The 5th annual London FinTech Week conference began with an extensive look at the state of the Fintech industry (with a focus on London and Europe), and a categorization of enablers and disruptors in the space. It was attended by a number of Fintech providers who specialize in blockchain, security and identity in the crypto space, APIs and customer onboarding, AI and data analytics, as well as larger brands e.g. law firms consulting in the space, insurance providers like Aviva, or International Payments providers as TransferWise and WorldRemit.
With global investments standing at $35bn, there’s been massive growth in the Fintech arena, with dominance in China with Ant Financial, and the majority of investments leading towards the loans and payments sector. Finastra noted the industry winners are those who invest in platform and network (community), for example Ant Financial, Amazon, and ParentPay, a simple e-payment service using biometrics and prepaid accounts designed for parents and school-age children.
With extensive growth in London and Europe, putting Brexit aside, the industry challenge and much of the agenda concentrated on understanding and acting on the enablers supporting tremendous scale. Three broad themes emerged through the day.
- Enabling regulation: which doesn’t hamper innovation, but allows markets to thrive and compete. There is a general regard for consumer oriented regulations like GDPR, MIFIDII, and PSD2 structures as valuable controls on privacy, security and trust. (It was noted through the day traditional banking institutions need to win back consumer trust). However, international payments providers such as TransferWise and WorldRemit acknowledge the need for harmonization in regulation at regional and local levels to allow for the growing trend of cross border remittances
- Collaboration: Expanding the Fintech pie is entirely possible. Partnerships and collaboration between large incumbents and smaller Fintech providers are the way forward, and there are several ways of doing this from Accelerators, to M&A, to startup bootcamp investments, to partnership and integration. As highlighted by Barclays (the Rise) and Aviva, large incumbents are reorganizing themselves in preparation for funding, partnering with, absorbing smaller and innovative Fintech companies, which are in a place to offer value to customers. Note the Insurance industry is playing catch-up, and now is the time for tech providers to develop customer centered and innovative approaches to creating differentiated, lower risk, lower premium propositions.
- Development on the fringes: After years of investment in blockchain technologies, cryptocurrencies, and Fintech platforms, there is growing recognition that scale is dependent upon certain enablers to drive customer awareness and engagement.
Software development firms as Innovecs specialize in Fintech and are well placed to support large and small industry players in these and other areas:
- Digital Identity and Authentication: A way to overcome the complexities in KYC, standardized and harmonized digital identity and authentication services gives consumers and institutions the opportunity to access and share data attributes in a secure, trusted and convenient way.
- Customer data intelligence and machine learning: Increased and pervasive online usage puts traditional institutions at risk of not retaining the loyalty and engagement with their consumers. Hence there is a need, in the post GDPR world, of improved understanding of customer journey maps, intelligence and predictive analytics based on what consumers need, browse, search, select, purchase and engage with finance.
- Open Banking and Asset Management: A new set of standards based APIs allows development of new 3rd party services based on data and assets held by institutions. A number of API development houses have emerged to enable competition and innovation.
- Blockchain apps development: Blockchain use cases extend beyond cryptocurrencies into identity, data management, computation, energy distribution. The business model for Blockchain houses is to build ecosystems of 3rd party services leveraging distributed ledger technology.
- Financial Inclusion: There has historically been a lack of business cases for traditional banks to include the underserved, low income demographic in emerging markets. However, financial inclusion has broadened its scope to offer commercial propositions for example international remittances as well as mobile payments, loans, insurance products for underserved sectors including farmers, women, and healthcare providers. Complementing current mobile money deployments, financial institutions and Fintechs are building propositions, compliant with local regulations, for these untapped markets.
It can be argued that customer engagement, regulation and core product development should remain with the financial institution, while much of what is stated above is delivered by proven software development houses as Innovecs. Delivering on cost and agility, Innovecs has a proven expertise in engineering customer centric platforms and marketplaces, artificial intelligence and machine learning, identity and authentication, gamification and apps development.
This expertise is vital to scaling Fintech in UK and Europe quickly. The call to action to incumbent and emerging financial service providers and Fintech is to collaborate and leverage this value proposition to build the digital enablers for sector growth.