When the United Kingdom voted to leave the European Union in 2016, most headlines focused on trade, immigration, and politics. But for the financial technology (fintech) sector — one of the UK’s fastest-growing industries — Brexit represented a seismic shift in how companies collaborate, compete, and comply across borders.
Years later, the dust is settling. The UK remains a global fintech powerhouse, and the EU continues to nurture its own thriving digital finance ecosystem. But partnerships between UK and EU firms have had to adapt to new rules, regulatory complexities, and competitive realities.
Here’s how Brexit is reshaping UK–EU fintech relationships — and what the future might hold.
Pre-Brexit: A Unified Fintech Playground
Before Brexit, UK and EU fintech firms enjoyed frictionless cooperation. Passporting rights allowed UK-licensed financial institutions to operate throughout the EU without obtaining separate licenses. London acted as a hub for investment, talent, and innovation, serving the entire European market.
UK startups could easily launch products in France or Germany; EU companies could seamlessly scale into the UK. Shared regulatory frameworks, consistent data rules, and a deep pool of venture capital created a single, highly attractive fintech environment.
The Post-Brexit Reality: Divergence and Complexity
Brexit effectively ended passporting. Now, UK-based fintechs that want to serve EU customers need separate licenses in EU jurisdictions, often via subsidiaries or partnerships. EU fintechs face similar hurdles when entering the UK market.
Key impacts include:
1. Regulatory Fragmentation
Instead of one regulatory home covering both regions, fintechs now navigate two systems. UK regulators (e.g., the Financial Conduct Authority) are gradually diverging from EU standards (e.g., under the European Banking Authority and local authorities). This divergence introduces both compliance costs and strategic decisions: Which markets to prioritize? Where to invest in licensing?
2. Talent Mobility Challenges
Brexit ended free movement of labor between the UK and EU. Hiring engineers, compliance officers, and executives across borders now involves immigration processes and, in some cases, visa quotas. For an industry that thrives on international talent, this adds friction and cost.
3. Data Flow and Privacy
Both sides still align broadly on data protection (the UK retained GDPR-like rules), but adequacy decisions can change. Any divergence could require firms to create complex data-handling frameworks to remain compliant, affecting everything from cloud hosting to cross-border payments.
4. Rising Competition
Brexit prompted EU hubs — such as Paris, Berlin, Amsterdam, and Dublin — to position themselves as alternatives to London. While London remains dominant, especially in capital markets and fintech funding, EU centers have gained ground, attracting firms that want a strong EU presence.
Adaptive Strategies: Building Bridges Through Partnerships
Despite the challenges, fintech collaboration between the UK and EU hasn’t disappeared — it’s evolving.
Subsidiaries and Dual Licensing
Many UK fintechs have established EU subsidiaries to retain access to the single market. Examples include Revolut (Lithuania), TransferWise (now Wise, Belgium), and Monzo (Ireland). These subsidiaries hold EU licenses while maintaining headquarters and major operations in London.
Cross-Border Partnerships
Some fintechs now partner rather than expand directly. A UK company may provide technology or back-end services to an EU-licensed partner, while an EU firm may rely on a UK-based specialist for niche capabilities. These partnerships reduce direct regulatory exposure while preserving market reach.
Regulatory Cooperation
Although political ties have cooled, regulatory dialogue continues. UK and EU regulators share interests in combating financial crime, ensuring stable payments systems, and fostering innovation. Initiatives like regulatory sandboxes and innovation hubs remain a point of commonality, offering channels for joint pilots and standards alignment.
Areas of Opportunity
Brexit may have introduced barriers, but it also created opportunities for fintech innovation and partnership.
1. Embedded Finance and B2B Services
Cross-border fintech partnerships are thriving in infrastructure areas like Banking-as-a-Service (BaaS), payments processing, and regtech (regulatory technology). Firms can collaborate behind the scenes without necessarily holding customer-facing licenses in each other’s markets.
2. Crypto and Digital Assets
Both the UK and EU are developing frameworks for digital assets — the EU with its Markets in Crypto-Assets (MiCA) regulation, the UK with its own phased approach. Regulatory clarity is attracting institutional players. Cross-border expertise sharing and joint ventures are likely as firms seek to scale across multiple jurisdictions.
3. ESG and Green Finance
Fintechs focused on sustainable finance see demand on both sides of the Channel. Partnerships can help standardize reporting, develop green investment platforms, and provide transparent, cross-border ESG tools.
4. Open Banking and Open Finance
Both the UK and EU were pioneers in open banking. Although their standards are now diverging slightly, there’s a shared vision of interoperable, consumer-centric data sharing. Joint ventures that create seamless, multi-market solutions will likely flourish.
The Competitive Landscape: London vs. EU Hubs
London remains Europe’s largest fintech hub by investment volume, workforce size, and global reach. However, Brexit accelerated growth in rival hubs:
- Dublin: Attractive for English-speaking companies seeking EU market access.
- Paris: Benefiting from strong government support and proximity to major financial institutions.
- Berlin and Amsterdam: Emerging tech ecosystems with vibrant startup communities.
This dispersion may dilute London’s singular dominance but could also create a networked fintech ecosystem across Europe, with UK–EU partnerships as connective tissue.
The Road Ahead: Cooperation in a Competitive Era
The next phase of UK–EU fintech collaboration will depend on:
- Regulatory alignment: Mutual recognition agreements or coordinated frameworks could reduce friction.
- Political stability: A calmer political climate could enable more pragmatic cooperation.
- Market-driven innovation: Ultimately, customer demand for seamless, cross-border financial services will pressure both regulators and firms to collaborate.
The forces shaping fintech are global — from AI to blockchain to cybersecurity. In that context, UK–EU friction is an obstacle, but not an existential threat. The incentives to cooperate remain strong, even as competition intensifies.
Final Thoughts
Brexit transformed UK–EU fintech partnerships from a seamless internal network into a cross-border ecosystem. The path is more complex, but innovation thrives on challenge. Companies are adapting through dual licensing, partnerships, and technology-driven collaboration.
The long-term outcome may be a more distributed, resilient fintech landscape — one where the UK and EU remain close partners, competing fiercely yet cooperating where it counts.
For fintechs, the message is clear: Regulatory complexity is the new normal, but opportunity still spans the Channel.