The comments come ahead of the recent TV debate between Boris Johnson and his rivals to be the next leader of the Conservative party and British Prime Minister.
Mr Johnson has been publicly open about a no-deal Brexit, which has weighed heavily on the pound.
The deVere CEO’s observation also comes at a time as Bitcoin, the world’s largest cryptocurrency, hit a 13-month price high on Sunday above $9,300, with predictions of the next crypto bull run making headlines. Bitcoin prices have soared more than 200 per cent over the last several months.
Mr Green comments: “It looks almost certain that Boris Johnson will be Britain’s next Prime Minister. His vow to leave the EU in October — deal or no-deal — has prompted a decline in the value of the pound.
“Sterling has lost almost 5% of its value against the US dollar since the start of May. Similarly, it continues six straight weeks of falls against the euro.
“As Mr Johnson’s campaign moves up a gear – as it moves into the next phase to win over the party’s grassroots – we can expect him to also up his hard Brexit rhetoric and this will likely drive sterling even lower.”
He continues: “We are already seeing that UK and international investors in UK assets are responding to the Brexit-fuelled uncertainties by considering removing their wealth from the UK.
“One such way that many are looking to diversify their portfolios and hedge against legitimate risks posed by Brexit is by investing in crypto assets, such as Bitcoin.
“Crypto assets are often used around the world as alternatives to mitigate geopolitical threats to investment portfolios.”
He goes on to add: “The no-deal Brexit issue might be the catalyst for new investors in this way, but they are likely, too, to be aware that many established indicators and analysts are pointing towards a currently new crypto bull run.
“As such, they might think this is now the time to jump into cryptocurrencies - which are almost universally regarded as the future of money.”
In May this year, deVere carried out a global survey that found that more than two-thirds of HNWs - classified in this context as having more than £1m (or equivalent) in investable assets - will be invested in cryptocurrencies in the next three years.
The poll found that 68% of participants are now already invested in or will make investments in cryptocurrencies before the end of 2022.
Of the survey’s findings, Nigel Green commented at the time: “Crypto is to money what Amazon was to retail. Those surveyed clearly will not want to be the last one on the boat.”
The deVere CEO concludes: “As Boris and Brexit continue to dominate the agenda, Bitcoin and the wider cryptocurrency sector could experience a boost as investors seek to protect – and build – their wealth by hedging against the geopolitical risks they pose.”
(Source: deVere Group)
On one hand there are the established, incumbent banks, including the UK’s four financial heavyweights – Lloyds, Barclays, HSBC, and RBS. On the other hand, there are the younger, more agile challenger banks: Monzo, Starling, Revolut and others. Needless to say, competition is fierce. Below Barney Taylor, Europe MD at Ensono, digs deeper.
Challengers have arrived quickly on the scene, specialising in areas not well-served by bigger banks at the time. Boasting speed, convenience, and excellent levels of customer satisfaction, challengers have seen particular success in the mobile banking market, with data from Fintech company Crealogix showing that 14% of UK bank customers now use at least one mobile-only challenger app.
How the incumbents are challenging the challengers
IT has been the linchpin of the challenger bank success story. Customers increasingly expect a seamless and ‘always on’ relationship with their banks, and challengers, built almost exclusively on digital foundations, have been able to deliver. Unsurprisingly, it is these digital foundations which traditional banks need to improve if they are to keep up with the shifting market.
Retail banks are generally attempting this by putting greater investment and development into mobile and online banking capabilities. HSBC, for example, recently launched its Connected Money app, allowing customers to easily access their account information from multiple providers within one central hub. RBS is even set to release its own digital lender called Bo in the near future.
This is a strategy that’s likely to pay off for many. However, retail banks have a larger asset right under their noses that’s typically overlooked and underestimated. It’s an asset that banks have been sitting on for decades: mainframe computers.
Mainframe: the trick up retail banks’ sleeves
Mainframe has been around since the late 1950s, when systems only had rudimentary interactive interfaces, punch cards, and paper to transfer data. Usage in the financial sector rapidly picked up in the 1960s, with Barclays among the first banks in the UK to adopt it, initially for account and card processing. In a world in which, arguably, the only constant is change, 50 years on the mainframe has adapted and thrived to become the most powerful computing power on the market, handling over 30 billion transactions per day (even more than Google).
In fact, IDC reports spending on mainframes reached $3.57 billion in 2017, with expectations that the market will still command $2.8 billion in spending annually by 2022. In particular, financial sector businesses have been noteworthy champions of the technology, with 92 of the world’s top 100 banks relying on mainframes today. And for good reason.
Firstly, mainframes, if properly modernised and maintained, provide the same fast and reliable banking experiences that have made challenger banks so successful.
Unlike server farms, mainframes can process thousands of transactions per second, and can support thousands of users and application programs concurrently accessing numerous resources. Today’s mainframes process a colossal 90% of the world’s credit card payments, with credit card giant Visa running 145,000 transactions every second on its mainframe infrastructure.
In the financial industry, where trust is everything, mainframe technology also reigns supreme with its air-tight data security. Mainframes have always been considered a secure form of storage, but new models of mainframe have gone one step further, introducing something call ‘pervasive encryption’. This allow users to encrypt data at the database, data set or disk level. If they so choose, users can encrypt all of their data.
While challenger banks have benefited from an inherently component-based technology infrastructure, which makes them agile, flexible, and fundamentally able to connect to mobile apps and other external ecosystems – new open source frameworks mean that the mainframe can achieve much the same, and can easily interact with cloud, mobile apps, and Internet of Things (IoT) devices.
Final thoughts
Challenger banks have benefited from simple, cloud-first infrastructures that provide speed and convenience, which has won them millions of customers as a result. However, traditional banks shouldn’t fall into the trap of simply mimicking the industry newcomers. Cloud has a lot to offer, but traditional banks shouldn’t disregard the mainframe computing power that they have at their disposal.
A modernised mainframe is a cost-effective workhorse and, far from dying out, it allows incumbent banks to compete toe to toe in areas that have thus far made challenger banks so successful. Modernisation allows workloads to be centralised and and streamlined, enabling even more agility.
The mainframe has a long history, but for enterprise, and for retail banks most of all, it’s still a technology of the here and now.
In this light, following increased pressure from digital banks, legacy banks have yet to follow Muhammad Ali, Joe Frazier III and Danny O’Sullivan’s example. Here David Murphy, EMEA & APAC Banking & Insurance Lead at Publicis Sapient, explains that while newly created fintech companies have stepped into the ring and landed a few punches on traditional banks by being quick and nimble, they are by no means facing a knock-out.
Legacy banks shouldn’t underestimate the challenge of newly created digital banks. By relying on their tech, rather than reputation, digital banks have shaken up the financial sector in the last five years. Exploiting poor customer service and lack of innovation in many parts of the industry, tech-driven fintech startups such as Monzo and Starling Bank have won over customers with simple, low-fee, mobile-first products and services.
The market share for current accounts of the big four legacy banks (Barclays, Royal Bank of Scotland/NatWest, HSBC and Lloyds) has lost ground, from 92% of all bank customers a decade ago to around 70% today.
Challenger banks have proven themselves to be more flexible, quicker to adapt to user needs and more friendly and personal than traditional banks. In fact, according to a recent survey from Which?, challenger bank Monzo was ranked as the best bank in the UK with a customer rating of 86% (banks were rated out of a series of categories by real customers out of 10). Their ability to match up to some of the biggest and most established names in the business is a concern for many in the traditional banking sector.
With digital banks winning over consumers and raising a significant amount of funding in order to grow their services - Monzo raised £20m in two days last year and Tandem is expected to raise over £80m in its funding round this month this concern is being amplified – the fightback from legacy banks, which began long ago, is gearing up.
However, this is no easy fight. Compared to younger, more agile fintech companies building new services and platforms from scratch, banks have to work around their legacy systems to make any technological leap. They also have to deal with the issues of siloed workplaces and cultural backlashes in order to improve their services and products.
For example, the boards of major banks today are dominated by people with experience in finance, accounting, law and regulation. Given the enormous changes in regulation since the financial crisis, it is not surprising banks have sought out board members with skills relevant to the sector’s strategic agenda for the post-crisis years: regulation, risk management and compliance.
But the post-crisis environment is shaped by another set of strategic issues that grow steadily more pressing: digitalisation, mobile, automation and the emergence of big data analytics.
To overcome structural issues, legacy banks need to fight smarter against digital banks. While older boxers have to learn how to be strategic and take a punch when competing against younger more nimble fighters, banks need to also adapt their tactics against younger, digitally-enabled competitors.
The contrast between banks and leading technology businesses is clear: tech companies’ boards have large contingents of people from technology, customer insight and digital media backgrounds. As a result, they demonstrate a sharper focus at the top level on the strategic issues of the coming decade, the digital transformation of all businesses, including financial service. Legacy banks need to create a multi-pronged approach to the rise of fintechs from innovating internally to capitalising on their experience in the market.
As we have seen over the past few months with Revolut - the bank has been linked to multiple scandals and failed to block thousands of potentially suspicious transactions on its platform for three months last year - challenger banks come with risks. Legacy banks can therefore, capitalise on their stability by reflecting this in their advertising and marketing campaigns.
Most importantly though, banks need to innovate and adapt to new technology. Many legacy banks are recreating the dynamism of fintech startups within their organisations through innovation labs, as well as partnerships with external technology providers. Initiatives such as innovation labs allocate space to incubate ideas internally with considerable time and investment. They also overcome the cultural issues that big organisations create by building small teams in the company to develop new competing platforms.
Fundamentally, banks need to put customers at the center of the picture. In order to deliver a knockout blow to digital competitors, banks need to ensure that they have the time, investment and willingness to develop and improve their digital banking platforms, enacting digital transformation holistically throughout the organisation and embedding a culture of innovation in their business, underpinned by experience and knowledge built over years.
“Banks have responded to this new paradigm, digitising their processes by leveraging and making decisions based on data and analytics, and shifting their focus on consumer experiences that go beyond mobile and online”, says Rosanna Woods, UK Managing Director at Drooms. “They have realised that to remain competitive and maintain market share they need to be more strategic and technologically adept, recognising the need to invest in automation, core modernisation and digitisation.” Below, Rosanna tells us why a collaborative approach is the way forward.
The changing landscape of investment banking
2019 is proving to be a momentous year for the global investment banking industry as it returns to normalcy in terms of profitability and capital adequacy. Global M&A activities, mainly by large US banks, are creating opportunities to expand overseas and acquire FinTech startups.
Today, most investment banks are enthusiastic about digital transformation initiatives to reduce costs and improve customer experience. Although investments banks adhere to their conservative business model, digitisation has shifted power to investors, who favour partnering with banks that are digitally more advanced.
Opportunities amid regulatory challenges
In Europe, the introduction of wide-ranging regulations has also impacted the working environment for banks. For example, the Second Payment Services Directive (PSD2) has encouraged innovation and competition between incumbents and FinTechs, while implementation of the revised General Data Protection Regulation (GDPR) framework has given EU citizens comprehensive data protection, forcing banks to ensure the privacy of customers’ data.
While addressing the myriad requirements of these new and contradicting regulations makes data management more daunting for banks, the major challenge for most of them is that data is being managed in siloed and disparate systems, making it all the more difficult to understand clients’ needs and demands.
Today, most investment banks are enthusiastic about digital transformation initiatives to reduce costs and improve customer experience.
However, the good news is that more banks are recognising the capabilities of cognitive technologies in gathering intelligent insights on customers, compliance and operations making collaboration with FinTechs more attractive. Also, robotic process automation (RPA) is rapidly gaining popularity as it brings productivity benefits to the table.
Helpful technology
The advent of Artificial Intelligence (AI) has been particularly helpful for banks in processes including client servicing, trading, post-trade operations such as reconciliations, transactions reporting, tax operations and enterprise risk management.
While much of the media attention towards AI has focused on its potential capacity to replace humans, at present it is seeing much more practical use in terms of complementing human intelligence. ‘Augmented’ intelligence involves machines assisting humans in their decision-making processes.
A sub-field of AI – Natural Language Processing (NLP) is a good example of augmented intelligence in practice. NLP systems are designed to read and interpret human languages. A key application of this in relation to banking is the analysis of substantial amounts of ‘unstructured data’, which is data that as yet cannot be ‘read’ by machines, such as PDF files, images and audio materials.
Banking is a data-intensive sector and many key tasks demand correct interpretation of partly structured data. Therefore, NLP has the potential to make processes much more efficient with less effort required from humans. As such, FinTechs have been quick to apply this technology because of its value in improving customer interactions, making collaboration with them attractive for most banks.
The advent of Artificial Intelligence (AI) has been particularly helpful for banks in processes including client servicing, trading, post-trade operations such as reconciliations, transactions reporting, tax operations and enterprise risk management.
Role in M&A
Technologies such as virtual data rooms (VDRs) come into their own for banks when used in M&A deals, helping to address many of the challenges such pursuits face even at the best of times. There are several key causes of failure, including politics around the deal, culture clashes among the personnel involved and, in particular, parties being unprepared for the due diligence phase. In this latter regard, M&A deals rarely fail because of a lack of knowledge. Rather, it is about how that knowledge is handled. Over half of deals fail because those parties involved are reluctant to confront issues head-on.
Buyers often proceed with deals despite the challenges because they feel obligated by the amounts of time and money involved. They should, however, be prepared to cut their losses if the risks outweigh the benefits. For example, allocating inadequate resources during the review stage cost Bank of America $50 billion in legal fees post its acquisition of Countrywide Financial in 2008, let alone the reputational damage it suffered for inheriting the past mistakes of the mortgage lender.
A VDR enhances the M&A process by increasing the power to collect, process and distribute information to the right parties with much greater security and accuracy. It digitises relevant documents, automates tasks and streamlines workflows.
Authorised users, including those inside a company and their external stakeholders, are connected digitally and in a secure environment with real-time access to all relevant documentation, depending on users’ individual permission levels.
A VDR enhances the M&A process by increasing the power to collect, process and distribute information to the right parties with much greater security and accuracy. It digitises relevant documents, automates tasks and streamlines workflows.
Creating a database in which documents can be updated consistently gives asset owners full control and the ability to react to the latest market conditions, bringing assets to market quickly when the conditions are right, sometimes at short notice.
One of the strengths of the Drooms NXG VDR is its Findings Manager function. This improves the vendor due diligence both prior and during the sales process. It allows for the automatic pre-selection of documents and helps in the assessment of potential risks and opportunities within a transaction. This yields greater control, instils confidence in potential buyers and cuts disruption to existing business.
Blockchain first
Macro forces such as blockchain are also slowly revolutionising many areas of banking. For example, blockchain made it possible to automate approvals of contracts as well as protect the transfer of confidential data from hackers and fraudster whenever transactions are made. In 2018, Drooms became the first provider to move its VDR offering into the blockchain age, using this modern technology to enhance the security of transaction data archives. Up to that point, all data had been stored on physical data carriers following completion of a transaction. But now it can be stored on Drooms’ own servers with blockchain protection. As a result, the secured data cannot be lost, is non-manipulable and is accessible to all parties involved in a transaction at any time.
A new threat
As more financial institutions start to adopt technologies created by FinTechs, a likely threat is emerging. Tech giants such as the likes of Amazon, Alibaba, Apple and Google are attracting customers in the payments domain by offering alternative ways of managing finances. In the US, Amazon is already offering its customers the option to turn spare change into gift cards, and parents can also give children their allowances via a reloadable debit card for example. In India, customers pay delivery fees through a Cashload feature and store excess cash from previous purchases in their account, as well as deposit money for future orders.
With platform companies’ potential to exploit customer data and come up with innovative solutions to address customer pain points, there is a lingering risk of disintermediation for banks. Customers who feel that tech companies alone meet their banking needs may decide to switch to non-banking channels. And there is also the possibility that tech giants may provide banking services in the future, making services provided by banks non-exclusive. Although big techs pre-dominantly target the origination and payments domain of banking, a stronger foothold by platform companies could threaten the survival of many banks in the industry.
Towards modernisation
The various areas of the banking industry will undoubtedly continue to evolve at varying speeds. And as time progresses more banks will likely partner with innovative FinTechs to remain competitive and market relevant. Potential for creative and ground-breaking collaborations and advanced modernisation will also likely increase.
That said, as technology transforms the future of banking, so ought banks’ mindset towards cognitive technologies and collaboration with FinTechs. After all, technology is not a panacea and it is accompanied by many challenges as well as opportunities.
The UK has long been a top destination for investors, having received over £4.5bn of investment into technology companies within the last 3 years. However, with Brexit on the horizon, there is a discussion about how the UK can maintain its attractiveness to foreign and domestic investors after leaving the European Union.
Ana Bencic, Founder and CEO of NextHash, comments on how UK-based, high-growth companies can maintain their appeal to investors in a post-Brexit Britain:
"It is clear that in the UK currently, there is no slowdown in appetite for the investment opportunities that exist, especially in the fast-growing tech sector, but there are questions about whether this will continue after Britain has left the European Union. The UK's abundance of high-growth businesses, particularly those in the technology sector including FinTech, require vital growth finance in the next five years and with the current funding gap, how will these businesses thrive in post-Brexit Britain?
“Blockchain investment platforms can help make global growth finance for scaling technology businesses more transparent and easier to access. Both individual and institutional traders will be able to engage more with blockchain technology-backed trading, where the businesses are backed by a Digital Security Offering and there is greater potential to make rapid returns on their investments than the traditional venture capital route. When this is adopted into the mainstream, it will revolutionise the way businesses will access scale-up finance, how investors will access these companies, and how illiquid shares can be traded into liquid capital in ways never imagined before. As Britain prepares for Brexit, new forms of investment could be crucial for these scaling businesses as well as global investors who want to maintain access to the UK marketplace."
(Source: NextHash)
At stake are our personal data, as well as our monetary possessions. While the concern for the former is a rather new phenomenon, the latter have been guarded by a multi-layered web of intermediaries. And still banks and other financial institutions regularly witness the weaknesses of this set-up. Below Igor Pejic, author of new book ‘Blockchain Babel: The Crypto-Craze and the Challenge to Business’, confronts the question: Is the Blockchain Really Unsinkable?
In recent years a technology hailed for immutability entered the stage: the blockchain. This cryptographically secured, distributed ledger technology was initially designed to bypass the financial system by enabling digital currencies, yet today banks are the most active in blockchain research, trying to reap the benefits of this supposedly tamper-proof ledger. But is the blockchain really unhackable?
In many a head there are probably stories whizzing around about stolen bitcoins and hacked exchanges. Mt. Gox is such a story. In 2014 Mt. Gox was the world’s largest crypto-exchange which processed around 70% of the world’s bitcoin transactions. 850.000 bitcoins were lost (of which around 200.000 were recovered). Further hacks such as the one of the Slovenian exchange Bitstamp followed. Most recently Quadriga, a Canadian exchange, made headlines because its founder Gerald Cotten supposedly passed away on a trip in India. He was the only one to knew the private keys to the wallets of 115,000 customers with funds worth $143m. That funds are thus not accessible and lost.
Yet when commentators use these examples to sow doubt about blockchain-security, they mix up different dimensions of data security, in particular data’s integrity during a transaction with its integrity before or after a transaction. The aforementioned hacks can be attributed to lax security standards aside of transactions such as the storage of private access keys. While parts of the crypto-sphere are reacting – Bitstamp has introduced two-factor authentication to access funds – many wallets and exchanges continue to operate with hair-raising security standards.
But what about the mechanism itself? Can attackers inject bogus transactions or rewrite past ones? This answer depends on the validation mechanism each particular blockchain uses. Let us illustrate this with bitcoin and other chains that work with so-called proof-of-work validation. In this set-up, validator nodes, also known as miners, are investing massive computing power to solve a mathematical puzzle with trial and error mechanisms. They are interested in the “right” solution, because only if they find it first, they are rewarded with freshly minted coins. Once found, the correct value can be verified quickly by the network. The major danger here is that a possible attacker gains control over more than 50% of the hashing power in a network and can vote a wrong truth into reality. The attacker could then submit a transaction to the network, and after getting the good or service he paid for simply use his computing majority to fork the network at a point in time before he sent the money.
Critics will point to the infamous DAO-hack. The DAO (Decentralized Autonomous Organization) was a leaderless organization that issued a token built on Ethereum’s smart contract code. A hacker exploited a cryptographic vulnerability to capture $50m. An ideological conflict of the Ethereum community prevented a soft fork that would have reversed the hack. Thus, a hard fork split the chain into Ethereum (version without the hack) and Ethereum Classic (version including the hack). But even this example was not a hack of the blockchain, but rather a bug that pestered the DAO-code sitting on top of the Ethereum-blockchain. Despite many problematic constellations – e.g. a high concentration of mining pools, as well as a limited number of ISPs hosting large parts of prominent blockchains – the mechanism as such has never been hacked. Attacks are very expensive and the advantages for the most part short-lived.
Does this mean the blockchain is immutable? No. We have to get the fairytale out of our heads that there is something like absolute security. There is always a way to trick the system, even if it is highly unlikely as the aforementioned 51%-attack. The question we should ask instead is whether blockchain is more secure than current systems. What most most critics of new payment technology do not know is that even the SWIFT-network, which enables monetary transactions between 11.000 financial institutions worldwide, has been subject to hacking in the past. In one heist, banks in Bangladesh and Ecuador lost millions. Blockchain technology has proven to be less susceptible to several attack vendors while doing away with intermediaries. This should render the discussion about absolute immutability superfluous.
The card uses a customer’s balance in Bitcoin or any other virtual currency and converts it into pounds or euro when paying in physical stores or online. It is the first crypto-based debit card to link directly with a cryptocurrency exchange in the UK and EU, as previously available crypto cards “required users to pre-load a specified amount of crypto onto their card, adding a point of friction to the process."
Why is the launch of the card important and how will it affect the crypto industry?
Making cryptocurrency usage easier
Along with Coinbase’s Visa card, the crypto exchange is also launching an app which will allow users to choose which cryptocurrency wallets should be connected to their purchases. The app will also allow customers to receive instant receipts, transaction summaries and access to spending categories. The process of converting users’ cryptocurrency into fiat is quite simple – “crypto, equivalent to the amount spent, is liquidated immediately into fiat ensuring the correct value is captured at the time of the transaction. Funds are debited immediately from the customer’s account”, explained Zeeshan Feroz, Coinbase UK CEO.
Rolling out Coinbase’s Visa card means opening up cryptocurrency payments to a large swath of users who are eagerly anticipating mainstream acceptance of cryptocurrency payments for everyday purchases.
The card will be first available in the UK only, with the view to soon be introduced across all European markets in which Coinbase operates. “The UK is a great first market for the Coinbase card with its thriving FinTech ecosystem and consumer willingness to try new ideas. The Coinbase Card will initially be available in the UK with a view to going live, in the coming months”, said Feroz.
What does it mean for the industry?
Rolling out Coinbase’s Visa card means opening up cryptocurrency payments to a large swath of users who are eagerly anticipating mainstream acceptance of cryptocurrency payments for everyday purchases and it goes without saying that any route that allows users to spend crypto in traditional ways is great for the crypto industry. Niv Abramovich, VP of Product at Coti, believes that utilising the card scheme will increase the popularity of cryptocurrencies. “Making digital currencies more accessible to consumers together with the ability to spend cryptocurrency in the real world could be the next phase to mass adoption and mass market of building digital economies and using digital money”.
“Making digital currencies more accessible to consumers together with the ability to spend cryptocurrency in the real world could be the next phase to mass adoption and mass market of building digital economies and using digital money.”
However, Richard Dennis, Founder and Senior Cryptography Adviser at temtum points out that since a Bitcoin transaction takes at least 10 minutes to enter a block, and 60 minutes to be fully confirmed on the blockchain, the payment processes and exchanges involved are risky. “There is a real possibility that a transaction might fail for a number of reasons, and there is nothing that Coinbase would be able to do about it if it does”, he says. So while the new Coinbase card is a significant step forward to using cryptocurrencies as a medium of exchange for daily purchases, as was the original vision of Bitcoin, Dennis thinks that the current generation of blockchain architecture is not able to completely remove the risk from the payment providers.
Steven Parker, CEO of Crypterium, on the other hand, admits that the card is a good ‘starting point’, however, he argues that the solution is still quite narrow because it will be only available to customers in the UK. “There’s no doubt that crypto debit cards are one of the easiest ways to bridge the gap between the crypto and traditional economies, enabling holders to spend digital assets with the same ease as fiat currencies. Big players like Coinbase play a vital role in spreading the word about this product, but ultimately, companies with more inclusive propositions will conquer the market”, concludes Parker.
Financial technology is rapidly progressing, so fast that people are forgetting the world economic crisis that happened 10 years ago. With the evolution of financial technology, new services and better options are being created for consumers all over the world. Digital technology has created a much better user experience for users all over the world, and sky’s the limit indeed. This is what you can expect from financial technology five years from now.
More digital engagement
It wasn’t too long ago that, for every financial service you needed, a trip to the bank was a given to get that service. With the advent of technology and the age of digitization, those days are no more. You can literally pay every single bill of yours and transfer money to people across the world with a mobile application at your disposal at any time and any place, and the evolution of these services is rapid and continuous. The digitization of financial affairs means a much better user experience, which reflects positively on revenues and sales numbers. People love slacking around and still getting things done, and in the future, there’s no telling how much more comfortable technology will make banking for users.
More services
As more technologies emerge and newer doors open, more services are being created to cater to people’s every financial need using financial technologies. For instance, you can now get an advance on that inheritance of yours that’s been taking ages to get processed in the courts. In this article you can learn about their conditions and how it works if you want to get an advance on your inheritance with minimal effort and quite an easy digitized process. This financial service, and many others, helps plenty of people who might be in a tight spot and in urgent need of cash, but are unable to access any due to the lengthy process.
Newer technologies
The quest to find newer technologies to facilitate and make things better for users is non-stop. For instance, banks now in some countries are operating hybrid clouds and cloud computing to address issues of security, compliance, and data protection. Hybrid clouds also offer reduced costs and a much better operational efficiency, making them truly the future of banking services. You even have artificial intelligence (AI) been implemented in some places, hopefully to an extent that in the future it can help in back office operations, customer service, and much more!
Is it a good thing or a bad thing?
An optimist will find the current advancements being made in financial technology truly remarkable, for they have the potential to create a better and more comfortable user experience for mankind and actually help people in need of such advancements. On the other hand, there are some who might worry about the digitization of something as critical as financial services, and dread the reliance on machines to manage our finances. While both opinions have their pros and cons, one can’t deny the fact that technology is moving at an exceptionally rapid rate, and it’s quite exciting to view what’s next in store.
According to Tony Smith, MD of Business Expert, for the most part, London has bucked this trend by beating even Silicon Valley to becoming the global Fintech hub. The historic financial centre has welcomed thousands of startups via progressive regulation, a forward thinking consumer market for tech products, and a central European location.
With the shadow of Brexit causing mounting uncertainty in the business community, the question of whether London can retain its title as the Fintech capital is becoming a talking point. More than almost any other industry, the ability to scale Fintech companies relies on access to global talent pools and, with post-Brexit employment laws still uncertain, many fear Britain is going to lose one of its greatest financial assets.
European Capitals Mop Up Fintech Exodus
While Theresa May struggles to push through her Brexit plan, other countries have been busy rolling out the red carpet with tax incentives and easy access to funding as a means of luring potential Fintech talent while the going is good.
Paris is one example of this. Sharing London’s historical reputation as business centre, Paris already hosts banks and large insurance companies, alongside a workforce rich in engineers and data scientists. Efforts are being made to entice tech talent via smoother regulation and a city-wide focus on AI training courses.
The German capital, Berlin, is another contender. Berlin is actively promoting Fintech relocation with it’s slogan ‘Keep Calm Startups and Move to Berlin.’ With cheap commercial real estate, governmental funding support, and 100 Fintech startups already placed, Berlin is likely to benefit widely from the political situation in the UK.
Tallinn, Estonia, while smaller than the major capitals, already has the third highest concentration of startups in mainland Europe. Tallinn is now benefiting from the efforts of the post Soviet government who recognised that technological education could drive the economy of the future. Estonia now has one of the most tech-savvy workforces in the world.
London still has a lot to offer
Despite the Brexit gloom, many pundits are at pains to point out that London is by means on the ropes just yet. In addition to its position as one of the world’s financial centres, a number of universities specialising in artificial intelligence have added to its hub status.
At the recent Amsterdam Money conference, London’s Deputy Mayor for Business, Rajesh Agrawal commented: “London is the greatest city in the world, and it’s no wonder that so many financial tech companies proudly call it home. As a fintech entrepreneur myself, I know that London has the right mix of clear regulation, world-beating talent, and a massive customer base to make it the international fintech capital.”
The SME market is becoming a key target sector for most banks, but these often more agile organisations demand a better digital approach, and according to Kyle Ferguson, CEO of Fraedom, a personal touch is what’s needed.
Thanks to technological advances within retail banking, the way we bank in our personal lives has changed dramatically. No longer do we wait for bank statements to arrive at the end of each month to get an idea of our spending; instead, we are able to do this whenever we want, and often in real-time, via an app on our phone. This evolution of banking in our personal lives has fuelled a change in expectation among SMEs who are demanding the same experiences and offerings within the world of business banking. As a result of this change in expectations, SMEs are demanding a better digital approach as reflected by 57% of SMEs that now want to move to an online/mobile banking business environment.
However, banks are currently struggling to meet the demands of SMEs and deliver the more personalised service and consumer-focused offering the majority desire. Yet, with a combined annual turnover of £2.0 trillion and accounting for 52% of all private sector turnover in the UK in 2018, SMEs are a highly lucrative market that banks can’t afford to ignore. So, where should banks start and how can they begin to attract SMEs?
Developing a digital offering
According to a survey conducted by Fraedom, 95% of commercial clients who bank digitally in their personal lives, expect to do so at work as well. Ultimately, SMEs want the same digital capabilities, such as apps and online platforms, they get as personal customers. Yet, just 43% of SMEs claim to have near real-time control over business spend. Similarly, almost a third of respondents feel they have very little visibility on a day-to-day basis and nearly a quarter confessing to having to regularly spend significant time and money investigating who spent what. Furthermore, over half of UK respondents said that on average they were personally spending more than two hours a week on expense or financial management tasks. The need to regularly go back and interrogate audit trails can be a further drag on a business’ efficiency and productivity.
Just 43% of SMEs claim to have near real-time control over business spend.
In our personal lives, we now have seamless mobile transactions, highly responsive customer service and fast transaction times. Yet, although personal bank statements typically update in real time and can be viewed on a mobile device, reconciliation of work-based expenditures can take days, if not weeks to process. It is therefore unsurprising that SMEs are left frustrated by the lack of innovation offered by banks and are demanding banks provide the same tools, level of service and personalised experience we have become so used to in our personal lives.
Gaining an understanding of SMEs
Banks’ engagement levels with SME customers have also been revealed by Fraedom to leave a lot to be desired with just 12% of UK SMEs saying they thought that banks their organisation had dealt with over the past year fully understood their needs as a business. It is therefore vital that banks work to understand the needs of SMEs and also learn to speak the same language.
This understanding of SMEs also extends to ways in which they want to interact with banks. For instance, the 2018 FIS Performance Against Customer Expectations (PACE) found that almost half of UK SMEs prefer to contact their bank through digital methods via a tablet or mobile, for example. Banks need to keep this in mind and offer preferred methods of communication if they are to really tap into this lucrative market.
The SME sector is a truly lucrative market for banks, and ignoring their pleas for a more digital, personalised approach would be a mistake.
Moving forward together
The SME sector is a truly lucrative market for banks, and ignoring their pleas for a more digital, personalised approach would be a mistake. It is vital that banks begin to innovate to answer this demand with partnering with fintechs often being the most effective way of doing this. Through fintech partnerships, banks will be able to not only implement the right technology but also to get a better understanding of their SME client-base. As a result, banks will be better able to understand the consumerisation of business processes and technologies; the eagerness of SMEs to adopt these to achieve enhanced agility; and the frustration they feel if they sense that banks are effectively not speaking their language.
This tailored service will allow banks to build lasting, more trust-based relationships with SME customers, while SMEs will gain greater business agility, streamlined efficiencies and increased visibility of expenditure.
The customer pain point defined by the limited function of outdated banking monoliths was realised some time ago. And, as we look at the state of the market in 2019, there are many vendors out there all vying to do the same thing: to bring banking to the state of digital usability that other industries such as e-commerce and entertainment reached a long time ago. Below, Finance Monthly hears from Tobias Neale, Head of Delivery at Contis on the three key areas to look at in order to be a successful FinTech in 2019.
Naturally, like any crowded marketplace, brand differentiation is vital in order to stay competitive in FinTech. After all, when there is an approximated £20 billion in annual revenue up for grabs in the UK alone, it makes sense that there are plenty of incumbents as well as new players joining every year, aiming to get a piece of the pie.
So, what truly makes a successful FinTech company stand out right now? Where are the areas that brands can truly get ahead? Also, and perhaps most importantly to consider, does FinTech look set to eclipse traditional banking altogether, or is there a way the two can grow closer?
Innovation
Building new infrastructure for financial services is not a new venture – the big payment giants have been shaking up the financial solutions market through regular technology investment projects for some time. However, given the recent wave of innovation instrumented by new and emerging rivals, it is increasingly evident that innovation has gone mainstream – beyond the big banks – and that continuous development is integral to keep pace for everyone, whether new or established. These new entrants, who put technology innovation at the forefront of their business, recognise that it is not just a case of creating technologies to contend with the big banking and payment giants, but also creating with them in order to integrate with and support them.
Agility
FinTech moves fast, and the pace at which a service provider can be disruptive is that which sets competitors apart. Start-ups have the advantage of being free of legacy systems that often prove a huge inhibitor to modernising quickly enough to keep pace for their long-standing and well-established counterparts. As a result, new entrants will do well to take advantage of this agile upper hand by ‘moving fast and breaking things’ with mobile-focused products. By quickly adapting to fill gaps left by traditional banking providers they can deliver services in record time.
Customer service at the core
In recent years, customer trust in the banking and payments industry from both the has been put to the test thanks to disruptions and data breaches affecting both businesses and consumers alike . This means that there is ample room for disruptors to capitalise on the need for a reliable and trustworthy provider that offers great services, extensive support and guidance, particularly for prospects that are looking to establish their first increment of banking services into their ecosystem.
What is important to remember is that disruption is not all about overtaking older established rivals – part of what makes a successful FinTech in 2019 is the ability to integrate with these institutions and move digital transformation for the industry and shared customers. Keeping innovation, agility and customer service at the core of a company’s proposition is what will truly define those looking to follow the success of companies like Monzo and Revolut, in 2019 and far, far beyond.
