After a packed and exciting two days of conferences, workshops and great conversations with others in the FinTech sphere, we thought we’d reflect on key insights about the sector that we’ll take away from Wembley.
From lending to digital currency to trading, an overwhelming theme throughout the two days was the rapid pace of change that financial technology is bringing about and banks’ generally slow response to the way that their industry’s infrastructure is changing.
As Gideon Valkin (Friendly Score co-Founder) pointed out in the Big Data, Analytics and Social Media Panel, data analytics are about to completely revolutionize financial services in the same way they revolutionized advertising. Perhaps, though, from a broader perspective the FinTech wave is best characterised as multiple smaller, focused revolutions. Many of the speakers pointed out that start-ups are not taking over the banks’ role in a wholesale fashion: rather multiple new firms are targeting individual services that the banks provide and offering a better user experience, eating away at their client base.
Given this, it makes sense for banks to seek to integrate these new technologies into their rich and varied offerings, yet (with a few exceptions, notably BBVA) banks are not doing so proactively. Fighting the new technology, rather than collaborating with it, is senseless, because there are some things that the agile new firms are simply better placed to develop (for example, solid data sets, unencumbered by complicated legacy systems).
Though some areas of financial services are adapting faster than others (for example capital markets, which are adjusting more quickly than commercial banking), brakes on technological progress are endemic throughout the banking system, especially if banks are being sold a product which requires fundamental change to the service they offer.
Leading a workshop on this topic, Chappuis Halder drew attention to the chicken and egg problem of start-ups needing to convince one bank in order to win over the others, and the difficulty of finding an internal sponsor in order to make that possible.
What Banks Can Learn From FinTech
Speakers pointed to the culture clash and knowledge gulf between FinTech firms and the banks. Both the software and the internal culture of each party were identified as barriers to them working together. Speakers also identified key FinTech working approaches that the banks could usefully learn from: the focus on a single pain point; the lean step-by-step start-up approach; the test and learn mindset and FinTech firms’ open architecture.
In a panel discussion on trading technologies, Ian Green (Financial Technology CEO) identified three areas that must be developed if FinTech disruption is to have a meaningful overall impact on financial services. Namely, FinTech’s scope must grow; the bank/tech firm engagement model must improve to enable more collaboration and company structures must change to enable both parties to co-adapt.
Across the board, speakers stressed the importance of user experience to the success of a FinTech product. Sketching the new digital money paradigm, it was agreed that users are fed up with clunky services and increasingly expecting a “swiss knife” style product (simple, unified, integrated experience with a good user interface).
In a panel on the European payment battlefield, speakers discussed the importance of tailoring the security levels of a payment product to its specific requirements, so that user experience isn’t compromised by one-size-fits-all precautions.
A memorable perspective on user attitudes and product value was offered by Mike Laven (Currency Cloud CEO) who made a distinction between “mind” share and market share. He emphasised that the former should not be underestimated (especially in a firm’s earlier stages), and pointed out that in changing client demand and expectation, FinTech start-ups also drive down price and improve transparency.
Our final take-away was that regulators and tech firms should have a positive, collaborative attitude towards each other. A theme throughout the two days was that regulatory demands are only going to increase, even in the UK (which boasts one of the most open, supportive and daring regulatory climates), as FinTech continues to develop and disrupt financial services.
As a result, a firm’s approach to responsible compliance is something that investors care about a lot, because it really can make or break the business. It is also central to enhancing user experience: if a tech firm satisfies regulators that it priorities responsible provision of its product, potential clients are also more likely to trust this new product and to use it for the first time.
The upshot is that it’s essential that FinTech businesses view compliance as part of the fabric of their firm rather than a box-ticking exercise. Albeit, this is a challenging task, given much of the FCA handbook is based on principles (meaning it’s not always clear what is required of FinTech firms) and given many of the experienced compliance professionals have been hovered up by the banks.
Lawson Conner identified five key steps to ensuring a firm satisfies regulatory demands: fit your business to the existing regulatory framework; protect counter-parties; be “fair” to everyone with disclosure; develop a “culture of compliance” and be careful to adopt robust processes.
Where We Come In
For many FinTech firms, adopting “robust processes” that fit the regulatory framework requires the best anti-money laundering data for both client onboarding and ongoing monitoring. We don’t just resell the same data everyone else has: we’re using our own new technology and sophisticated data analytics to provide these firms with the tailored information they need to make the right risk decisions.
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