FUTURE OF FINTECH ROUNDTABLE - DAC Beachcroft · 2019-03-19 · INSIDER’S FUTURE OF FINTECH WITH...

FUTURE OF FINTECH ROUNDTABLE

THURSDAY 14 FEBRUARY 2019

1FUTURE OF FINTECH DAC BEACHCROFTFUTURE OF FINTECH

INSIDER’S FUTURE OF FINTECH WITH DAC BEACHCROFT Insider’s Future of Fintech roundtable brought together a range of fintech disruptors to discuss how the evolution of financial services is being driven by emerging technologies and automation, Open Banking and consumer reactions against the behaviours that led to the financial crisis of 2008.

PARTICIPANTS KEY THOUGHTS

“I joined the business a couple of months ago after 30 years working at traditional banks. As the name suggest, we’re a clearing bank – the UK’s first new clearing bank in 250 years. We’re about banking as a service, so we provide our infrastructure, and effectively, in layman’s terms, we rent our banking licence to other financial institutions, to allow them to go and innovate with their customers. “There is a phenomenal amount of activity in the fintech space currently. The large financial institutions are not ignorant to what’s going on [in terms of fintech disruption into traditional financial services], but they’re desperately trying to work out how to defend their position – looking at all different scenarios, most of which I don’t think will necessarily succeed. My own view is that probably in the next two to three years, we’re going to see a dramatic impact – I think all the momentum is just building up. You’re now starting to see some fintech disruptors making a real mark. All of these disruptors which currently have about half a percent of the market, in a couple of years are going to have about 10 per cent of the market. I think it will suddenly hit the [big four] banks. They’re trying to come up with their defence mechanisms, but I’m not sure to what degree those defence mechanisms will be successful.”

Nigel Walder Chief Operating OfficerClearBank

2 DAC BEACHCROFT FUTURE OF FINTECH

At Open Gamma, we work with hedge funds and banks, providing analytics software to help them to trade derivatives more efficiently. We’re relatively early stage still – two years in to a re-founding of the business. “This business exists specifically because of the 2008 crisis, resulting in regulations that inevitably create a load of impact on people. They suddenly have a whole new problem set they have to deal with if they want to continue doing business under the new regulations. So it’s a perfect environment for people coming to market with solutions that solve very specific problems. You can grow a business in that environment very quickly.”

Peter Rippon Chief ExecutiveOpen Gamma


“Yoyo is a commerce platform for omni-channel retailers that enables them to do three things incredibly efficiently –payment loyalty, enabling them to not only understand who their customers are, but matching their customers to basket data, monetising club card-like experience, and on the consumer side we provide an infrastructure that enables us to power different mobile wallets – some of which may be called Yoyo, some of which may go under other consumer brands.

“On the issue of big data there’s a key point – big data, fundamentally, has always existed. It’s everywhere. The issue is how do you turn this into something that is useful? Banks have been sat on this for decades. They know far more about any of us than we even knew it was possible to know. What they haven’t done is provide a service to anyone outside of themselves that allows us to better facilitate the banking experience for consumers or for businesses. With the Open Banking initiative, although it’s a great start, the reality is these guys have been forced to open up the infrastructure, by the highest authority possible before they got fined. What you’ll start to see, over the next 18 months, is the emergence of banks understanding that actually, they’re going to be the beneficiaries of receiving this actionable insight back to them in the form of real receipt-level data. There’s some early signs of that already happening.

“Fintech innovations have come about on the back of both a reaction to the 2008 banking crisis, and the impetus to want to do things differently, but also the fact that at roughly the same time we all started to have iPhones in our pockets – that’s about the mass distribution of access to information. Off the back of that entrepreneurs started looking at routes through which you could get to market more effectively and more scaleably without having to have networks of branches.”

Michael Rolph Chief Executive & FounderYoyo


“I’m part of the Technology team at DAC Beachcroft, and have been advising on FinTech for about 14 years. Our FinTech team advises businesses on the full breadth of FinTech legal and regulatory issues – whether you’re a FinTech business or a financial services business using FinTech. Our clients in the FinTech space include start-ups, scale-ups, challenger banks, established banks, and insurers.

“Open Banking is hugely significant for the evolution of FinTech. We’ve advised on a number of Open Banking implementations, including one of the first live implementations of Open Banking in the UK. Open Banking is definitely on track to revolutionise how individuals manage their money and access meaningful (and actionable) data about their finances – as well as making it easier to buy financial services and products. But we haven’t got to the full potential of Open Banking yet. It’s still a work in progress. I don’t think it’s because something’s gone wrong – although some may say that things could have been approached slightly differently. I just think it takes time for such a big shift in this space to gain traction and realise its full potential. Eventually we’ll get to it being much bigger – hugely benefitting not just consumers but also businesses.”

Prakash Kerai Partner DAC Beachcroft

“At Satago, we offer an online cloud accounting platform that connects to your cloud accounting software, and we offer free debtor chasing and insight tools and then a low-cost selection of invoice financing to bridge cashflow.

“There is a thirst for invoice financing now, but there is a massive education gap. Over 70 per cent of small businesses get turned away from their banks, which is generally the first place they go for a loan, and often they don’t look any further. So there’s a massive education gap, which is why it’s important to inform small businesses that there are other options. We’re finding that’s a major barrier to entry for alternative lenders, so that’s what we’re working on at the moment – educating small business owners and start-up founders that actually there are other options for finance.”

Eleanor Beaumont-Smith Marketing ManagerSatago


“Regionally is a regional share exchange, set up by Justin Urquhart-Stewart of Seven Investment Management, and we’re opening private members share exchanges around the country starting this year. The first one goes live from February 26, in the South West, then we’ve got Newcastle and the North in May, Yorkshire and the Humber in June, and then another seven to launch over the next 12 months. Beyond that, we raise finance that’s tradeable in SMEs. “We certainly wouldn’t be able to do the due diligence that we do on our customers and investors without Open Banking. We don’t want to have 30 people checking investors all the time – we want to be able to just go and have a look and get the information; just a check that somebody is appropriate to be on the platform. So we couldn’t do what we’re doing without Open Banking – our costs would be too great.

“In the SME marketplace, the access to funds for SMEs is really difficult. It’s stratified to crowd-funders that are at the very low end, with just a few unicorns – and that zero to five million pound raise has become almost impossible. Then everybody turns to other forms of financing – like invoice financing, which is great, but it only goes so far. So access to funds since 2008 has been really difficult, and that’s why we have a £6.5bn funding gap in the SME space at the moment – businesses need to find £6.5bn to continue their growth and we’ve got to find solutions for it and the innovation in fintech gets us some way to achieving that.”

Karl Straw Chief Executive Regionally


“Banks use our technology to clean, calculate and format the technology they send to the regulators. We follow the regulations quite closely and we sit in that space between banks and their regulators and sometimes between two banks. The biggest problem we see is around communicating data. There is no agreed format for a bank to send a portfolio of loans to another bank. So we went to the European Commission and got a grant to publish an open-source format to do that. We’ve been using that and there are now about 500 banks using it to varying degrees.

“I think one of the key challenges is that sharing of data. People just need to agree and there are a lot of big legacy IT companies that don’t want this to happen – and a lot of consultants that make money from integration, but I think it will change. Open Banking has really pushed that agenda forward and said ‘this is the future, you’re going to have to be able to exchange data easily’.

“With more data, you also get more problems. The big challenge is not necessarily big data, but going to small data which is actionable. I think that will come from more subject matter experts, as people with the knowledge about credit and lending history – perhaps with 30 years of banking knowledge – start working more closely with these new technologies and start finding their flaws. So I think the data revolution will come, but perhaps not immediately.”

Murat Abur Chief Technical Offcer & Co-Founder Suade

“We’re the first FCA-regulated Islamic fintech platform in the country. We provide real estate investment opportunities to everybody for as little as £100, paying out monthly returns as if you’re a buy-to-let landlord without any of the hassle associated with owning a property.

“We have found a lot of support as a backlash to what happened in banking in 2008. A lot of our investors are disgruntled investors who are probably sick and tired of traditional financial institutions, who are not being able to gain access to some of the juicier returns from the larger financial institutions. What fintech allows is to lower the barriers to entry and give everyone an opportunity to be involved in something that previously may have been inaccessible.”

Zeeshan Uppal Co-FounderYielders


“At DJS (UK), we are a fintech start-up working in the short-term lending space. We were the first fintech short-term finance company to be regulated by the FCA. We have got a generic lending platform, which allows us to leverage technology to facilitate lending across various different verticals.

“The nature of our customer base is that we facilitate very small loans, which means that we can see large numbers of people coming through the system. As a result, that means we’ve got lots of big data, so we need to understand the intent of that data and what it’s going to tell us about our customer base. It’s really about using it to enhance the systems and controls. We’re happy with where we’re at. But it’s about understanding how to take a large volume of data and squeeze it down to something useable – so it could be credit risk score carding, it could be default rates, it could be many things – the question is how do we leverage and make use of the tools that are available to us? –for example, machine learning – and using those things to direct what we’re doing with the data.”

Darren Cheeseright IT DirectorDJS (UK)

“I’m from an organisation called B-Hive – it is an open innovation platform. Within our platform, on the one side we have a lot of financial institutions that want to innovate, and on the other side we have a growing database of start-ups. What we’re trying to do is get the two to work together.

“From the start-up side, people are saying as a career of choice I don’t want to work for a bank, I’ll just do it myself. The ability to do a start-up now is a lot more easy than it was ten years ago. The new technologies are more readily available. Knowledge is a lot more free now – you can YouTube a video and get a lot of information, there are open-source tools and kits, so you don’t have to spend a lot of money to set these things up.

“The unbound thinking that you get from a start-up – or beginner’s mind as I call it – means people are coming into the field of finance and saying ‘I don’t like how this process works, how can I do it differently?’ They’re not entrenched with 30 years of working in traditional financial services. The banks just don’t know how to change themselves.

“There are also great funding levels for fintech start-ups now. The VC and PE activities are just going crazy. Some start-ups will work, some won’t work. But we’re going to see a lot more unicorns come in the fintech space.”

Aman Cheema Innovation LeadB-Hive


“I look after the operations for a company called Trussle. We are a consumer brand that helps people organise their home finance or mortgage instantly and easily – so hopefully they’ll never have to worry about it again.

“Mortgages are a funny world, like insurtech, they haven’t generally followed the same pace towards fintech innovation as in banking. One thing that continually amazes us is the number of people who had such a painful experience with their first mortgage, and decide they don’t want to do it again and are willing to pay thousands of pounds a year on top of what they need to pay just because they don’t want to go through the hassle again of applying for a new mortgage. UK users are overspending billions of pounds a year on their mortgages. For us it is a complex challenge to educate consumers that there is a better way to do this and that actually the hassle you had last time can be fixed.

“Open Banking has made a good start. We are one of the best use cases for Open Banking because at the moment providing verification around your income and affordability is a huge pain for customers. It’s a real pain for lenders too, because they need to have underwriters sitting going through people’s bank statements one by one. That can be fixed in a second through open banking.”

Rob Fairfield VP of Operations Trussle

“We are a relatively new player focusing on launching a digital credit card. We have already launched our beta version. The idea is to simplify the usage of credit cards. There’s been a lot of innovation in the debit and prepaid space with the like of Monzo, Revolut and so on. We’re digging deep in the demanding customer base who also want the same – or better – experience for the credit card. We have achieved so much positive traction and feedback from not only consumers, but also businesses. So we will be not only a consumer-facing brand, but will also scale in parallel with partners.

“We’re in an interesting situation in that we started with no legacy, so we can mostly listen. People often ask me if I’m concerned by the competition copying us. But I say, if other people are doing it too, that’s great if they’re part of the same breed. The more we are banging the drum to get the change made to happen here in the UK, the better and the more we all benefit. The way we approach working with other brands also gives us the opportunity to ask if our software could be repurposed for a completely different customer base. So we’re trying to approach this with an open mindset – trying to liberate, be democratic and get other people excited by it too. Every day we bring test users in so we can enable other people to be part of it. Customers are excited to be part of the creation.”

Kyrre Riksen Chief Marketing Officer & Co-FounderJaja Finance


“Instimatch connects institutional borrowers and lenders in the Euro unsecured money market. It provides increased transparency and efficiency, and the ability to diversify counter-party risk. We have more than 60 institutional users and we’re continuing to build this network of global counter-parties that include banks, corporate pension funds, asset managers and insurance companies on an international basis. Our digital platform essentially enables money market participants across different industries to trade at roughly half the average brokerage commission charge today.

“With Instimatch, the inspiration really came after the financial crisis in 2008. In this market, in cash deposits, liquidity dried up, and it was very difficult for institutions to find funding and yet in this part of the market trading hasn’t changed at all. It’s still trading on the phone, with relationships, and yet, as we saw with the crisis that was a big problem. So although we were only founded a few years ago, it was the 2008 crisis that inspired it.”

Britini Doo Head of UK SalesInstimatch Global

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FUTURE OF FINTECH ROUNDTABLE - DAC Beachcroft · 2019-03-19 · INSIDER’S FUTURE OF FINTECH WITH...

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