Starting Global: Why international business presence is the key to post Brexit success
Will Marwick, CEO of IFX Payments, looks at how companies that had a pre-established international business presence are better prepared for post-Brexit success. He offers some tips on how to help an organization guarantee the best international move.
As the clocks turned 2020 into 2021 the UK left the European Union after 47 years. The decision divided the country, and businesses were forced to adapt to – and comply with new regulations. Certain industries were clearly more affected than others, and businesses that had some sort of international presence benefited from a smoother transitioning period.
Players in the payments industry were perhaps one of those lucky ones, due to the nature of international capabilities inherent in the sector and its continued ability to stay agile.
A key consideration and a massive point of debate was whether London would remain the centre of the financial services sector, and if not, what would the repercussions be for businesses.
For the payments sector, while the UK’s Financial Conduct Authority (FCA) has instituted a Temporary Permissions Regime (TPR) enabling registered European payments firms to continue operating in the UK without relicensing through 2024, the European Central Bank (ECB) has been more robust, spreading a sense of uncertainty across the board.
It wasn’t just new regulations that threw many businesses, but the issue of successfully managing and retaining an international workforce. As companies were forced to adapt, the financial industry saw the underdogs leading the charge, as smaller firms proved to be more agile and resilient to the ever-changing Brexit landscape.
Friend or foe? Brexit and the payments industry
Before Brexit, the payments sector was seamless, cross-border and collaborative. Like many industries, it was easy to access multiple markets as trading wasn’t so limited. In the past seven months, the imposed regulatory changes have made everything more challenging and forced the industry to focus on digitalizing its offering and cementing its international capabilities in order to stay competitive and futureproof itself.
But the initial stages were far from easy, and in the early months of Brexit, many industry players reported of IBAN discrimination being a major issue as a number of companies across Europe began to refuse Euro account bank details if they contained the country code ‘GB’.
As a result of Brexit, sending a payment to Eurozone countries resulted in additional charges. Whilst the fee is nominal, it means that payments can be short of the required full amount being sent. This new imposed fee has caused an unnecessary disruption, and operations teams have been tasked with managing flows into different accounts to mitigate unforeseen costs.
Starting Global, Thriving Global
In a bid to mitigate the impact of Brexit and futureproof our growth, we knew early on that our international capabilities would help us navigate this challenging time. As a bespoke payments and FX technology platform, we were programmed to integrate seamlessly with global data fields across multiple banking partners. We also know which global industries benefit from our digital cash management system and how we can take that into new markets – so really the missing piece is local permissions to enter new jurisdictions. Therefore, it was a no-brainer for us to really focus on bringing our pre-established international operations to the forefront and help the teams mitigate any disruption.
Brexit has not changed the need for cross border payments, rather only the operational functionality and regulatory requirements. Having established experts in multiple fields reduces the time spent by management members imposing new legislation and regulations – many of which are interpreted at each local regulator’s absolute discretion.
Tips to help your business guarantee the best international move post-Brexit:
- Consider timing. When considering whether expanding internationally is the right move, you should always consider if now is the right time. Ask yourself ‘should the business grow internationally?’. If ‘yes’ the follow-ups in tandem are ‘when’ and ‘how’. ‘When’ is predominantly driven by market forces, whereas ‘how’ might be driven by local legalities (wholly owned subsidiary vs joint venture with locals).
2. Watch out for pain points. When expanding to new markets, it’s important to identify industry pain points when it comes to payments and remittance. From my experience in running an FX brokerage, it’s easy to get drawn to currency and mitigating the exposure firms have to shifts in the FX market. But our ibanq product can do much more than help – it can be a virtual cash management system to complement open banking permissions with its instant receipt notifications, and it can also act as a reconciliation tool for businesses with multiple client accounts and correspondent banking infrastructure. Once you identify the pain points of firms operating within a given industry, new markets identify themselves.
3. Do your homework. Understanding your formal institutions (political, economic, legal, regulatory, financial etc) and the informal institutions (culture, religion, language etc) is of paramount importance. Coupled with your local market research, you need to understand how your business, or a version of your business, interacts with each of these considerations.
READ MORE:
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4. Foster a culture of unity. When teams are spread across multiple nations, it can be difficult to keep an international workforce blended and united in a common goal. In order to make it work for everyone, having a clear company strategy is paramount. Mission statements are useful tools in helping guide all forms of decision making throughout the group and across different countries. If you have a clear message internally, you can trust people to make considered decisions in pursuit of achieving that message.
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