Perspectives

FinTech – where to next?

The 2018 Innovate Finance Global Summit comes at a critical juncture for the FinTech industry, and the role it can play as part of the wider financial services landscape. Broadcaster Katie Durham began proceedings by describing the current state of FinTech as “vibrant” and “alight with innovation and opportunities”, citing a compound annual growth rate of 41 per cent in investment in UK FinTech since the first Summit four years ago. However, she also questioned the role that FinTechs are playing within financial services, asking “whether these changes are truly beneficial or just disruption for the sake of disruption”.

Charlotte Crosswell, CEO of Innovate Finance, described how FinTech disruption was breaking out of its original verticals and niches, and now “seems to be infiltrating all aspects of financial services as we know it”. But she also noted that the aims of the industry go beyond disrupting traditional players and industries, towards making financial services “more responsible and inclusive, accelerating the path to financial inclusion”. Along these lines, one of her goals during the Summit is to “throw out preconceptions that women cannot found and run successful FinTech businesses”, with at least one female representative on every panel throughout the two days.

Deloitte’s Global Financial Services Digital Transformation and Innovation leader, Michael Tang, emphasised how far the FinTech industry has come in the last three years. According to Michael, in 2015, all of the talk was about how FinTech would bring about “death by a thousand darts”. In 2017, it was “partnerships everywhere… all about collaboration”. This year, the conversation is about how “innovation has reshaped how financial services are provisioned and consumed today. The impacts of this are radically changing the business model of our industry”.

With that in mind, Michael moderated a panel which explored such new business models. Anne Boden, CEO of Starling Bank, believes that the most successful will be those that are “not about innovation, it’s all about costs. This is going to be a battle of the cost base.” She thinks that while innovative new products and services can be replicated by incumbents, “they won’t be able to match our costs”.

Ron Kalifa, Vice Chairman and Executive Director of Worldpay, advised FinTechs looking to grow their business to focus on two key elements: access to distribution, and the ability to scale. As he put it, there was no point running a FinTech business “if you can’t be number one or number two in your chosen verticals”.

A key message throughout the morning was that advances in technology do not in and of themselves constitute innovation, but are rather enablers of innovation. When Lance Uggla, CEO of IHS Markit, was asked about his company’s competitive edge, he said “it’s not technology, it’s subject matter experts and content, and using technology to leverage that”. Jeff Lynn, Chairman at Seedrs, made a similar point when he said “technology doesn’t change the underlying elements of finance” but, instead, it can “make economic reality work better for more people”.

Jaidev Janardana, CEO at Zopa, implored FinTechs to “stay true to their focus on customer-centricity”, which, in his opinion, has been the greatest impact FinTechs have had on financial services. Incumbents were also positive about the impact of FinTechs; Kirsty Rutter, CIO of Barclays UK, said that “the challenge presented to us by FinTech has energised our business”. Kevin Hanley, Director of Innovation at RBS agreed, and believes that the future of FinTech and financial services will see “more focus on what services are provided, rather than just how they’re provided… products need rethinking in a customer-centric way”.

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