As we emerge from the pandemic and also feel the consequences of Britain’s departure from the European Union, Rishi Sunak will undoubtedly see it as a foremost priority of the government to take the steps needed for London to retain its status as a leader in fintech.
Speaking to Payment Expert, Anthony Venus, Founder and CEO of YayPay, underlined the potential damage of a capital gains tax increase, as well as why the visa scheme can be pivotal to the sector’s growth.
Payment Expert: Firstly, can you tell us more about YayPay and your offering?
Anthony Venus: COVID has proved more than ever that cash is king. Companies need to boost their liquidity in order to survive. YayPay helps them get their cash through the door more quickly, and helps them predict which debts will go ‘bad’. We offer hundreds of companies a SAAS or ‘software as a service’ accounts receivable product to do this- powered by artificial intelligence. Our software uses algorithms to sift through data and help financial controllers predict with accuracy when their invoices will be paid.
PE: What do you believe British Government needs to do in order to secure a future for London as a Fintech leader following Brexit?
AV: London remains the pre-eminent fintech hub in Europe. We have a great ecosystem that enables start-ups and their clever, ambitious founders to thrive. We have a critical mass of capital and VC investors to support them with finance and know-how. We have a deep pool of world-class talent to draw from, and a forward-thinking approach to regulation. But we must not rest on our laurels. Data shows that other European cities are catching up fast- including Paris and Berlin, and we also need to recognize that competition for talent and company-making is global. London’s biggest competitors as a fintech hub are actually San Francisco and New York.
The ‘work from home’ revolution means founders can set up anywhere. In fact, many of the founders I mentor on the New York-based Techstars seed accelerator are actually European. They go there for better access to capital and in search of larger markets.
There are lots more early-stage/seed VC and angel investors in the US. Founders can get pay 0% capital gains tax through the US’s qualified small business relief on any gains of up to $10m, and if and when they grow to unicorns the listing rules are friendlier for founders.
There’s plenty more the UK Government could be doing to support fintech founders and their backers. Scaling back entrepreneur’s relief was a mistake, since London is now simply not competitive with the US Qualified Small Business Stock relief.
Expanding R&D tax credits would super-charge investment at a point when we need it most in this economic cycle. Encouraging more institutional investors to put more money into start-ups would grow the number of successful unicorns. The Government really needs to think about enhancing the whole stack: that means tax credits for risk takers, encouraging a strong investor ecosystem, and making the listing rules more founder-friendly.
PE: How important do you believe the visa scheme for fintech workers could be following Brexit?
AV: Talent acquisition is key for any successful start-up to flourish. Tech is in a war for talent with big banks, private equity and hedge funds. Brexit could make that competition tighter by making it harder for us to recruit highly-qualified EU workers. I think it’s interesting that the recently-published Kalifa review of fintech calls for a new visa system to allow tech and fintech companies to access global talent. So it’s clear that while we need to nurture home-grown talent, we also need to be able to recruit internationally. Brexit could actually become an opportunity in this respect. The US is tightening visa requirements, just as the UK is exploring a points-based system. This could work really well by providing a pathway for highly skilled people who previously wouldn’t have got a look in when the UK was part of the EU. The UK also has a really good Tech Nation visa scheme to attract highly talented founders and technologists, and this may need to be expanded.
At YayPay, our incredible team of talents speaks more than 15 languages. We really benefit from this meeting of cultures and ideas.
PE: How damaging do you believe an increase on capital gains tax would be to entrepreneurs and the fintech sector?
AV: Well I think the Chancellor may not have followed through with widely-trailed plans to hike takes on entrepreneurs because he realised that this might reduce investment and job creation, crucial ingredients for an economic recovery.
The private sector in the UK is the biggest engine for employment and wealth creation. Small firms account for almost two thirds of the new jobs created in the UK in an average year. And if you read Boris Johnson’s forward to the Government’s Build Back Better report, he clearly states his ambitions to make the UK a science and technology superpower. He specifically references access to global talent. And he celebrates those in the private sector who invest money and take risks on new ideas that lead to new jobs, new industry. Higher capital gains taxes on entrepreneurs here will just drive talent and capital to the US.
PE: In what ways do you believe fintech has been crucial to the economic recovery following the pandemic?
AV: We’re not out of the woods yet but the most recent GDP data shows that the downturn wasn’t as bad as many had feared, and in fact next year we’re poised to outstrip economic growth in Europe and the US. I think the surge in ecommerce means consumer spending- a key part of the UK economy- has held up well. 35% of retail spending is now online up from just 20% a year ago.
Companies have shifted effortlessly to working from home and that has even boosted productivity, a perennial issue in the UK. I think that COVID has also accelerated some key trends for businesses- the digitalisation of key processes especially in finance, as well as the ability and acceptance of working from home.
These trends won’t go away – in fact a slow economic recovery will continue to pile pressure on companies to find ways to reduce costs and increase productivity. We have benefited directly from these two trends. Traditional, office and paper-based accounts receivables functions are migrating to the cloud – and kitchen table – as teams work from home. That’s driving a sustained uptick in business from mid-sized businesses that want to digitalise their accounts receivables departments.
