Emmanuel Macron is an ex investment banker which may explain why the French President is pursuing an aggressive strategy to try to relocate fintech startups and financial services companies to Paris in the aftermath of Brexit. Can he succeed?
Last week, Revolut, the startup “Challenger Bank” founded by a Russian, Nicolas Storonsky, but headquartered in London, indicated that they had rejected Macron, and the French government’s repeated attempts to lure the business to Paris.
Revolut’s most recent results reveal that the startup has almost tripled its user base to 1.3m users, who can either use the free version of the banking and international money transfer app, or pay £6.99 for a premium version.
Revolut, which permits people to send money to more than 120 destinations worldwide, has a UK Electronic Money (EMI) licence and is regulated by the FCA, giving it the right to do business across Europe using the “passporting” regulations that permit authorised firms in the UK to market and practice their services anywhere in the EU with minimal administrative burden.
But, in a post Brexit environment, there is uncertainty as to whether British firms will still have the right to “passport”, hence the firm has been looking at alternative headquarters, possibly in Luxembourg.
France is of course another option, and President Macron is known to be keen to attract disruptive fintech firms to Paris, having announced the launch of a $10 billion innovation fund at the Davos Economic Forum earlier this year, focused on “disruptive innovation”.
Macron has also promised tax cuts for businesses, and promised to adapt French labour rules to make the country more attractive for overseas businesses.
So, should London be panicking ahead of a potential “brain drain” of top fintech and financial services across “Le Mer”?
Revolut founder Storonsky has been quoted as saying that ‘What I love about London is it’s so international. Paris is not international at all,’ and insists that he will keep the company in the Uk, and London. After all, London has the potential to expand into other international markets besides the EU post-Brexit, and the costs of relocating entire business divisions overseas are not insignificant.
The issue of passporting and potentially relocating headquarters from London to Paris, Frankfurt, Amsterdam, or Luxembourg, or even Tallinn, Estonia, has been much discussed in financial services circles since Britain elected to leave the EU, but so far, most companies, including the likes of Goldman Sachs, have adopted a “wait and see” approach.
If the UK leaves the EU without a deal in place, it will undoubtedly create problems for financial services businesses, but at the same time these must be balanced against opportunities. France, and Macron, would relish the opportunity to seize market share from London and shift the European powerbase somewhat, but does it have the infrastructure, skills, and reputation that London has?
For now, Revolut, and most other companies, seem to be content to watch and wait, perhaps anticipating a counter-move by the British government – a set of measures designed to convince fintech startups to stay put.
Revolut’s revenues increased to £12.8m in 2017, the company announced last week, but pre-tax losses doubled to approximately £14.8m. The company has recently released a metal bank card, available for £12.99 pcm, which provides extra services such as travel insurance, but the company has also been best by technical issues, with customers becoming locked out of their accounts.
Brexit may be the least of the Challenger Bank’s worries, as the competition with other London based startups, such as Monzo, Starling, Tandem, and Atom, hots up.
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