A Global Guide to FinTech and Future Payment Trends
Peter Goldfinch
In his book, payments specialist Peter Goldfinch sheds light on highly topical themes such as the evolution of payment systems from paper instruments to computerisation, their role in enabling commerce to contribute to the development of emerging economies, cryptocurrencies and the slow decline of physical credit and debit cards due to the introduction of alternative forms of payment.
A Global Guide to FinTech and Future Payment Trends offers a comprehensive overview of the evolution of payments, looking at the ways they’ll develop in the future and encouraging readers to explore their own predictions. Published earlier this year, the book is an unmissable summer reading for technologists, marketers, executives and investors in the FinTech field, as well as academics teaching business and technology courses.
Inclusive FinTech: Blockchain, Cryptocurrency and ICO
David Lee Kuo Chuen & Linda Low
With the uninterrupted growth of the cryptocurrency market and the new class of FinTech companies born out of digital finance, this book illustrates how the underlying technology innovation may be applied to a wide range of industries and explores trends in FinTech, blockchain and token sales.
Inclusive FinTech: Blockchain, Cryptocurrency and ICO’s aim is to dispel the numerous misconceptions about cryptocurrencies and blockchain (especially bitcoin, Initial Crypto-Token Offering or ICO), as well as the idea that businesses can be sustainable without a social dimension going forward. It is a book for people who are interested in switching to a more meaningful and sustainable career or for those on the lookout for new business opportunities. The book’s primary hope is to change our mindset and show the potential that digital economy has.
Blockchain Regulatory Compliance Made Easy
Jargon-Free Insights and Tips for Blockchain Executives and Compliance Professionals
Simone Domenico Casadei Bernardi
Authored by a compliance adviser who works with a number of crypto-businesses and FinTech companies, Blockchain Regulatory Compliance Made Easy is the blockchain regulation compliance bible. Jargon-free and easy to assimilate, the book delves into the ins and outs of compliance and the ways you can benefit from it, discovers the strands of financial services regulation, the different sources of regulation and the regulatory models in the US and EU and explains how a number of directives and regulations might apply to your blockchain FinTech business. It also offers advice on what to do when things go wrong, discussing what the consequences of a breach are and what happens if the regulator starts an investigation.
This book is a vital read for compliance professionals operating in the blockchain FinTech sector, crypto business owners and senior managers, as well as journalists and bloggers who struggle to get their heads around compliance.
Blockchain Design SprintMoses Ma & Langdon Morris
The blockchain era is the next tsunami of digital change and it’s only getting started; expected to disrupt business models and inspire more change than ever before. Blockchain Design Sprint hopes to educate readers on the impact that blockchain will have on their businesses and help them develop a successful strategy for surviving and thriving in the blockchain era.
The workbook combines powerful techniques from Agile Innovation design sprints to increase creativity, as well as carefully designed exercises focused directly on building a blockchain business. Designed to prepare the reader for the remarkable future that the advent of decentralised financial services and the blockchain promise, this FinTech edition focusses on exercises and special content for the financial services blockchain developer.
FinTech: The Banks Strike Back
Yves Eonnet & Herve Manceron
Technology is changing the way the financial industry works as FinTech companies, BigTech firms, and the markets for third-party services continue to develop. Failing to keep up with the latest digital trends and hindered by cumbersome branch networks, traditional banks are fighting for their survival. FinTech: The Banks Strike Back is a book that examines not just the ways banks are responding to the FinTech thread, but also how they’re striking back through reinventing themselves.
Chatbots
In a matter of years, the use cases for chatbots have increased dramatically going from only being capable of completing very basic tasks, such as answering FAQs, to initiating actions on their own. Consequently, chatbot technology is likely to completely disrupt the way banks interact with their customers which will have a tremendous impact on the way banks operate. In fact, Juniper Research estimates that the operational cost savings from using chatbots in banking will reach $7.3 billion globally by 2023, up from an estimated $209 million in 2019. Additionally, it is expected that there will be a growth of nearly 3,150% in successful banking chatbot interactions between 2019 and 2023, while Gartner predicts that by 2020 consumers will manage 85% of their total business interactions with banks through FinTech chatbots. Thanks to advances in chatbot technology, banks will be able to streamline their operations, reduce service costs, improve their customers’ experience and be able to serve more people, more quickly.
Blockchain
In recent weeks, we have heard a great deal about Facebook’s new digital currency Libra with London FinTech Week making the case it is energising the blockchain and FinTech scene. This may well be the case as blockchain continues to gain momentum across banking and financial services sectors and looks set to be one of the most disruptive FinTech trends moving forward. This is echoed by the fact the financial services industry was found to be spending about $1.7 billion per year on blockchain last year, however, the International Data Corporation (IDC) predicts this figure will increase to $11.7 billion by 2022.
One in ten banks and other companies are now reporting blockchain budgets in excess of $10,000,000.
Further research from Greenwich Associates revealed that one in ten banks and other companies are now reporting blockchain budgets in excess of $10,000,000. Additionally, it found that the typical top-tier bank now has about 18 full-time employees working on the technology. These figures are substantial and are expected to rise as blockchain technology gains more traction. As its adoption increases, it is likely banks and financial services organisations will focus more on how they can use blockchain technology to reduce operational complexity, streamline efficiencies and find a competitive advantage.
Advances in Mobile Banking
Increasingly, small businesses are demanding the same mobile interactions they get from their personal banks with research from Fraedom finding that 95% of commercial clients bank digitally in their personal lives. As a result, commercial banks are beginning to invest in key technology areas to make consumerisation possible. This is a trend that will grow as more commercial banks expand their digital offering to allow businesses access to a greater range of mobile banking capabilities.
Partnerships
According to London FinTech Week, the trend of financial institutions partnering with FinTechs will continue to develop, with Fraedom finding that more than 84% of commercial banks in the UK are considering new FinTech partnerships this year. There are a number of drivers for this, such as improving customer experience, speeding up digital transformation, better cash and card management and cost savings. Partnerships with FinTechs are not only enabling banks to implement the right technology, but they are also helping banks to better understand the consumerisation of business processes and technologies.
84% of commercial banks in the UK are considering new FinTech partnerships this year.
Regulatory changes
As the financial sector tries to get to grips with the new wave of regulations being introduced and the FATF prepares to roll out new rules to increase the compliance requirements on cryptocurrency exchanges, regulation was unsurprisingly a hot topic at London FinTech Week. However, where regulation may once have been seen as a barrier to the FinTech market, there is now more positivity associated with it in part due to PSD2 and the introduction of Open Banking showing regulations can actually be instigators of innovation. While we can’t say all regulation will have the same impact, it has certainly highlighted that the financial services sector must prepare for their introduction so as to be able to manage their influence.
As the financial services sector gets back to normality after London FinTech Week, it’s vital that they apply the learnings from the event and capitalise on these trends. With technology at the heart of many of these developments, partnering with FinTechs will be instrumental in helping banks to make the most of them, allowing them to improve their customer service, develop the more modern offering that society now expects and stay at the forefront of developments within the industry.
We live in a digital world, and the financial industry is no exception. Eschewing traditional methods, finance has merged with technology to create a whole new sector, FinTech, that is changing the way we manage our money in a big way.
With banks and other established financial institutions cutting jobs in favour of automatic processes and AI, it's no surprise that many people in the industry are turning to FinTech for career opportunities instead. Plus, there's a lot of investments being made in FinTech start-ups and they have incredible potential for growth, so you could end up making more money if you find the right position.
So, whether you're looking to start somewhere fresh or are just after something more lucrative, here are the three things to consider when making the change from finance to FinTech.
Identify your transferrable skills
You don't necessarily need to be an expert in technology to find your place in FinTech. FinTech refers to the use of technology in any aspect of financial service, including markets, banking, payments, and insurance. There's such a broad area of focus that you'll likely find a company to suit your interests whatever they may be. And, whether you're technologically inclined or not, your experience in finance will be invaluable for identifying and assessing opportunities that technology specialists might overlook.
You know how the financial industry works and you have regulatory knowledge, which means you have valuable insight into the possibilities and limitations posed by standards, which will be useful when designing financial technology.
You know how the financial industry works and you have regulatory knowledge, which means you have valuable insight into the possibilities and limitations posed by standards, which will be useful when designing financial technology. Most importantly, though, FinTech companies are very data-driven, so you'll continue to be expected to use numbers and data to make business decisions.
It's also important to consider any other valuable professional skills that you've acquired in your previous roles, like communication and management. These are the kinds of qualities that will set you apart in any business, so it's just as necessary to draw attention to them as well as your financial background.
Aim for the right companies and roles
If you don't have a strong background in technology, don't worry. You could focus on looking for roles at FinTech companies in financial analysis, accounting, credit risk analysis, risk management, and compliance, as these are good roles for financial specialists to fill. The big question, though, is where to apply.
There's a lot of FinTech start-ups to choose from and not all of them will last, so working out which companies to approach can feel like a bit of a gamble.
Early-stage start-ups will probably ask you to take on a more dynamic role, which is certainly a chance to gain more responsibility, but it means you have to be much more invested in the company than you would normally be. Make sure you ask potential employers about their future goals before you accept these sorts of positions to determine whether they are in line with your own aspirations.
If you're looking for a position with more job security, remember that it's not only start-ups that are focussing on FinTech.
Additionally, start-ups have to be fluid but also capable enough to adapt to unexpected challenges and opportunities. Although there's a lot of money being pumped into FinTech start-ups, a lot of them will fail. So, if you have any concerns that their plans for the future won't provide you with the career you need, you'll be better off looking at one of the many other FinTech companies out there.
If you're looking for a position with more job security, remember that it's not only start-ups that are focussing on FinTech. Established financial institutions are also working out ways to combine finance and technology to keep up with industry trends, so don't rule out looking for major opportunities in places like HSBC and Citibank as well.
Continue to nail networking
Networking is always important if you want to keep abreast of news and job opportunities within your sector, but it is especially useful if you're thinking about changing from a career in finance to FinTech. It's a fast-moving sector, so by attending events such as new app launches you can get a better idea of the structure of the industry, the upcoming trends, and the sorts of positions available that might suit your experience. You may also begin to recognise some little-known companies and their representatives that you can add to your list of potential employers, as well as pick up some technological knowledge.
The buzz around FinTech means that you won't be the only person you know who's thinking about transitioning, so you don't need to be shy about building relationships with like-minded professionals. They might be able to share tips and recommend places to you if they find their way into FinTech, so make sure you keep in touch with fellow job-hunters you think have the potential to become valuable through social media.
Identify your transferrable skills, find the right company, and up your networking game. Focussing on these three areas can help you make a smooth transition from finance to FinTech and find the best opportunity for you.
Some 55% of respondents of the survey carried out by deVere Group affirmed that they ‘regularly use financial technology to access and manage their money.’
883 people from the UK, Europe, Asia, Africa, Latin America and Australasia took part in the poll.
Of the findings, Nigel Green, deVere Group founder and CEO notes: “Even two or three years ago, that figure would have been significantly lower. The fact that today 55% of people polled globally use fintech solutions on a regular basis highlights the staggering rate of the digitalisation of our everyday lives.
“And it is speeding up. From self-driving cars, genetic bio-editing to AI, new technologies are beginning to impact every part of our lives. Our financial lives are no exception. We’re in a new age.”
He continues: “Fintech firms are filling the void left between what traditional financial services companies are offering and what customers are now expecting, especially in terms of customer experience.
“In broad terms, this means immediate, on-the-go, 24/7 access to, use and management of their money. It means personalised, on-demand services. It means lower costs.
“Fintech is already a major disruptive presence in the financial services marketplace. This trend is only set to grow as ‘digital natives’ - the first generation that grew up with the internet and smart devices – become ever more dominant in the workforce and in social and political roles.”
According to the data collected by deVere, emerging markets in Asia, Latin America and Africa are becoming the biggest growth areas for participation.
“This could be due to fintech typically offering more inexpensive solutions compared to traditional financial services. Also because these areas are home to many of the world’s 1.7 billion unbanked or underbanked population – those who don’t have access to or have limited access to financial institutions – and fintech allows this issue to be overcome,” affirms Mr Green.
Other standout trends: Around two thirds (67%) of those polled used fintech apps to send remittances and money transfers. 46% use financial technology vehicles to track investments and/or accounts. 28% use them for storing and managing cryptocurrencies.
The deVere CEO goes on to add: “Fintech – a major part of the so-called 'fourth industrial revolution' – is a positive force for three key reasons.
“First, it is meeting clear and growing client demand for on-the-go services.
“Second, it is speeding up the advance of financial inclusion across the world. Helping individuals and companies successfully manage, save and invest their money will only result in a better society for us all.
“And third, it gives firms the opportunity to diversify, cut costs, meet regulatory requirements and improve the client experience, which will help build long-term relationships and trust.”
Mr Green concludes: “The poll underscores that fintech is the new normal.”
But it is the speed at which the technological advancements have reached that has forced traditionally slow-moving financial institutions to heavily invest to remain relevant to their consumers and remain competitive in the marketplace.
Personal
Banking is one of the oldest businesses in the world, going back centuries ago, in fact, the oldest bank in operation today is the Monte dei Paschi di Siena, founded in 1472. The first instance of a non-cash transaction came in the 20th century, when charga-plates were first invented. Considered a predecessor to the credit card, department stores brought these out to select customers and each time a purchase was made, the plates would be pressed and inked onto a sales slip.
At the end of the sales cycle, customers were expected to pay what they were owed to the store, however due to their singular location use, it made them rather limiting, thus paving way for the credit card, where customers that had access to one could apply the same transactional process to multiple stores and stations, all in one place.
Contactless
The way in which we conduct our leisurely expenditure has changed that much that we can now pay for services on our watches, but it wasn’t always this easy. Just over a few decades ago, individuals were expected to physically travel to their nearest bank to pay their bills, and had no choice but to carry around loose change and cash on their person, a practice that is a dying art in today’s society, kept afloat by the reducing population born before technology.
Although the first instances of contactless cards came about in the mid-90’s, the very first contactless cards associated with banking were first brought into circulation by Barclaycard in 2008, with now more than £40 million being issued, despite there being an initial skepticism towards the unfamiliar use of this type of payment method.
Business
Due to the changes in the financial industry leaning heavily towards a more virtual experience, traditional brick and mortar banks where the older generation still go to, to sort out their finances. Banks are closing at a rate of 60 per month nationwide, with some villages, such as Llandysul closing all four of its banks along with a post office leaving it a ghost town.
The elderly residents of the small town were then forced into a 30-mile round trip in order to access her nearest banking services. With technology not for everyone, those that weren’t taught technology at a younger age or at all are feeling the effects most, almost feeling shut out, despite many banks offering day-to-day banking services through more than 11,000 post office branches, offering yet a lifeline for those struggling with the new business model of financial firms.
Future innovations
As the bracket of people who have grown up around technology widens, the demand for a contemporary banking service continues to encourage the banking industries to stay on their toes as far as the newest innovations go.
Pierre Vannineuse, CEO and Founder of Alternative Investment firm Alpha Blue Ocean, gives his comments about the future of banking services, saying: “Artificial intelligence is continuing to brew in the background and will no doubt feature prominently in the years to come. With many automated chatbots and virtual assistants already taking most of the customer service roles, we are bound to see a more prominent role of AI in how transactions are processed from all levels.”
Technology may have taken its time to get to where it is now, but the way in which it adapts and updates in the modern era has allowed it to quicken its own pace so that new processes spring up thick and fast. Technology has given us a sense of instant gratification, either in business or in leisure, we want things done now not in day or a week down the line.
Sources: https://www.sysco-software.com/7-emerging-trends-that-are-changing-finance-1-evolving-cfo-role/ https://www.vox.com/ad/16554798/banking-technology-credit-debit-cards https://transferwise.com/gb/blog/5-ways-technology-has-changed-banking https://www.forbes.com/sites/forbesfinancecouncil/2016/08/30/five-major-changes-that-will-impact-the-finance-industry-in-the-next-two-years/#61cbe952ae3e
Digital banks raised over $1.1bn in fresh funding throughout 2018 in Britain, a figure that is set to be dwarfed if the current pace of growth continues to demand the attention of investors. Claudio Alvarez, Partner at GP Bullhound, explains for Finance Monthly.
Europe is truly leading the fintech charge, accounting for roughly a third of global fundraising deals in 2019, up from only 15% in the fourth quarter of 2018 according to our data. These are digital firms raising globally significant levels of capital. Adyen, the Dutch payment system, is now one of the frontrunners to become Europe’s first titan, valued at over $50bn. Europe has become a breeding ground for businesses that can go on to challenge US tech dominance, and it is fintech where we will find most success. Europe’s unique capacity for incubating disruptors is a phenomenal trend to have emerged over the past few years.
It’s true, European culture has always been more open to contactless and cashless, in contrast the US, where legislation and the existing banking infrastructure make adopting new technologies in banking slower and more convoluted. Europe has been able to take an early lead, while the US remains fixed on dollar bills.
As the ecosystem evolves, borders will become less relevant and markets more integrated, allowing the big players based in Europe to expand into further geographies with greater ease. European success garners the growth, momentum and trust needed to brave new regions and cultures. Monzo won’t be alone in the US for long.
As the ecosystem evolves, borders will become less relevant and markets more integrated, allowing the big players based in Europe to expand into further geographies with greater ease.
Whilst the Americans’ slow start has allowed European start-ups to become global players, it’s also true that the regulatory environment has distracted the European big banks and opened up the space for innovative and disruptive newcomers. While PSD2 has eaten up the resources of the incumbents, the likes of Monzo and Revolut have focused on consumer experience, product development and fundraising. The result? Newcomers are able to solve problems that older institutions simply don’t have the capacity to address.
However, a word of warning: traditional bricks and mortar banks aren’t dead yet. For one, digital banks will still need to justify the enormous valuations they’ve secured recently, and will have only proved their worth if, in 3 to 5 years’ time, they have managed to persuade consumers to transfer their primary accounts to them, which would allow digital banks to effectively execute on their financial marketplace strategies
Meanwhile, traditional banking institutions have a plethora of options to fend off the fintech threat and most are developing apps and systems that mimic those created by the digital counterparts. Innovation isn’t going to come from internal teams – it needs to be a priority for the old players and they need to invest in third party solutions to excel as truly functional digital platforms in a timely manner. In the first instance, the traditional banks will need to solve the issues that pushed consumers towards the fintechs and secondly, work on attracting consumers to stay by offering, and bettering, the services that make fintech’s most attractive.
Competition breeds innovation. For the fintech ecosystem as a whole, this new need for advancement is only good news – a rising tide lifts all ships. As traditional banks try to innovate and keep pace, we’ll see them investing in other verticals in the fintech market. Banks’ global total IT spend is forecast to reach $297bn by 2021, with cloud-based core banking platforms taking centre stage. Digital banking may have been the first firing pistol, but the knock-on effect of the fintech revolution is being felt across the board.
The fintech boom shows no sign of bust, market confidence is riding high and will continue supporting rapid growth. The aggressive advance of digital banks has opened doors for a whole host of fintech innovation - from cloud-based banking platforms to innovation in the payments sector. The number of verticals that sit within financial services creates a plethora of opportunity for ambitious and bullish fintechs to seize the day.
This month Finance Monthly had the privilege to connect with Harriet Rees, Head of Data Science at Starling Bank, to hear about her role within the challenger bank, her experiences as a woman in finance and FinTech, and the gender imbalance in the FinTech industry.
Can you tell us about your career before joining Starling Bank last year?
Following my Master’s degree in Mathematics at Oxford University, I made a natural move into the financial services industry in the City of London. Back then, I remember thinking that I really wanted a job that would actually enable me to use my Maths degree, so I chose to pursue an actuarial career in insurance, which is a typical route for a mathematician. I was very lucky that the company I chose, AXA, encouraged growth and was very supportive of women in the workplace. As part of my role there, I was able to move my life and career to Paris where I lived for four years - running predictive analytics projects mainly in Europe, but also in Asia. This is how I fell in love with the field of data science.
However, whilst I enjoyed my role at AXA very much, I also found that I was often frustrated by the lack of progress, the bureaucracy and committees that we had to attend to in order to get things to move at a faster pace which I perceived to be a lack of a burning desire for innovation at speed. At the time, I became very aware that industries like FinTech and InsurTech were moving quicker, innovating and flourishing and I found myself feeling a bit jealous, as I really wanted to get involved. I remember hearing Anne Boden, the Founder and CEO of Starling Bank, on the radio one day. It was International Women’s Day, so she was talking about women in technology and FinTech, how women are part of innovating at Starling and how she wanted more and more women to get involved in all the wonderful things they are working on. I remember feeling very inspired after hearing Anne, so I wrote a letter to her and the rest is history - I've been at Starling ever since.
I think from the outside, it can feel like FinTech is a space where men are more present, as men fit the notion of the pro tech culture.
Have you ever experienced any challenges in the workplace that have been connected to your gender?
I am very fortunate to say that I've never directly experienced anything that I assume to be adversely impacting me because of my gender. But of course, I shouldn't say that I'm grateful or that I feel lucky that it hasn't happened to me and I suppose the reason I say this is because I have spoken with colleagues from both Starling and AXA who have found that to be the case – whether it’s been connected to the way they've been treated or how much they’ve been paid, etc.
During my time at university though, I was often one of the few women in the room - certainly during my Master's degree studies. I was hardly ever taught by female lecturers or professors at any of the higher education institutions that I have studied at, which I think is indicative of the problem and the fact that women are less present in these sectors and that, of course, has its own impact on the whole ecosystem.
And in your opinion, is there gender diversity in FinTech?
I've read a few articles on this, even before joining the field and there's certainly work to be done here. I work in a purely engineering team at Starling which is certainly male-dominated, despite our best efforts for it not to be. Only 20% of the engineering workforce is female and at Starling, we are always actively on the lookout for women to bring into these roles. I think from the outside, it can feel like FinTech is a space where men are more present, as men fit the notion of the pro tech culture. However, if you look a little bit below the surface, you will see that there are actually a lot of powerful women movements within the industry and in fact, there are inspiring female leaders in the FinTech space - it's just that there are less of them. Our CEO is someone who speaks very vocally about this and it is Starling Bank’s mission to bring more women into the FinTech space.
I rarely speak to people who say that it's really difficult to be a woman in FinTech, the main issue, however, is getting here in the first place.
What do you think are the biggest issues for women in FinTech?
To be fully honest, I rarely speak to people who say that it's really difficult to be a woman in FinTech, the main issue, however, is getting here in the first place. I think that for me personally, I was so inspired to join Starling and the world of FinTech because I heard Anne on the radio. But would I have made that jump if I hadn't heard Anne calling out to all women? Perhaps not. Perhaps I needed that reassurance and push to get me to take the leap into FinTech.
There’s certainly more work to be done to really show the outside world that FinTech is a place where women could thrive. Although there are fewer women at the top of these companies, they are still inspiring and powerful and they are innovating in the same way that men are. Movements like Women in Data, Women in FinTech and Women in Finance are a great start, but I think that we need to encourage more of that in order to address gender imbalance in FinTech and show more women that the industry is changing.
Does the fact that Starling Bank was founded by a woman mean that the company has a focus on ensuring that there are women at the top within the organisation?
40% of senior managers at Starling are female, so yes, the company definitely has a focus on ensuring that there are women at the top. However, I would like to think that this isn't just because Anne is a woman – I would like to think that Starling would have this mentality regardless of our CEO’s gender. We are an inclusive workforce and we don't discriminate based on gender - both for our customers and our staff. As part of the RBS' Alternative Remedies Package which we were fortunate to be awarded earlier this year, we talked about the fact that we would actively work across the industry to increase the number of women working in technology roles in the UK and we also pledged to continue having 40% of our senior management occupied by women in 2021. So we really do seek to embrace fusion in all forms, but particularly on the gender front and I really do believe that this isn't just because Anne is a woman, but also because Starling as a whole is a company that is eager to reshape the FinTech space.
There’s certainly more work to be done to really show the outside world that FinTech is a place where women could thrive.
What's your piece of advice for other women wishing to work in FinTech and how can they make it to the top?
My piece of advice would be to take the leap. As I mentioned earlier, I moved from a large corporation into a tech start-up and back then, this felt like a very brave move. However, I've never looked back. I enjoyed my job before Starling but I’ve also always had the desire to innovate, code and make changes faster and in a more impactful way. Thanks to the wonderful world of FinTech and the ecosystem it’s created, I am now able to do exactly that. So, I feel that women and girls who are in the same position I was a while back and are looking at FinTech as a potential, need to give it a chance - take the leap and I think you’ll be as excited about it as I am today!
And as for making it to the top, we need to really leverage the networks that exist to encourage and support like-minded career-focused women. Perhaps we need to increase schemes like mentorship in order to encourage female innovators to speak more and discuss ways to elevate the position and prominence of women in FinTech.
How is AI implemented at Starling Bank?
Today Starling uses AI mainly for operational purposes across credit, lending, fraud and optimisation of customer service operation. It's very much an operational focus and this obviously has two main benefits - efficiency for the bank but also better customer experience.
We know that we're definitely at the beginning of the AI journey and what we really want to do is bring AI into the product so that the whole customer experience can be enhanced by utilising more intelligent decision-making. Ultimately, we want to be able to make experiences better before the customers feel the need for it to happen.
we need to really leverage the networks that exist to encourage and support like-minded career-focused women.
What projects are you currently working on with Starling and what's on the bank's agenda in regards to financial innovation for the rest of 2019?
A lot of this links to the RBS Capability and Innovation fund that we were so fortunate to be awarded. In February this year, we received £100 million that will help us build our SME proposition. In this area, there's a lot that relates to my world of data science and AI and as part of this, we pledge to integrate the intelligent tools around the product that would offer insights into automation around cash flow forecasting and recommendations for banking solutions to our SME customers. Obviously, within this, we also connect to the idea of technology for good, so we commit to tackling the wider issues around algorithmic bias to ensure that our customers can be equipped with AI recommendations or predictive based analytics, without any inference of bias.
Additionally, we've also recently launched our new Euro account, so we'll also be focussed on fully launching and developing that offering for our customers. We're very excited about where it can take us - watch this space on this one.
Are there any changing trends you foresee in the field of FinTech?
I think that FinTech will soon start moving away from this operational focus to a more personalised payments service, which is something that we're only just seeing in other fields, but we don't really have from banking products yet. I'm hoping that FinTech will soon lead that journey.
The financial crash of 2008 created a huge amount of mistrust toward big banks and FinTech entrepreneurs have taken advantage of that. The disintermediation of banks from areas such as travel money has given rise to a new kind of financial service firm, an area set to carry on this trend. There are some brilliant ideas in FinTech and the problems they solve are widely unrelated to Brexit, meaning that investment is likely to continue to grow.
In much the same way as FinTech came from the financial crash, existing sectors will be disrupted, and new ones created to tackle problems that arise. Many FinTech innovations were born from a lack of trust of banks and traditional sources of financial services. Since 2008, over 200 FinTech companies have been founded in the UK alone, with seven of these going on to reach a billion-dollar valuation or a ‘Unicorn’ status.
Unicorns refer to start-ups that have reached what many perceive to be the holy grail of a $1billion valuation. In terms of producing these companies, the UK is the third best place in the world behind only the US and China. In 2018, 13 companies reached this valuation in the UK, bringing the total number to 72. Many of these companies are FinTechs born of the financial crash. It seems likely that in a few years’ time we may be discussing an even greater number of companies reaching this milestone with a contribution from new and growing sectors.
With Brexit, there are going to be more problems to solve, and entrepreneurs are going to come along and innovate.
The first sector that looks set to benefit is regulation and regulation technology. With Brexit, there are going to be more problems to solve, and entrepreneurs are going to come along and innovate. Everything will get more complicated with import and export, say, and some smart man or woman will come along and solve it. RegTech has already been impacted – perhaps indirectly – by the financial crash, as an increased amount of regulation and legislation led to the birth of many innovative solutions to keep financial services at such a high pace.
Since this time, it is clear to see the rise of this sector within financial services, with over 300 companies working with Financial Services firms in a variety of sectors. Each of these dealing with a specific problem that is ever evolving and often becoming more complex.
Regulatory Reporting is one such example, it enables automated data distribution and regulatory reporting through big data analytics, real-time reporting and the cloud. Many financial organisations have expressed frustration with the high level of redundancy, dependence on manual processes, and opacity of their regulatory reporting processes. This is a critical activity for financial institutions and without tech solutions would require a concerted effort from a range of departments including, risk, finance, and IT.
Risk Management detects compliance and regulatory risks, assesses risk exposure and anticipates future threats. There are over 45 companies specialising in this already and with so much uncharted territory around leaving the EU, this looks to be a potentially important field in the next few years. One of the most important things businesses can do is to properly understand and calculate risk, take too few and growth will stall, take too many and you may be overexposed.
Compliance is the largest RegTech sector with a large scope and responsibility.
Identity Management & Control facilitates counterparty due diligence and Know Your Customer (KYC) procedures. Alongside Anti Money Laundering (AML) and anti-fraud screening and detection. Identity management is the second biggest sector in terms of the number of firms and is hugely important in a wide range of ways especially when growing and taking on new customers and clients.
Compliance pertains to real-time monitoring and tracking of the current state of compliance and upcoming regulations. Compliance is the largest RegTech sector with a large scope and responsibility. Companies from this sector are charged with meeting key regulatory objectives to protect investors and ensure that markets are fair, efficient and transparent. They also seek to reduce system risk and financial crime. As regulations change when we do leave the EU, this will likely be one of the key sectors to face some of the challenges that arise.
Transaction Monitoring provides solutions for real-time transaction monitoring and auditing. It also includes leveraging the benefits of distributed ledger through Blockchain technology and cryptocurrency. Even apart from Brexit, cryptocurrency and Blockchain tech looks to be a sector of huge growth in the next few years, regulating that in the context of traditional financial service providers will be of significant importance.
For all of these sectors, it is likely that changes to legislation and procedures after Brexit will have a profound effect on what is required by firms in order to stay compliant, potentially creating a huge number of problems that will have to be dealt with in one way or another.
You just have to reverse engineer all the problems that are going to be thrown up by Brexit and then you’ve got investment opportunities. Here’s a problem, let’s find an opportunity.
Wherever’s there’s huge problems and disasters, there’s always going to be an entrepreneur who comes along and will find a solution. From my perspective, that’s exciting because these new crunch points provide opportunity and employment. I set up IW Capital in a recession after a stock market crash, and WeSwap was set up because the market was falling to pieces. What actually happened was the birth of the FinTech sector. Opportunity comes out of a crisis.
In the UK alone, it’s estimated that fraud costs the economy £110-billion a year, with the global economy suffering losses to the tune of £3.2-trillion annually.
If authorities are to seriously tackle this scourge and put an end to any future Madoffs they need to invest massively in technology, and blockchain, in particular, says Dave Elzas, CEO of Geneva Management Group.
Caught in the past
The trouble is, most authorities responsible for detecting and catching fraudsters are using yesterday’s technology.
In a 2016 op-ed published by The Guardian, former US congressional representative Randy Hultgren points out that the regulators investigating Madoff were stuck using the same pen and paper technology as their 1930s’ forebears. As a result, repeated fraudulent reporting slipped between the cracks, despite six complaints about his firm having been lodged between 1992 and 2008.
In the UK alone, it’s estimated that fraud costs the economy £110-billion a year, with the global economy suffering losses to the tune of £3.2-trillion annually.
Meanwhile, a recent article in Bloomberg points out that the US$9-trillion business of financing global trade is still largely paper-driven, making it susceptible to forgery at every point in the value chain.
By contrast, the criminals these regulators are supposed to investigate and catch have embraced digital technology and use it to take their illicit activities to new heights.
Whether it’s using up-to-the-minute designs to phish bank customers or sophisticated algorithms to skim minuscule amounts off billions of global transactions, today’s financial criminals are tech-savvy, increasingly difficult to detect and capable of more sophisticated crimes than at any other point in history.
Banking on blockchain
That does not, however, mean that the fight against financial crime is lost. Regulators, banks, and the financial transaction giants whose business depends on correct verifiable financial data and accountability can fight back.
Doing so means abandoning current practices that have so far proved ineffectual to the benefit of the Bernie Madoffs of the world.
Instead, regulators and financial industry players alike should focus their efforts on blockchain. Its system of cryptographically-linked, unmodifiable entries is ideal for the financial space.
Because records cannot be altered or deleted, hiding illicit financial movements becomes almost impossible.
There are several other factors which make blockchain ideal for fighting financial crime. These include:
- The technology allows independent verification without reliance on third parties.
- Transactions are recorded in immutable chronological order.
- Records stored in the blocks are contained in millions of computers participating in the chain, making fraud logistically much more difficult.
- The blockchain is secure and transparent.
- Every transaction can be tracked on the blockchain.
These characteristics make blockchain useful for more than just tracking financial transactions. Blockchain-enabled smart contracts, for example, could go a long way to eliminating the forgery that bedevils the financing of global trade.
Banks are already embracing blockchain at a much faster rate than expected, with some (including major players such as UBS) implementing blockchain labs to explore potential new applications for the technology.
Embracing early adoption
Admittedly, some blockchain applications have had teething problems, as is to be expected with any new technology. However, as the global usage of blockchain will increase, so will its accessibility and reliability.
Certainly, none of the incidents which have impacted blockchain-enabled applications should deter regulators, banks and other players in the world of global finance from becoming enthusiastic early adopters of the technology.
Banks are already embracing blockchain at a much faster rate than expected, with some (including major players such as UBS) implementing blockchain labs to explore potential new applications for the technology.
It should not only be banks that embrace blockchain. Regulators, authorities and other secondary players also have a role to play. Landed registries, companies worldwide and any official registration agencies would benefit from the cost effectiveness, automation and accuracy of blockchain. More importantly, these various players all need to work together in standardising processes and protocols.
In some places, this kind of forward-thinking collaboration is already in place. The Canton of Geneva’s support of the Geneva FinTech Association (which plays a pivotal role in educating and advocating for blockchain) is a good example of what’s needed around the globe.
These kinds of initiatives need to become far more widespread. It’s time to stop patching up leaks and start putting in better pipes.
Philip Hammond says that the UK fintech industry is currently worth £7 billion, employing more than 60,000 people. These massive, tech-driven disruptions are proof that fintech has finally emerged as a mainstream industry. Not only that, but these changes have also created numerous new trends that will benefit both businesses and consumers. Here are some to watch out for this year that will affect the financial industry:
Voice technology will grow in banking
Consumers can already operate a handful of things by voice, including music, TV, GPS, and even home security. Currently, banking is slowly catching up in order to improve customer service and prevent fraud. HSBC have reportedly saved £300 million in fraud through voice biometrics. Customers repeat a phrase after giving the bank their details over the phone in order to provide an extra level of security. Expect more banks to follow suit this year and for voice biometrics to become even more widely used.
Faster payment processing
Bloomberg reports that customers can expect banks to speed up checkout lines through a wider adoption of contactless cards. Payment Relationship Management CEO Peter Gordon said large banks do not want to be displaced so they’ll do what they can to be more efficient. In Singapore, they opened their first real-time and round-the-clock payment system called FAST. Singapore Minister for Education Ong Ye Kung talked about it at the launch of SGQR, Singapore’s single and standardised QR code for e-payment. "We will allow non-bank players to have direct access to FAST. This is to enable their e-wallets to bring greater convenience to consumers," he said. Expect e-wallets to become more widely used this year.
Blockchain-powered freelance market
The global recession along with the advancements in technology has led businesses to embrace alternative work arrangements particularly for freelancing, which is becoming increasing popular in the finance industry. In fact, the world’s first blockchain-powered freelance market has already been launched in the UK. The Fintech Times highlights how the marketplace gives employers instant access to a talent pool of freelancers. Work and skills are continuously validated and recorded, and the platform allows freelancers to create smart contracts, which ensures they get paid on time. This brings transparency and fairness to the gig economy. And Yoss explains how the current state of freelance recruitment now includes “highly rigorous skills validation and qualification tests,” as the demand for specialists in areas such as AI increases. The blockchain platform will allow companies to find freelancers based on the quality of their work rather than the quantity, which will benefit both businesses and those looking for jobs.
Alternative Finance for SMEs
Resesarch by American Express found that 30% of SMEs find it difficult to access the finance they need, despite the fact that 68% think cash flow is important to their business. In the UK an increasing number of SMEs are moving away from traditional financial avenues like bank loans. This has led to a 13% increase in the use of peer-to-peer lending in the past 12-months. Peer-to-peer collaboration is a much more streamlined way for SMEs to access financial support. For instance, micro-lenders mainly operate online, which helps reduce overhead costs and takes out the middleman.
Chatbots and robots
Apart from speeding up transaction times, fintech is also revolutionising customer service through chatbots and AI. Today’s chatbots are already able to not only understand what the customer needs but also the entire context of the conversation. This will help reduce the amount of time customers spend waiting for answers or on being hold. The technology will also mean that banking apps will become the primary form of communication between customers and their banks in the future. This will reduce costs and allow for a more streamlined service.
The finance industry is not only opening doors to faster transactions and better customer service, but it’s also creating more opportunities to work in a fast-evolving and lucrative industry. Chris Renardson points out that if anyone wants to make it in the industry, it takes more than technical and numerical know-how. So follow the above trends to stay ahead of the competition.
Below Finance Monthly hears commentary from interactive investor cryptocurrency analyst Gary McFarlane on bitcoin passing $11,000 over the weekend.
The recommendations, as expected, from the global G7-instituted Financial Action Task Force, which will see crypto exchanges and others required to provide full know-your-customer (KYC) details on clients and all parties to crypto transactions, has done little to dampen bitcoin buying.
Other top altcoins – all other coins barring bitcoin – are struggling today.
Two notable exceptions are decentralised application platforms Ethereum (its Ether token is the second-most valuable crypto), and one of its many rivals, Tron, whose founder and chief executive Justin Sun recently won the auction for lunch with legendary investor and crypto sceptic Warren Buffett at a cost of $4.57 million.
Other factors in play behind the bitcoin rally
Geopolitical tensions, notably in the Middle East; the realisation that historically unprecedented loose monetary policy by central banks is not being reversed any time soon, the China-US trade war encouraging bitcoin’s use as a conduit to effect capital flight by some Chinese investors; record high trading in distressed economies such as Turkey and to a greater extent Venezuela and some other countries in Latin American; and talk of an outright ban on crypto by the authorities in India. These are all helping to propel the bitcoin price higher, providing, as they do, a range of examples of its use case as a store of value, no matter how peculiar that may sound for such a crash-prone asset.
Is the fourth parabolic bitcoin price upturn upon us?
Talk is now turning to the possibility of “the fourth parabolic”, which postulates a rise in the bitcoin price beyond the previous all-time high at $20,000 in December 2017.
With end of year targets of $40,000 from Wall Street analyst Thomas Lee of Fundstrat Global Advisors and commodity trader Peter Brandt saying $100,000 for next year is a possibility, which would align to the run up to block rewards halving from 12.5 to 6.25 in May 2020 for bitcoin miners, it is starting to feel like 2017 all over again.
That might sound fanciful in the extreme but on past form it is a possibility – and so is a crash from wherever any potential new all-time high might form.
When bitcoin first surpassed $10,000 on 29 November 2017 it only took 17 days to reach its all-time high near $20,000, but past performance is of course not a reliable guide to future performance, especially where crypto is concerned.
New FOMO?
Judging by Google Trends, searches for ‘bitcoin’ haven’t surged yet in the way they did last time round: December 2017 scores is 100 and we are currently registering 16.
It suggests current buyers are those who have previously been in the market and were waiting on the sidelines for a new entry point. That could mean there is plenty of near-term oxygen to drive this market higher, but as always with crypto, it will be a high-risk rollercoaster ride. The fear-of-missing-out (FOMO) impulse for now is more in evidence among institutional buyers.
Even though those at the top stand to reap untold rewards with the right products, the 2008 financial crash has seen big businesses and regulators avoid the light-touch approach to innovation. Today, with 39 fintech firms valued at a combined $147 billion/£115 billion, safety and financial security are paramount. Indeed, with such much on the line, companies are now taking every precaution possible before launching a new product.
Fintech Creating a Safe Place to Play
With that in mind, the sandbox strategy has become a standard across the industry. A term taken from computer security, sandboxes provide a partition between a live network and a test net. By using a sandbox, developers can test new commands and isolate faults without compromising an existing system. Using this dynamic, fintech companies are now using sandboxes to ensure financial products are not only secure but performing in the way they’re intended.
Expanding on the use of partitions within fintech, consumers are being offered an ever-increasing number of sandbox options. From financial simulators to demo games, individuals can explore potential investments without putting their money on the line.
Turning Serious Investments into a Game
This idea of turning simulations into games is one that’s also been adopted by the gaming industry. With online casino gaming now worth in excess of $45 billion/£35 billion, more novices are now eager to explore the financial potential of the industry. However, with real money on the line, playing slots and the like is always a risk. Therefore, to mitigate any financial burden, free demo slots have become popular, as you can see here. Providing full functionality without the cost, these free-play games provide that same safe environment as virtual trading platforms.
Perhaps the most interesting sandbox innovation for consumers is the growth of free investment platforms. Running parallel with their real money counterparts, these platforms allow novices to invest in stocks, shares and contracts for difference (CFDs) using a virtual bankroll.
Perhaps the most interesting sandbox innovation for consumers is the growth of free investment platforms. Running parallel with their real money counterparts, these platforms allow novices to invest in stocks, shares and contracts for difference (CFDs) using a virtual bankroll.
In tandem with a virtual bankroll, financial simulators can be used to test the potential profitability of an investment. On a basic level, Monte Carlo simulations can be created inside Microsoft Excel. By entering certain values, the Monte Carlo method assigns probabilities to potential outcomes. Or, as described by Investopedia, Monet Carlo Excel spreadsheets can compute “the probabilities for integrals” and solve “partial differential equations, thereby introducing a statistical approach to risk.”
Similarly, by using products such as Countdown to Retirement, individuals can get an idea of their future financial status without crunching the numbers.
As a consumer, the benefits of these so-called sandbox options are obvious. By giving you ways to explore the financial sector without the cost, companies are not only reducing individual risk but their own risk. What’s more, they’re providing new opportunities for the uninitiated. By removing financial barriers and giving novices a safe way to learn, fintech has become a more responsible industry for all involved.
