Brexit has cast a shadow over business for almost three years now, creating uncertainty and a reticence in the world of business. However much like any other major economic or political event, there will undoubtedly be sectors and businesses that benefit from the changes. 
The financial crash of 2008 created a huge amount of mistrust toward big banks and fintech – financial technology – entrepreneurs have taken advantage of that. The disintermediation of banks from areas such as travel money has given rise to a new kind of financial service firm, an area set to carry on this trend. There are some brilliant ideas in fintech and the problems they solve are widely unrelated to Brexit meaning that investment is likely to continue to grow.
In much the same way as fintech came from the financial crash, existing sectors will be disrupted, and new ones created to tackle problems that arise. Many fintech innovations were born from a lack of trust of banks and traditional sources of financial services. Since 2008 over 200 fintech companies have been founded in the UK alone, with seven of these going on to reach a $1bn valuation or ‘unicorn’ status.
The first sector that looks set to benefit is regulation and regulation technology. With Brexit there are going to be more problems to solve, and entrepreneurs are going to come along and innovate. Everything will get more complicated with import and export, say, and some smart man or woman will come along and solve it. Regtech – regulation technology – has already been impacted – perhaps indirectly – by the financial crash, as an increased amount of regulation and legislation led to the birth of many innovative solutions to keep financial services at such a high pace.
Since this time, it is clear to see the rise of this sector within financial services, with over 300 companies working with financial services firms in a variety of sectors. Each of these dealing with a specific problem that is ever evolving and often becoming more complex.
Regulatory reporting is one such example, it enables automated data distribution and regulatory reporting through big data analytics, real-time reporting and the cloud. Many financial organisations have expressed frustration with the high level of redundancy, dependence on manual processes, and opacity of their regulatory reporting processes. This is a critical activity for financial institutions and without tech solutions would require a concerted effort from a range of departments including, risk, finance, and IT.
Risk management detects compliance and regulatory risks, assesses risk exposure and anticipates future threats. There are over 45 companies specialising in this already and with so much uncharted territory around leaving the EU, this looks to be a potentially important field in the next few years.
Identity management & control facilitates counterparty due diligence and 'know your customer' (KYC) procedures. Alongside anti-money laundering (AML) and anti-fraud screening and detection. Compliance pertains to real-time monitoring and tracking of the current state of compliance and upcoming regulations.
For all of these sectors it is likely that changes to legislation and procedures after Brexit will have a profound effect on what is required by firms in order to stay compliant, potentially creating a huge number of problems that will have to be dealt with in one way or another.
You just have to reverse engineer all the problems that are going to be thrown up by Brexit and then you’ve got investment opportunities. Here’s a problem, let’s find an opportunity.
Wherever’s there’s huge problems and disasters, there’s always going to be an entrepreneur who comes along and will find a solution. From my perspective, that’s exciting because these new crunch points provide opportunity and employment. I set up IW Capital in a recession after a stock market crash, and WeSwap was set up because the market was falling to pieces. What actually happened was the birth of the fintech sector. Opportunity comes out of crisis.
Luke Davis is chief executive officer of IW Capital. The views expressed above are his own and should not be taken as investment advice.