Earlier this month, Chancellor Philip Hammond appeared at the inaugural International FinTech Conference.
“We are on the brink of yet another industrial revolution,” he announced to a crowd of avid listeners.
“FinTech will transform the way we live and do business.
“Whether it is cashless transactions between friends, or apps that automatically invest savings at the best rates.
“FinTech provides consumers with better services, more choice, and lower costs.”
What is FinTech?
There are many definitions of FinTech and it can cover a broad spectrum of financial services but Susan Hall, partner, at Clarke Willmott puts it succinctly.
“FinTech is a disruptive way of using technology to drive economic value in ways we didn’t think of prior to.”
Fair enough, what’s not to be enthused about? And it is growing at a tremendous rate.
In total, the sector generated almost £7bn revenue last year and now employs more than 60,000 people.
Not only that, but the big players are wising up to this need for disruption with Barclays opening a flagship FinTech accelerator in May, offering 500 workspaces for start-up innovators.
HSBC and Tradeshift have also confirmed that their new ‘procure-to-pay’ product will go live in summer allowing businesses to manage their entire supply chain and working capital requirements in one place, from any device.
Although these developments tend to be London-centric, there is a lot to look forward to in the sector and Greater Manchester is ahead of the trend.
What does FinTech do?
Phillip Nunn, CEO, of multi-asset investment house, the Blackmore Group, agrees.
“FinTech is a financial eco-system that flows with the current trends of how people are choosing to live their lifes.
“The absolute essence of FinTech is bringing something to the masses that they were not able to have before.
“It makes things more transparent and accessible and gives services to people that weren’t there before, other than for the elites.”
This transcends into innovations like PayPal, the online system which uses electronic payments as an alternative to traditional paper methods.
Self-confessed ‘FinTech enthusiast’ Nunn says he sees a lot of parallels between how technology is being applied – from healthcare to financial services.
“A lot of adaptation comes from financial services and is then developed into other areas.
“We are working with a FTSE100 company right now on a pension dashboard that we believe is industry changing,” he reveals.
However, FinTech is not a new concept as such – rather a new ‘buzz word’.
History of FinTech
In the early 1980s the industry was completely disrupted by the advent of ATM machines.
Suddenly customers no longer relied on the local branch of their bank to access money, it was 24/7 seven days a week and revolutionary at the time.
Former Apprentice candidate Adam Hosker alluded to this at a recent Pro-Manchester event around opportunities in FinTech.
The innovation specialist at SoftwareONE said: “Back in the 80s, when ATMs came into play, people thought it would be the end of bank branches and jobs, but instead it freed up clerks to perform other tasks, like mortgage advice, which actually added value to the customer.
“Moving on to the current day and bank branches have now become mobile phones – or apps – people can access their accounts and information at a touch of the screen.”
This throws up an interesting point – how have the banks reacted to new frontiers in financial technology and are they embracing it?
What do the banks make of it?
Blackmore Group CEO Nunn explains it thus: “The banks used to put up a lot of barriers but in 2014 there was a finite shift in attitude.
“The incumbents have realised that they need to embrace FinTech or they will die off.”
Flipping the argument over to the banking industry and some agree it has taken a while for emerging technologies to be adapted, but not without reason.
James Higgins, global product manager for BNY Mellon, said: “These banks are huge multinational corporations who also have a responsibility to their shareholders, so in the past perhaps they haven’t been as agile.
“However, I think the adoption of technology is coming around quicker now and the banks are not just seeing it as a threat but an opportunity.”
Anish Kapoor, CEO of Manchester FinTech firm AccessPay agrees with this shift in dynamics.
“The banks are very focused on what is the best thing for their customer and how can they service them better,” he said.
“Instead of resisting FinTech, they are now embracing it and seeing it as more of an enabler rather than a potential conflict.”
AccessPay, which moved from London to Manchester, is flying after a recent £2m funding boost.
Based in City Tower, the fast-growing firm is looking to recruit 60 new staff and expand into the US after securing funds from Clydesdale and Yorkshire Banks’ Growth Finance team.
The specialist in cloud-based payments and cash products has been driving innovation in the sector since it was founded in 2012.
Its software allows businesses to automate their payment transactions more quickly and securely through one platform.
And they service a range of clients from SMEs to large corporates including Clifford Thames and European research organisation CERN.
What is the future of FinTech?
However, with some saying there needs to be more innovation in FinTech, and we are yet to find ‘our Uber’, what’s the next big trend or disrupter going to be?
The Governor of the Bank of England Mark Carney sees the future of FinTech in its potential.
“FinTech’s promise springs from its potential to unbundle banking into its core functions of settling payments,performing maturity transformation, sharing risk and allocating capital.
“This possibility is being realised by new entrants – payment service providers, aggregators and robo advisors, peer-to-peer lenders, and innovative trading platforms.
“And it is being influenced by incumbents who are adopting new technologies to reinforce the economies of scale and scope of their business models.”
Other experts, such as Nunn, believe that the tech dominators namely Google, Facebook, Amazon and Apple will become the banks of the future.
“They already know all your behavioural patterns and the crux of this industry lies in big data and how we analyse it to gain information.”
He also believes that dynamic and accessible personal savings will be a massive game-changer for millenials.
For example giving people the option to save £10 after a purchase to go into your retirement fund or store offers relating to personal savings rather than money-off deals.
Blockchain, bicoin and cryptocurrency
This is a project he is already working on.
Elsewhere, experts agreed that ‘blockchain’ would play a central part in the future of FinTech.
Blockchain is digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.
“The biggest drive forward will be linked to blockchain and possibly the end of money,” predicted Hall.
And the banks agree.
Higgins said: “75% of what we are looking at in emerging technology is blockchain.
“Essentially blockchain is a trust play and that’s the line that banks and financial institutions are in.
“If we have a situation where the intermediary is no longer needed because payments are peer-to-peer it will tear up the fabric.”
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