Companies operating internationally must be able to swiftly adjust their business strategies and tactics to align with constantly changing rules and regulations. Given the possibility of a hard Brexit becoming a reality due to the impending departure of Prime Minister Theresa May in the United Kingdom, international companies operating within the region will need to rethink their approaches to conducting business. Fintech companies in particular must reassess their strategies – and fast – as they partner with banks to route transactions and cross-border payments in a compliant fashion.

Depending on who takes over as prime minister, and whether or not they push for a hard Brexit, fintech companies and other institutions who operate within the U.K. will face new challenges. For those who hold U.K. licenses, they will need to now become licensed in the greater European Union as well; the converse is true for those who are currently regulated under a non-U.K. EU entity. In both cases, companies will need to work with new regulators and overcome the hurdles that come along with a regime change.

It’s not you, it’s me – navigating bank partnerships and relationships

It is extremely important for fintechs to be proactive and maintain appropriate bank relationships in both the EU and in the U.K. That is the only way they will be able to continue to be successful and guarantee that customers will still be able to seamlessly make and receive cross-border payments.

Under current EU rules, U.K.-based financial institutions can operate throughout the union with a domestic banking license. That is likely to change if and when the U.K. leaves the EU, making it more difficult for fintech companies and other tech/finance institutions to transmit payments across borders with minimal friction. In order to avoid any potential issues, fintech firms and other outside financial institutions are proactively applying for licenses in other EU countries to allow for continued operations across all markets in any Brexit scenario - including U.K. banks.

Brexit Pro-Brexit activists march outside the Houses of Parliament in central London, Feb. 27, 2019. Photo: TOLGA AKMEN/AFP/Getty Images

Business negotiations in the face of international scrutiny

Banks are generally already cautious when partnering with outside financial service companies due to heavy regulatory and compliance concerns. Add in a monumental geopolitical event like Brexit, and they are even less likely to want to forge new fintech partnerships. Fintech companies will therefore need to amplify the amount of care and attention that they give as part of the business partnership negotiation process.

Not only will they need to prove that they are compliant and licensed within the region, but also that they are taking into account that a finalized and solidified Brexit might come with a slew of new expectations to abide by within the borders of the U.K. Additionally, with some in the U.K. population becoming more steadfast with supporting local businesses in recent years, securing a partnership or deal with a larger financial institution might prove difficult for foreign-based organizations.

The benefits outweigh the challenges

Despite challenges with compliance, licensing, increased competition and more, there is a reason why partnerships between banks and fintechs are still on the rise in the U.K., the EU and internationally. These partnerships thrive because they provide both parties – as well as the customer – with new, disruptive products and services and key infrastructure that complement each other in many ways.

Whether it’s working on seamless cross border payments, instant money transfers or open banking, banks and fintech companies work best when they partner together. While Brexit might feel like a massive speed bump in forging new relationships between the two, overcoming these temporary challenges will prove more than beneficial to both in the long run.

Jody Perla, Managing Director of Payoneer