Fintech is an adolescent suddenly realising it can’t use the excuse of being young for any inadequacies. Like with everyone when they reach adulthood the rules change.
Remember when fintech was on the fringes of the IT and banking industries? Today it is an industry of its own which combines the two.
The government is focused on it as an industry of the future while the industry itself is coming to terms with becoming mainstream.
Fintech like other industries now has grown up things to do. For example it has to consider diversity like other mainstream sectors because eyes are on it. So too does the industry have to deal with regulation as the organisations policing the sector shine torches onto its methods.
The Innovate Finance Global Summit is testament to this.
I attended the first day and thought I would summaries some of the interesting things I heard. I couldn’t be everywhere, gone are the days when fintech events were one room, this one took over London’s Guild Hall.
But here is a selection of talking points.
I must point out that although Brexit was mentioned OCCASIONALLY by speakers I saw, it was ALWAYS the elephant in the room. As fintech author Chris Skinner pointed out,“ we are not sure if it’s an Indian or African one.”
Kicking off with an opening speech from Innovate Finance CEO Charlotte Crosswell it was proclaimed that fintech is coming of age.
She said that the financial services industry has a new face and one that consumers can trust. “The industry has been recovering from the 2008 crash for far too long and I do feel like we have turned a corner.”
She said some of today’s banks look very different. A group of these took the stage moments later. These were crowdfunding platform Seedrs, challenger banks Starling and OakNorth, and payments firm Worldpay.
Collaboration seems the order of the day for these companies.
Anne Boden, CEO at Starling Bank, said as a challenger bank the company is all about regulation, technology and access to payment s systems. ”We are providing a platform for other people in this marketplace.”
For example she described how Starlings membership of payment schemes like BACS, SEPA and Faster Payments means it can provide infrastructure to the industry. “This allows fintechs, other banks and even governments connect to payment infrastructure in a low cost way with high availability.”
She went on to say the big battle in banking involves the cost base rather than innovation. All traditional banks can innovate. They have huge budgets so there is nothing stopping them creating the same fintech services as challengers. They are already doing it. But rather than having hundreds of staff they have tens of thousands. As a result the new players have a huge advantage in terms of cost base.
Fintechs on stage also talked about how regulation has spurred innovation and how new finance suppliers have focused on certain vertical markets.
Later on I attended a presentation from Liam Maxwell, national technology adviser to government. His key message was if government services, which like financial services are heavily regulated and used in high volumes, can be modernized then traditional finance firms can do the same.
This takes me on to a speech by MP Nicky Morgan, who chairs the House of Commons Treasury Select Committee. Earlier in the day another Conservative MP, John Glen, who is economic secretary to the treasury, talked up the UK’s strengths as a fintech hub. He said the governmment is putting its weight behind the industry. But he didn’t mention Brexit. Unsurprising given the lack of positives.
So I was expecting Morgan, an opponent to the hard Brexit, to fill the gaps. She did eventually mention Brexit and the challenges it creates, but I got the feeling she was holding back.
What she did emphasise is the need for the sector to become more diverse. In particular that there are not enough women in leading fintech positions.
I also attended an interesting debate about cybersecurity in financial services.
Some of the talking points were: financial services firms should share intelligence on cyber security, blockchain is immutable but not necessarily secure, and whoever has the first quantum computer will control the world.
“The entire internet is based on something that is not quantum safe,” said one panelist. “I think quantum will do us all.”
I heard from Chris Woolard, director of strategy and competition at the FCA who talked about the importance of collaboration between the financial services industries in different countries and called for a global sandbox for fintech development.
To finish my day I was interested in hearing about the role of artificial intelligence from the experts.
A panel including representatives from the Alan Turing Institute and Google gave their thoughts on AI.
It seems from an IT career point of view many professionals working in enterprise IT are looking to move into artificial intelligence roles. “Many people are doing degrees in big data and machine learning,” said one panelist
“We should be very careful not to produce those junior-level analyst jobs that are going to be automated away,” said another. “We care working on artificial intelligence for data analytics. Please focus on those people that understand the business and are conversed in the technology to bring the groups together and we will all be better off.”
See all grown up? Not a mention off a smartphone app.
Although it is not an area I specialise in I do from time to time write about cryptocurrency.
Writing about the subject from a high level is doable for me, but when it gets into the detail of how it all works I quickly realise I have limited understanding. I basically know it’s a thing.
So when I read a survey that tells me 55% of people think they will be paying for bus journeys using cryptocurrency within seven years my initial shock is understandable. But if you think about it, why is it shocking?
We already pay for buses using contactless technology so there is no need for cash, and who understands how the financial system really works, apart from people in the sector. Just like cryptocurrency, where only the experts understand how it really works.
So when people expect it to be used to pay for bus journeys within seven years they just expect it to be as secure as the money we currently use. Digital money is just numbers siting on bank servers.
A few years ago ho would have thought that we would be able to pay fro things using mobile phone? And who, back in the day, would have even thought we would have mobile phones.
Although it is clearly not necessary to understand how money gets its value and is created to spend it, it is nice to have some idea. What would be great is if someone could come up with an explanation of what cryptocurrency is and how it can be used.
If anyone is up for the challenge feel free to put your effort in the comments in the blog. I would love to read some explanations. Remember this is aimed at consumers with not background in cryptocurrency or the financial services sector.
Software robots are already replacing humans in the corporate world with robotic process automation software being used to carry out repetitive tasks. But modeling jobs will be taken next as human like robots hit the catwalks and photoshoots.
Automation has gone beyond automating contact centres by connecting customers to the right department, to using cognitive technology to answer questions for customers.
Software robots today even give financial advice. For example NatWest is offering consumers an investment advice service automated through software. In 2017, The Royal Bank of Scotland (RBS), which owns NatWest, said automated financial advice services led to a 220-employee reduction in its face-to-face adviser roles.
The financial services sector is leading the way when it comes to using software robots.
At Deutsche Bank the CEO recently said thousands of human staff will be replaced by robots.
Sweden’s SEB bank became the first bank to use IPsoft’s cognitive technology for customer services after the software robot proved successful in an internal IT service desk project.
The list goes on.
According to research from of data from sources including Oxford University and governmental databases carried out by Leisure jobs, the most likely jobs to be automated or taken boy robots by 2035 are telemarketing jobs, with a likelihood of 98%. About 221,000 jobs for humans are expected to go in that time frame.
That is not surprising but second place is. According to the study the second most likely job to be automated or taken by robots, with a 98% chance, is modeling. About 98,000 jobs are expected to go by 2035.
I recently interviewed Chetan Dube, founder of AI platform maker IPsoft, and he made a startling prediction.
“We are carbon-based organisms and robots are silicon-based, but I think the boundaries around them are going to get progressively diffused to the extent that you will not be able to distinguish between a human and an android in the next nine years,” he told me.
But there is good news for all those aspiring artists out there. In the past people were often discouraged from focusing art through the fear that it was difficult to make a living out of it. Well the good news is automation software and robots only have a 4% chance of taking over the role of a fine artist. So while the models look set to become robots the designers look safe.
If you want to know how likely your job is to be done by a robot by 2035, use this tool.
I hate the B-word and won’t mention it in this blog post. I have done too many blogs about the B-word recently.
It was hard not to say the B-word when I wrote this. See if you can read it without thinking about the hideous portmanteau that is the B-word.
Here we go:
The world is being transformed through digital technology and IT skills will be at the centre of societies and their economies in the years ahead.
Imagine if a country fails to educate and train its population to become the IT experts of tomorrow. Imagine if a country restricted to entry of IT experts from other countries and pushed those already here away.
A recipe for disaster.
That is why I was shocked by the latest data from the Education and Skills Funding Agency that suggested the number of people starting ICT apprenticeships in 2016/17 dropped by 6.3% in comparison to 2015/16. This meant a drop to 15,010 in 2016/17 from 16,020 the year before.
The reason I am shocked is due to the positive feeling I got when I interviewed youngsters either currently on apprenticeships or having recently finished them. I have met some of our future tech leaders and was very impressed by many of them.
The most recent set of interviews I did was with the first female degree apprentices in Capgemini’s degree apprentice programme. Like with all the interviews I have done with IT apprentices I was very impressed.
Have a read of some more interviews I did.
Back in June last year I interviewed member of an apprentice scheme being run by IT firm Voyager Solutions, which suppliers automation services.
In 2016 I spoke to the first group of IT graduates emerging from Accenture’s apprenticeship scheme in north-east England.
Also in 2016 members of the apprentice scheme at UK IT services firm MCSA told me why university was not the natural progression for them.
Why are apprentices so important? The average worker in the digital age will probably need a better understanding of IT than the average worker today has. At the same time the people that build the IT for businesses will need to better understand the business. Perfect storm for IT apprenticeships. So why are they falling?
I leave you with this quote from a company in the IT sector. “The UK has suffered from a chronic underproduction of tech skills, which has made it increasingly reliant on foreign talent to plug skills gaps.” I could not use the full quote because it went on to use words that alluded to the B-word.
I did it but did you think of the B-word?
When does a challenger bank just become the digital arm of a traditional bank?
A contact of mine recently told me that if challenger banks want to success they pretty much have to hire people from the traditional banking sector and abide by the same rules. In the end they look pretty much like traditional banks.
In fact they are quite literally becoming traditional banks. Digital challenger bank Atom is now about 40% owned by a traditional bank after its latest round of fund raising.
Spanish Bank upped its stake in Atom following the challenger bank’s latest round of fund raising, where it got £149m.
Atom Bank was one of the earlier challengers in the financial services sec tor, when it received its banking license in 2015. It launched its banking app in April 2016 after regulators lifted a restriction on its authorisation. It has taken more than £1.3bn in customer deposits and lent over £1.2bn, since its launch.
According to the Financial Times BBVA said the new investment “is a sign of BBVA’s confidence in both the business strategy and management team at Atom”. BBVA CEO Carlos Torres Vila said Atom is “progressing extremely well”, adding that “we are fully aligned with the vision of banking that Atom is pursuing, and the disruption it is already bringing to the UK financial services sector”
We have already seen another fintech pioneer acquired in full by a traditional high street bank when French retail banking giant BPCE acquired Fidor.
Fintech firms seem to have three choices of how to proceed. In this order of likelihood fintechs can become a leader in a niche financial service, be acquired by a traditional player or become a free standing full service bank.
Like renowned Fintech blogger Chris Skinner recently told me: “The most likely outcome is that the big banks will copy, acquire or stamp out the threat with their billions of capital. As a result, I don’t think digital will destroy banking as we know it. But I do think the banks as we know them will be transformed by digital, both structurally and culturally.”“Tomorrow’s HSBC may well be today’s First Direct. Tomorrow’s Lloyd’s Bank may well be today’s Monzo. Oh yes, and tomorrow’s BBVA is today’s Atom Bank. These are interesting times indeed.”
Then you have TSB reinventing itself as a challenger bank and Virgin Money building its own challenger bank. banks will be banks again before you know it.
Perhaps the big tech forms like Amazon and Google take over some of the prominent challenger banks. That way we might see some real disruption to the traditional banks, creating even more interesting times.
When Metro Bank launched in 2010 it was the first new bank in over 100 years. Its emergence was welcomed at a time when the public opinion of the traditional high street banks was rock bottom.
The financial crisis of 2008 caused a significant recession and the finger of b lame pointed at the banks.
So when Metro launched with its new approach, introducing for example branches that are unmanned but open 24 hours, it was a breath of fresh air.
But today, just eight years on and Metro doesn’t feel like anything special at all. The fintech revolution has seen to that. As one banking professional said to me recently: “Think about Metro. It is hard to think what makes them really so special today.”
“Sooner or later you face the same challenges as the incumbents. You hire the same people like the incumbents, maybe coming from in incumbents. Sooner or later you might end up being just a normal bank
Chris Skinner, chairman of the Financial Services Club said: “Metro Bank, who have had billions of backing but are still struggling to challenge the big five.”
The early challenger s were simply not different enough.
Virgin Money is another example. Back in 2011 when it acquired Northern Rock from nationalisation, after the lender was rescued by the tax payers, it looked like it could become a major challenger on the high street.
But the bank has not really gained much market share. It is now even launching another, digital only, bank so it can take on the big banks and probably the fintech based challengers .In fact it has invested £38m in building this digital bank.
Today we even have traditional banks like TSB reinventing themselves as challenger banks and emulating some of the tech developments of the fintech challengers.
Meanwhile big banks like RBS and Lloyds Banks, which both relied on government financial assistance, seem to be getting strong again. They have also managed to keep up with and to an extent control a lot of fintech development.
Perhaps there will be third wave of challengers as a result of teh new open banking and PSD2 regulations. Watch out for Google bank.
A few years ago I was writing article after article about how the big banks were under threat from challengers coming to the market using fintech as an advantage.
But the big banks seem to have come though the perceived threat.
One of the banks damaged most by the financial crisis of a decade ago, in financial and reputation terms, was the Royal Bank of Scotland. So much so it was nationalised.
RBS customers seemed there for the taking. But it hasn’t really panned out like that. Last week we had news of the Royal Bank of Scotland’s first profit in ten years taking the headlines.
The bank also reached another significant milestone in its mobile banking division. It announced that for the first time it now has more active mobile banking users than internet banking customers, some 5.5 million.
This has been coming. Back in 2015, according to the British Banking Association’s Way We Bank report there were 11 million logins to banking apps, via mobile, every day in the UK compared with 4.3 million logins to internet banking via bank website.
This represented a 2% fall in internet banking logins compared with the previous 12 months. RBS said there has been a 40% decline in bank branch transactions since 2013. We will probably see similar declines in the use of internet banking in the near future.
Furthermore RBS also said it is beginning to move its businesses banking customers to mobile. It has 90,000 commercial customers using its Bankline online service to bank but it expects these customers to move to an app which it will launch this year. Initially, customers will be able to view transactions and send payments with biometric approval.
So fintech has helped RBS cut its costs and seemingly prosper.
I must admit once I moved to mobile banking I have never even considered using internet banking via a desktop or laptop.
RBS is a very old bank, dating back to the early 18th Century so this is quite a big achievement.
It does bring home one of the major advantages the new challenger banks have. A bank like Starling for example is only app based and has only ever been in its brief history. Starling got its UK banking license in the summer of 2016.
Banks like Starling don’t have the huge additional costs supporting other banking channels such as branch networks. Banks like RBS are cutting down their branch networks as fewer people use them and IT operations are also changing with cuts made in the traditional IT department made to make room for new types of skills for the digital age.
But would it take to convince you to move your banking to a fintech based challenger bank?
Despite all this the big banks are retaining their customers. They have managed to keep up with developments in fintech, such as mobile banking, and rather than appearing to be under serious threat they are benefitting from them.
The service that was introduced to make it easy for people to switch bank accounts has not really been taken up in droves. Challenger banks are gaining customers. For example thousands of people are downloading Starling’s app. But it seems people are using challenger banks they seem to be doing so as a second account.
The truth is, and I say this as a consumer, there is little point changing bank unless they offer real financial benefits like high interest rates for saving and low interest rates for mortgages and loans.
I would like to hear from people about their mobile banking habits. Let me know if you have moved to mobile or whether you still use internet banking.
For example. I have an account with a challenger bank and one of the big high street banks. I have to say my main bank on the high street has really improved the mobile experience and although the challenger bank app is easier to use and has some really useful tools there is not really enough for me to move my main banking activity to the challenger yet.
But one contact of mine thinks there could still be a threat lurking for the big banks. He believes big tech companies could make in-roads into the market share of traditional banks. “If the big tech firms like Apple, Google, Microsoft, Paypal, Amazon and others wish to get into specific financial services, I think they have the power to beat the banks. But increasing regulation and de-globalisation of financial services may put them off.”
With the Open Banking and PSD2 rules now in force banks will have to up their game. Third parties, including big tech firms, will be looking at ways of offering financial services to consumers.
The UK is still a member of the EU. Freedom of movement is still as it was. But something has changed forever.
This change could have huge ramifications on future generations and the UK economy for years to come.
The latest ONS figures show that the number of EU citizens coming to the UK (220,000) decreased by 47,000 over the last year and is now at a level comparable with 2014. Meanwhile the number leaving the UK (130,000) is the highest recorded level since 2008.
The aim for any country should be to make it the most attractive place in the world to live. But Brexit has made the UK a less attractive place to live for EU citizens at least. Figures don’t lie.
Forget the fake promise of millions of pounds extra for the NHS and the UK increasing its trading with the rest of the world, we all know why some people voted to leave the EU in the referendum. Some people don’t like foreigners and are being told that these foreigners are taking their jobs and hospital beds. This is not all people as I know many don’t feel this way and actually want the UK to remain open. But politicians are appealing to those that don’t so they can do as they wish.
In fact “these people coming over here” are providing tax revenue, innovation, skills…..the list goes on
Tech firms are already reporting staffing problems caused by Brexit. Research of 5,400 tech founders, carried out by Tech London Advocates (TLA), revealed that 55% said Brexit and how it affects the search for talent is the biggest threat to startups and scale-up companies in London.
So the UK is already seen as less attractive to people in other countries. This is probably the worst news possible. It can go rapidly downhill from there. Fewer and fewer people and businesses come to the UK, while more attractive places get more people and become even more attractive.
Maybe I am biased being married to an Italian. But I see at firsthand how someone that has lived and worked in London for 18 years and raised a couple of children as well, suddenly feels she chose the wrong country to move to. It was between London and a German city back in 2000 and she chose London. Her decision would be different now.
And she is not alone it seems.
So those who voted for the UK to leave the EU to reduce immigration should be happy. Well probably not because the ONS figures show immigration from outside the EU has increased and the total figure has increased.
I wrote last week about the fear that the fintech industry has over a potential hard Brexit or cliff edge Brexit as it is also known.
A sudden loss of access to the single market and the ability for banks to trade across Europe will inevitable mean the UK is no longer the place for fintech’s to be headquartered. But that is not the only problem with less access to talent a major concern.
At a recent House of Lords EU committee meeting Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, which is a network of entrepreneurs and tech experts that support the UK tech startup sector, warned of dire consequences for tech startups, particularly those in the fintech sector. He stopped short of telling these firms to move their headquarters to an EU country but recommended they set up a presence.
This is happening. The Financial Times reported this week that London-based payments company Currencycloud has started to implement its Brexit plan. According to the FT the company is applying for a license in the Netherlands. This is to ensure it can still serve clients in the EU and access much needed talent.
Todd Latham, chief marketing officer and head of product at Currencycloud told the FT: “While we’d love for the UK to have a soft Brexit, you can’t guarantee that. Our concern is about how we service customers and how we make sure that we’re bringing the best talent into the organisation.”
The talent issue as Computer Weekly reported earlier this month is a major concern. The quota for tier two skilled workers from outside the EU has been reached for the last few months, sparking fear that an exodus of EU IT professionals might leave tech firms short of much needed expertise.
Jackie Penlington, senior associate at law firm Stevens & Bolton, said Brexit is reducing the availability of skilled staff. “You can’t say for certain, but I think the impact of Brexit, with less EU workers coming to the UK and all the uncertainty, is fueling the increased demand for these visas,” she said. “We are in a global market for workers and people may be deciding to go to other countries.”
One of my colleagues met up with a tech firm last week who told him that they recently offered someone from the EU a job because they really needed their expertise, but were rejected because of Brexit.
I am interested in hearing from the fintech sector about preparations for Brexit.
An international fintech delegation to UK: now you see them, now you don’t. Just like that.
I was all geared up to meet 50 fintech companies from across Europe and Israel as part a delegation invited by the Department for International Trade (DIT) and the City of London. I would have got to interview the head of DIT’s Financial Services Organisation as a well as some of the startups.
But sadly I was informed, a day before the event, that rather than attending the entire two-day event, journalists would only be allowed to attend a networking event for just two hours in the evening. A major last-minute change of plan.
This is a shame as I was interested in what these fintechs thought about the prospect of the UK financial services sector losing passporting rights after Brexit, as well as other Brexit-related questions. I am sure every journalist that planned to attend had the same thought, it would be a giant elephant in the room for two days.
It must be hard selling the UK to these fintechs at the moment with so much uncertainty around Brexit. How do you entice a company to come to the UK with so much uncertainty?
Last week I listened in on a recent House of Lords EU committee meeting, where members discussed the impact of Brexit on the UK IT sector.
Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, which is a network of entrepreneurs and tech experts that support the UK tech startup sector, said that fintechs will be finding it hard if the UK can’t secure a good deal with the EU.
“If we go over this cliff edge it will be immensely disruptive. The entrepreneurs that I meet say they will just get on with it and make the best of it but it will be a very, very disruptive process for a number of them, particularly those in the fintech sector. That is one of the most vibrant aspects of the tech community in London and many of the companies will need passporting rights.”
But it is not just the loss of passporting rights that might put fintechs off building a big presence in London or UK, but also issues such as a talent shortage. EU staff make up about 8% of employees working in the UK tech sector. These are highly skilled and talented people with most earning salaries between £45,000 and £80,000 a year, he added.
I am sure the UK and London in particular will remain attractive to these firms, as most major economies are, but perhaps they will have smaller UK operations than they would if the UK remained in the EU. They will want to ensure they have access to the EU market, which is not yet guaranteed, so will ensure they have an EU presence.
Back in June I spoke to a London-based fintech startup at an event who said plans were in place for his company to set up a Dublin office.
If you are a fintech it would be great to hear your views.