Post-Brexit cross-border trade & investment calls for stronger financial infrastructure

In a post-Brexit world, there is an increasing number of opportunities for enterprise-level companies to explore new horizons. However, there are still challenges holding businesses back, especially for those without a solid and effective financial infrastructure in place. The UK is also currently experiencing a skills shortage so severe, it’s set to cost the economy £30-39 billion a year if no action is taken, according to CBI Economics. Despite a worldwide decline in terms of the money invested into the fintech sector, cross-border payments are on a growth trajectory, with expected payment flows in this arena projected to exceed £130 trillion by the end of 2022 – up from £124tr in 2020. Currently, over half (55%) of payment executives are prioritising modernising their business infrastructure to accommodate real-time payments, demonstrating that services and providers specialising in these areas are becoming increasingly important for supporting enterprise-level companies with making it onto the international stage.

When expanding overseas, varying regulatory requirements, in addition to fluctuations and technical challenges, can make managing payments extremely complex and hard to navigate. Gaurav Singh, growth strategist and founder of global startup investment banking platform, JPIN, has urged companies to enlist the help of external advisers who can help them put the necessary financial infrastructure in place to accommodate international moves. The international business landscape has changed considerably for UK firms post-Brexit, with many now setting their sights on markets far beyond Europe. This was evidenced in a 2021 study from EY finding that UK companies were much more likely than their overseas counterparts to state that their trade plans were driven by a distinct need to increase their global reach – 42% for UK businesses compared to 29% for non-UK firms.

However, the impacts of legal and regulatory changes have also undeniably disrupted financial chains between the UK and Europe. A drop in funding and valuations has further exacerbated the VC landscape and now, Singh explains that businesses should take this time to re-assess and re-establish their structures in order to arm themselves for expanding further afield. Currently, regulation is the top risk factor for companies looking to explore cross-border payment options, with a staggering 83% of companies stating so – according to Autorek. The same study found that integrating payment tech into existing finance functions can pave the way for efficiencies in international financial transactions, with 77% of companies looking to implement this. However, Britain’s tech talent shortage has undoubtingly restricted businesses’ ability to improve payment technology. Despite this, Singh explains that there is still a huge pool of international talent who could assist the UK with improving the cross-border payment structure, which could ensure a future of more efficient and safer payments.

Gaurav Singh, founder of JPIN, explains the need to solidify stronger international payment technology routes in Britain: “Brexit has had a huge impact on encouraging companies to expand overseas. This trend is also evident in the government’s activities as they seek to secure potentially the most lucrative trade deal in British history with India. These high-profile negotiations are piquing the interest of various startups in the UK who are now seeing the potential in foreign markets outside of the EU. However, when a firm expands internationally, it makes managing payments a much more complex issue.

“You can fall foul of sudden currency changes, regulatory requirements and a host of other issues. The banking industry differs significantly from country to country and firms need to have a good understanding of what each landscape looks like first of all. Also, the financial systems that are operated in certain territories don’t allow for firms to connect via an API for example, which can help streamline payment processes – so it’s important to understand what you’re up against from a tech perspective too.

“Companies must first ensure they have the relevant expertise – either in house or from external advisors – that can help them with this vital aspect of international expansion. A Western business looking to expand overseas, for example, will need to consider enlisting the help of a different payment services provider that specialises and is popular in the particular market of interest.

“Businesses must also be aware of the regulatory and tax implications of expanding overseas as this can prove to be very costly if not understood correctly. If the firm is trading across international boundaries, then it is also vital to have a clear and real-time overview of profit and loss that accounts for cross-currency transactions and changes in forex rates. Ideally, all of these aspects will be automated using the appropriate financial technology otherwise it will become incredibly time consuming and errors can occur.”