The US is viewed as the golden goose for many UK fintech firms, with everyone from TransferWise to Monzo making the leap in recent years.
The appeal also goes two ways, with data from Dealroom showing that US firms accounted for 60% of investment in UK fintech firms in the first nine months of 2020.
When Joe Biden becomes the next US president on 20 January, what will his policies mean for British fintech’s fortunes across the Atlantic?
Biden’s approach to foreign policy, particularly on the topic of visas for skilled tech workers, will make for “an obvious change of tone” from that of President Donald Trump, according to Dawn Capital general partner Josh Bell.
Trump practiced an isolationist foreign policy, tightening the rules on the popular foreign worker H-1B visa to make it harder for US companies to hire international talent. The rules announced in October reduced the number of “speciality occupations” that were eligible for the visa, and increased the salary threshold that companies must pay H-1B workers.
“Now that they’ll jettison America First, but also in terms of our American-based portfolio companies, just being able to hire and bring in global talent will just be a different ballgame to what it has been for the last couple of years under Trump,” Bell said. “So that’s all just very positive.”
More of what you know
Liam Gray, fintech lead at industry body Tech Nation, said the reasons why UK fintech firms find the US desirable are “multifaceted”, with more than 40% of the body’s recent accelerator cohort hoping to launch there in the next 12 months.
These reasons include the east and west coasts’ reputation as a “hotbed” for growth capital, a shared language and the size of the US market, which is “simply bigger than most other countries”.
“Arguably India and China are the countries that offer the largest opportunities, but the language and culture present signficant hurdles,” Gray added. “Finding success in just a handful of US states can translate to considerable growth for a fintech.”
William Samengo-Turner, a corporate and M&A partner at law firm Allen & Overy who specialises in technology across Europe and the US, told Private Equity News‘ sister publication Financial News that he expects the new administration to be “quite focused on technology”.
“The appointment of Gary Gensler as the lead on financial policy and the transition team is interesting because he’s quite well known in crypto circles, and is quite well informed in that area, which suggests that there’s going to be special [focus] on the fintech side,” he said.
Gensler, a Wall Street veteran who chaired the Commodity Futures Trading Commission from 2009 to 2014, was tapped to lead the financial policy transition team for Biden earlier this month. He formerly served under President Barack Obama, implementing post-financial crisis rules on derivatives and managing the prosecution of major banks for manipulating the London Inter-bank Offered Rate.
Bad for big tech?
The Biden-Harris administration is also expected to be tough on major technology firms. Biden’s deputy press secretary declared Facebook was “shredding the fabric of our democracy” in a now-deleted tweet, just days after the president-elect’s win was called.
This might be a boon for UK fintech firms and smaller companies seeking to set up in the US, with the outcome of antitrust action at the top likely to benefit those lower down the food chain.
The Department of Justice recently filed an antitrust lawsuit, challenging Visa’s planned acquisition of payments fintech Plaid.
“If you are a small or medium-sized fintech, of which there are lots in the UK, this could create greater opportunities because the idea of that legislation and an activist regulator is to create more competition — which is exactly what [they’re] after,” Samengo-Turner said.
To counter that, vice president-elect Kamala Harris may also be an aide to the tech sector’s mission, being from the tech friendly state of California and reported to be close to Facebook chief operating officer Sheryl Sandberg and Uber’s chief legal officer Tony West. A person close to West told FN that the executive could be in the running to succeed Dara Khosrowshahi as chief executive of the ride-hailing firm.
Fintech priority across the board
Jeppe Zink, general partner at venture capital firm Northzone which is an investor in London fintech startups such as Zopa and TrueLayer, said that all the big US technology firms have fintech as one of their top three priorities for the next five years.
“The system is so different over there that it’s a huge effort to go after, so you’re not going to do it if you think that the deck is about to be reshuffled in a way that would have massive ramifications.
“I don’t think we’re going to see any ramp or negative shift [which could] make it harder for [British] companies operating out of the US.”
To contact the author of this story with feedback or news, email Emily Nicolle
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