Digital is steadily transforming just about every business vertical beyond recognition, and in the past decade it’s been the turn of the financial services sector to undergo changes of unprecedented scope.
At the heart of this revolution, you’ll find a range of smart start-ups offering agile digital services which are beating the banks at their own game. Welcome to the world of Fintech, an idea whose time has well and truly come…
Making life easier
Global investment in Fintech ventures soared from £2.65bn in 2013 to £8bn last year, as the application of pioneering software moves further into front-end consumer finance products.
This success should come as no great surprise.
Fintech businesses arise from a shared company/client need: to make life easier. Whether it’s reducing fraud, saving money, battling hidden fees or easing payment processes, these nimble players offer lower cost bases and better user experiences than the traditional players.
And as the Fintech capital of the world, it’s only fitting London played host to the sector’s leading industry event.
So what’s it all about?
Now in its second year, London Fintech Week took place between 14-20 September, 2015. It showcased around 40 disruptive companies known on the circuit and visitors had plenty of opportunities to learn, network and engage via workshops, talks and interactive start-up demos.
Increasingly, banks are realising that the Fintech revolution is here to stay, and that they need to see such companies as potential partners rather than rivals. In the UK, for instance, Santander has become the first high-street bank to endorse peer-to-peer (P2P) lending via its partnership with Funding Circle.
This is why Fintech start-ups shared the stage with the likes of Aviva, Barclays and Visa Europe. Together they thought long and hard about this year’s key themes: payments, investments, big data and future funding.
Shaking up the small business space
Wherever you look in today’s SME marketplace, Fintech helps emerging businesses, but key areas remain payments, transactions and access to funds.
Start-ups like iZettle now take up space in an area once dominated by the likes of PayPal (which itself started life as a disruptive force), providing electronic wallets for mobile devices. Others like Cashcloud have enjoyed huge success with an app allowing company payments, voucher collections and even person-to-person payments via social media channels.
Customer Direct Debit payments can be made effortlessly thanks to the likes of GoCardless, while small businesses can access loans at unprecedented speed thanks to peer-to-peer lenders and working capital providers like Everline.
Little wonder that as many as 95% of European bank managers acknowledge that new market entrants are likely to threaten revenues, according to a recent survey. (Source: Roland Berger Strategy Consultants, The Future of Retail Banking in Europe.)
Where next for the UK?
Following the lead of US frontrunners like Mint, European firms are steadily developing their own brand of Personal Finance Management (PFM) apps and services, regularly tied in alongside conventional online banking.
Fintech muscle can really be flexed through the offering of credit models and new finance arrangements – formally a stronghold of the banking giants. Where new start-ups are finding particular joy is in specialised areas, for example those which help finance online retail sales.
Pinpointing a niche in this way continues to be the best lift-off for start-ups, zeroing in on an aspect of the financial process as yet untouched or still under-serviced by the big players.
The next step for Fintech is to expand its scope beyond early adopters – a challenge that will be high on the agenda in the capital…
By Russell Gould, COO at Everline and ezbob
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