threatens to erect barriers that will hinder UK firms trading on the continent, the same is true in reverse. UK fintechs will enjoy privileged access, in geographical and regulatory terms, to the enormous B2B market the City offers.

Such companies will also have privileged access to the UK’s highly competitive retail finance market, worth £58-£67bn a year. There are signs that leaving the EU could help invigorate at least some segments of that market. A recent article in the FT reported that SME providers of retail banking services werey looking forward to Brexit in the hope of being freed from onerous EU regulations designed for “too large to fail” banks which also applied to smaller institutions.

Taken together – along with the availability of investment for fintech startups in London, and the UK’s sympathetic regulatory environment – these facts signpost a future for the UK as a global B2B and B2C fintech incubator. But this won’t happen by itself. Right now, we’re still faced with the threat of a fintech exodus.

To make sure the UK’s fintech motor doesn’t stall, the British government must work out a transition deal with the EU27 that gives London-based fintech firms an incentive to keep at least some of their businesses here for long enough to see what opportunities Brexit and a post-Brexit UK could bring.

As an industry, we need to lobby as hard for that transition as we have for a PSD2 that’s fit for purpose. Recognising that there are profound risks associated with Brexit should not stop us from looking for opportunity in it. Why should it? For as long as the world hasn’t ended, there is still business to be done.

Simon Black is CEO at PPRO Group

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