Todd Latham, Currencycloud’s CMO, explains why a little foresight should smooth the Brexit bumps in the road.
We still don’t know what Brexit is going to look like. We don’t know if it’s going to be a ‘no deal’, a ‘bad deal’ or ‘some deal we haven’t even thought about yet’. What we do know is that Brexit is five months away and the clock is ticking. Regardless of what we think the outcome might be, the time for action is now.
As far as how Brexit is going to impact firms, there are three different categories of exposure.
The first will affect companies that are regulated in the UK but have no customers in the EU. This includes the likes of Monzo, which only focuses on a UK customer base. There is nothing business critical in terms of payments for this kind of organisation and there is a high probability that payments into the EU clearing zone will be largely unaffected.
The second category of exposure affects companies that are UK-based but do have a proportion of their customer base residing in the EU. Here, there are two choices.
In a ‘no deal’ or ‘bad deal’ scenario, it’s unlikely these companies would be able to service their EU-based customers.
If that portion made up perhaps 10% of their customer base, those companies might say ‘well, that sucks, but it’s not worth getting regulated for’. But if that proportion was as much as half of the customer base, it becomes a massive business risk and separate EU regulation would be a serious option.
One solution for those companies with a small customer base in the EU, is that Currencycloud could step in, allowing them to service that customer base through our products.
The third and final category, meanwhile, describes those companies that are already regulated in the EU who are worried if they can continue selling to UK customers. Even with a ‘no deal’ Brexit, it’s straightforward, as EU customers will have access to the UK market whatever happens.
Currencycloud has taken on the implications of Brexit for its customers across the Eurozone, as well as those outside it. For us, the simplest and clearest solution was to establish an office within the EU, in this case Holland. We are in the process of getting set up and regulated in the Netherlands, acquiring a licence with the DNB.
Our overall message to clients facing Brexit is to have a plan. You need to be able to reassure your customers, because five months isn’t a long time. We suggest reading the government’s white paper on the ‘no deal’ impact on financial services. As you might imagine, it’s a gripping yarn. But it is also both informative and pragmatic. Ultimately, from today you should be operating on the assumption that there will be a ‘no deal’ Brexit. This worse-case scenario might still not happen, but it’s always better to be prepared.