FinTech 10 years on

Natalie Ceeney, chairwoman at Innovate Finance, spoke to several leading FinTech entrepreneurs to get their views.

Ten years have passed since the credit crunch rocked the financial services sector and led to an unprecedented economic crisis. Rising from the ashes of this devastation was the FinTech movement, which aimed to develop innovations that would create a sustainable and inclusive financial services sector.

But has the promise of FinTech become a reality for consumers?

“In many ways nothing has changed. All the big banks still exist!” said Michael Rolph, co-founder of mobile payments app Yoyo Wallet. “The reality though is that the crunch acted as a catalyst for change. The open bank API mandate is a great example of how FinTech is shaping the future of finance. It’s opening up the banks and allowing us to gain easier access to customer data. It’s a change for the better.”

Michael Kent, CEO and co-founder of money sending app Azimo, agreed.  “Finally it seems to be about the experience of the user, more than about the greed of a corporate. With FinTech products in our pocket we feel engaged and more in control – and finance seems to be on its way up.”

“More recently the most notable FinTechs are bringing together a wider range of services to provide an alternative to banks themselves, “ added George Bevis, founder and CEO of Tide Banking.

In the small business space, FinTechs are stepping in where high street banks failed. “Traditional banks have not been able to offer small businesses the capital they need to grow despite tremendous government support and incentives,” explained Christoph Rieche, CEO of iwoca.  “FinTech companies like ours moved in to fill this funding gap and have built sophisticated technology that enables faster and more efficient decision making.”

Equity crowdfunding providers have also helped to scale up SMEs. “These platforms have given ambitious entrepreneurs from across Europe the opportunity to fund their early stage businesses with patient capital, by offering access to hundreds of thousands of online investors,” said Lucy Sharp, director at Seedrs.

The banks have responded by accelerating their own efforts to advance innovations and to support technologies that are less about disruption and more about improving financial services and overall operations. Examples include Barclays’s FinTech working space in London, the largest in Europe, RBS’s £885m fund for startups, and Lloyd’s commitment to creating a seamless digital experience for consumers. From the global banks’ blockchain consortium R3, to their investment in AI, fingerprint recognition and other biometric data, FinTech has now become key to the future of traditional banks.

Not quite there yet

However, despite advancements, FinTech’s full potential is not yet fully realised. “One of the most disappointing aspects of the revolution is the lack of focus on bringing those excluded by financial mainstream into the fold,” said Virraj Jatania, CEO and co-founder of Pockit, a digital bank for unbanked and low income consumers in Britain.

“In the UK today, there are still an estimated 1.5m people living without a bank account. It’s staggering that so many people remain without a card to make payments online or a direct debit function to pay bills”.

Virtual currencies have also come under scrutiny. “Bitcoin still seems to be predominantly used for speculation and crime,” said Bevis.  “It’s too complex for widespread use and too volatile to be relied upon for anything important.”

“Awareness of FinTech solutions among SMEs is too low,” added Rieche. “The majority of small businesses only go to their bank for finance and give up if the bank can’t help. While referral schemes like RBS NatWest Capital Connections are a step in the right direction, more must be done to encourage banks to refer customers to FinTech players.”

So how can we make FinTech more mainstream? Start by telling your friends. “Having that recommendation factor is powerful – it normalises the use of FinTech services,” said Dan Hegarty, CEO of digital mortgage broker Habito. “Time and general education will also help efforts, but having a measurably better offering that saves consumers time, money and hassle, is something people will talk about and share.”

“There needs to be more proactive investment by the government to level the playing field,” added Rieche.

“FinTech infrastructure must evolve to bring the benefits offered by the industry to a broader audience,” said Jatania. “An area that is very prohibitive is KYC and, while accurate verification during onboarding remains important to any responsible financial service provider, Regulation must change for those who do not possess expensive documents such as passports and driving licences.”

“For FinTech to hit the mainstream we must keep beating the drum,” concluded Rolph.  “A tech-native generation is coming through and as their influence spreads, so will FinTech. Those who cling on to a branch and paper-based financial service industry will have to adopt or die – literally!”

 

What are the challenges and opportunities for UK FinTech? Where is the industry heading? Let us know your thoughts in the comments section below.