Despite rising investment, Brexit and growing interest from tech giants could cut off start-ups’ opportunities in 2020
While a burgeoning tech industry, education and the value of the pound have made UK tech start-ups an attractive target for investors outside the UK – with investment in UK tech start-ups growing 44 percent to £10.1bn in 2019 – businesses need to be aware that they may only have a short window to attract investors, city law firm Fox Williams LLP has warned. With a large proportion of investment dependent on the talent in place at start-ups, an inability to attract and keep the best and brightest talent post-Brexit could turn away investors. At the same time, as markets such as FinTech grow, they become more attractive areas for technology giants such as Apple or Facebook to invest in – meaning start-ups may only have a limited time to grow before their market is taken over.
“London’s position as the number one destination for tech investment in Europe isn’t guaranteed for ever,” said Jonathan Segal, Partner at Fox Williams. “While the value of the pound and the fact that businesses, talent, regulators and investors are all clustered in a single city help make London start-ups attractive for investment, it is quite possible that this will change. At present, UK start-ups are seen as a low-risk investment. Yet changes to the sterling exchange rate, or to immigration and employment laws that make it harder to attract and keep talent, could change this. Start-ups and growth companies will need to ensure they are doing all they can to attract investment; understand where their funding is coming from; and have both a clear final goal and a route mapped out.”
As it becomes harder to differentiate and attract investment by creating a never-before-seen product or service, so start-ups need to demonstrate their value through their talent, their professionalism, and by showing a clear path to profitability. This means not only having skilled personnel in place and being able to point to an experienced management team, but making certain that they will not be negatively affected by any changes in immigration law.
Fintechs will want to help EU citizens already present in the UK and arriving in 2020 to stay long term by ensuring they apply for settled status, providing advice on obtaining endorsement by Tech Nation under the Global Talent visa route and ensuring that UK based companies apply for a sponsor licence if they plan to recruit from overseas from 2021.
At the same time, start-ups need to demonstrate that they are taking the right advice. For example, most law firms will have a tech practice that can advise start-ups. However, for those in specialised sectors such as FinTech it is essential to employ advisers that also have financial services expertise.
As well as demonstrating their value and professionalism, start-ups need to know who is funding them, and ensure they have done relevant due diligence. The right advice will again be critical here, to ensure that regulators do not veto any investment in, or takeover of, any regulated business in the financial services sector, in particular FinTechs. Yet even if everything is clear from a regulatory perspective, start-ups need to be confident that they are completely happy to be funded by an investor, and have not missed any factors that might damage their reputation.
“This is no time for complacency,” continued Jonathan Segal. “While investment is increasing, it is not infinite. FinTechs and other start-ups that cannot show that they have prepared themselves to succeed with the talent, the professionalism, and the right attitude to advice will soon find themselves losing out to better prepared competitors. At the same time, organisations need to lobby for the support they need – such as ensuring clear and favourable post-Brexit immigration and employment laws are in place so they can plan as appropriate.”
“Businesses should consider seeking strategic immigration advice at an early stage, to help ensure they can recruit the talent they need into the UK,” added Segal. “It’s vital that employers in the tech space are aware of and adhere to the correct processes and systems to ensure that the business is able to manage flow of talent in a seamless and orderly way. The UK Government is keen to attract highly skilled tech talent to the UK and in light of Brexit and the new immigration system being introduced in the UK, it is critical that companies seek advice to ensure that talent mobility is not an issue.”
GALA TECHNOLOGY SELECTS NUAPAY TO ENABLE OPEN BANKING PAYMENTS
Nuapay, powered by Sentenial, today announces it has been chosen by Gala Technology, a payment security solution specialist, to provide Open Banking payments to its partner network and direct merchants across multiple sectors including retail, hospitality, and financial services.
Gala Technology’s multi-award winning SOTpay ‘Pay-by-link’ solution simplifies PCI DSS requirements and protects merchants against the ever-growing risk of fraud by ensuring that the transactions are authenticated, shifting liability and often lowering acquiring processing costs. SOTpay’s integration with Nuapay’s Open Banking platform now enables them to process non-card payments.
Nuapay’s FCA-licenced Open Banking payments service enables Gala Technology’s partners and merchants to accept payments via any sales channel of choice, including telephone, web chat, SMS and social media. It can do this without requesting sensitive card data, which ensures SCA compliance and eliminates fraudulent chargebacks.
“The capabilities of Open Banking have become more apparent in 2020 as merchants have been forced to explore alternative contactless, mobile and ecom-friendly payment methods that can be accessed quickly and are lower in processing costs, due to a need to respond to change brought by Covid-19.” shares Nick Raper, Head of UK at Nuapay. “We’re thrilled to be working with Gala Technology, as we have a shared drive to eradicate payment fraud. This partnership will help to increase widespread adoption of live bank transfer payments as SOTPay gives us an exceptional opportunity to demonstrate Open Banking payments’ usability and benefits to new audiences.”
Nuapay is one of the only PISPs which offers a fully inclusive open banking payment initiation, webhook notification and payment account solution; which quickens checkouts, speed-up access to cash flow, reduces processing costs, and enables full reconciliation and batch settlements of transactions. Gala Technology’s customers now have access to new payment innovation and will be able to perform refunds or make instant payouts.
Steven Jones, Commercial Director at Gala Technology, said: “We chose to work with Nuapay as their complete Account-2-Account payments capabilities and high customer service levels are unparalleled. Looking forward, Nuapay’s presence within the UK and Europe will greatly help us reach new clients and will extend our service offerings to existing clients too. Nuapay’s Open Banking payments solutions help us to provide a better service; in turn, the time, money and resources our customers save will enable them to focus on growing their businesses in a more profitable way.”
Nuapay’s PISP processor has a single connection to all major banks in the UK and a growing number of connections across Europe, ensuring that Gala Technology’s clients’ payments will be supported, no matter where their customers bank.
THE EMBEDDED BENEFITS IN ESEF DIGITAL FINANCIAL REPORTING
The inclusion of a simple link delivers serious gains in transparency, trust and real time verifiability for the whole financial ecosystem. It’s another digital feather in the LEI’s hat, explains Stephan Wolf, CEO, Global LEI Foundation.
In a battle for significance, no other public facing business document can match the annual financial report. It is the document that a public corporation must, by law, publish to describe its operations and financial condition, and to chronicle its activities over the past twelve months. Shareholders, investors and the wider financial ecosystem make innumerable strategic and operational decisions based on its contents.
In today’s digital age, then, it is little surprise that the European Securities and Markets Authority (ESMA) has mandated that annual financial reports published from the start of 2020 follow a consistent digital configuration, known as the European Single Electronic Format (ESEF) and, in them, embed their Legal Entity Identifier (LEI).
On first glance, the ESEF format appears to be designed to drive financial report production into a convenient paperless form factor. While this is both true and highly commendable, an ocean of additional potential is revealed by ESMA’s insistence that corporations embed their LEI. This mandate will heighten transparency, enhance trust, and provide instant and non-repudiable verification that the organisation filing the report is, indeed, who they claim to be. These far-reaching benefits are all enabled by the report linking to the filing entity’s verified LEI reference data held within the Global LEI Index.
The simple process of embedding an organization’s LEI – or, indeed, that of its affiliates, subsidiaries and parent companies – within an ESEF financial report means that regulators, investors, traders and other financial stakeholders, can consolidate and verify information on the filing entity faster and more conveniently than ever before.
LEI reference data includes business card information on an entity, including name and registered address, together with relationship data which confirms if the entity owns, or is owned by, other entities. This increased transparency relative to an entity’s ownership structure means that relationship networks between LEIs can be quickly and automatically established, since the LEIs of the filing entity, its affiliates, subsidiaries and parent companies are all provided in the new machine-readable ESEF format. Usefully, because the reference data is reverified annually by GLEIF accredited LEI issuers, it is always accurate and up-to-date. The net result is a substantially more useful document for end users, which is also verifiably trustworthy, authentic and integral.
ESMA has published the Global LEI Foundation’s 2019 annual report on its website to provide a best practice example of a report published in the ESEF format, which other preparers can reference. The report is published in human and machine-readable Inline XBRL and HTML formats, with LEIs embedded within both the annual report and the digital certificates of the report’s signing executive officers. The combination of these two features provides something completely unprecedented: instantly available, digitally verifiable credentials that confirm both the authenticity of document and the key individuals responsible for its content.1
Beyond the single report, the LEI embedding process creates broader opportunities for the financial ecosystem. Aggregating information on companies from multiple sources is dramatically simplified, making the job of comparing standardized financial information both faster and easier. This can be accomplished either manually, by ‘clicking through’ to view the LEI reference data, or via an automated process, saving yet more time and eliminating the risk of human error. In time, this level of facility will lead to the automated creation of online databases that use the linked LEIs to collate key data assets, to the benefit of, frankly, any person or organization that has interest, globally.
The mandatory embedding of LEIs in financial reports is just one demonstration of this technology’s transformative potential. In broader terms, not only is the LEI shoring up the digital financial ecosystem, it is helping to stabilize the evolution of the world’s digital economy. It is no exaggeration to say that the LEI, together with the Global LEI System, solves the problem of trust for legal entities worldwide. It is the only open, commercially neutral, standardized and regulatory endorsed system capable of establishing digitized trust between all legal entitles, everywhere. It was conceived and designed as a public good, and can be deployed without charge in a wide – and growing – variety of digital use-cases. Put simply, the more it is utilized, the more good it will do.
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