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What’s the value of fintech?

In recent years, the Fintech ecosystem has seen tremendous growth, predominantly as a result of ongoing technological advancement, shifting customer expectations, greater availability of capital and strong support from the regulators.
Building on KPMG’s Pulse of Fintech report and the extensive interviews done with leaders in the financial services ecosystem, the City of London Corporation commissioned KPMG to produce a deep dive to understand how fintechs enhance the role of financial services firms. Specific areas include:

  1. Improvements to financial inclusion

  2. Enhanced customer experience offerings

  3. Greater transparency

  4. Modernised security and compliance solutions

  5. Additional support and guidance.

The Value of Fintech report contains a number of suggested actions for the UK fintech ecosystem, including a sector deal with the Government to drive fintech innovation and improve financial services while building on the UK’s reputation as a global destination for fintech.
Access the report here.

Fintech – what does the future look like?

The fintech imperative
Without a doubt, fintech has the potential to be one of the biggest disruptors of our time. These start-ups offer world class customer experiences, deliver services at a lower cost and improve back-office efficiency ”“ all through the use of modern technology. The value chain is undergoing a significant reinvention. For many financial institutions, how and when to embrace the appeal of fintech is a strategic priority.
By surveying over 160 financial institutions from 36 countries and interviewing the key leaders throughout the ecosystem, KPMG is able to provide a better understanding of how these companies will adapt to the modern day digital paradigm.
Building the right foundation
A key learning from the global study was that there is no single optimal approach. Many of the large organisations are attempting to leverage fintech in very different ways ”“ from partnering/buying solutions to direct investment into the new companies. However, consistent across all successful approaches is a defined and focused fintech strategy, which typically includes:

  • a strong understanding of current business operations

  • a keen awareness of the signals of change

  • ability and appetite for change and understanding of the potential barriers

  • aligning business objectives to the fintech strategy

  • innovation activity focused on large scale paradigm shifts as well as incremental improvements.

Integrating fintech
A defined and focused strategy is not enough to ensure fintech is successfully integrated into an organisation. The continuum of approaches is notable across the financial institutes ”“ some are looking to defend their position through the use of fintech while others seek growth. The leading organisations are asking four key questions:

  1. What will we be famous for?

  2. What role(s) do we want to play in our customers’ lives?

  3. Where should we play?

  4. How can we win?

The answers to these questions will likely require significant changes to an organisation’s business model and culture, therefore the required fintech capabilities are strongly linked to the organisation’s aspirations.

Why a London based fintech chose to grow in Scotland

David Brown, Co-founder & Chief Product Officer at Previse, spoke to us about the reasons behind the company’s expansion in Scotland.

It was first and foremost a very early meeting with the Datalabs that triggered the interest of the senior management team.
With a highly skilled workforce and a huge amount of new talents fresh out of world class universities, Scotland appeared to be the ideal place for Previse to locate, develop and recruit talent in data science with an ambition to use artificial intelligence technology to fix global trade finance.

Previse are still growing their presence in Scotland helped by Scottish Enterprise who awarded them a significant grant in order to support the company’s hiring strategy.

Clockwise, the co-working space in Glasgow, currently hosts the first Scottish recruits. Datalabs are still heavily involved as their R&D partner.
Previse is also working with the leading Scottish universities to disrupt trade finance by bringing data together with artificial intelligence.

David added that the required skills were “in short supply, but, by investing in developing these talents, Scotland can become a destination of choice and lead the way in providing high quality and high paying jobs in this sector.”

LendingCrowd toasts Scottish Enterprise anniversary

 

LendingCrowd, the only peer-to-peer (P2P) lending platform headquartered in Scotland, has completed 33 loan deals ”“ worth some £3 million ”“ to companies based north of the Border since forming its groundbreaking partnership with Scottish Enterprise a year ago.

Loans have been secured by a range of fast-growing companies, including restaurant chain Tony Macaroni, property lettings agency Umega Lettings and Summerhall Distillery, the producer of award-winning spirits brand Pickering’s Gin.

The Scottish Enterprise tie-up, announced in October last year, will see the economic development agency provide LendingCrowd with £2.75m to lend to Scottish SMEs across its platform.

Stuart Lunn, co-founder and CEO of Edinburgh-based LendingCrowd, is now targeting total lending of £15m to Scottish SMEs in 2018, more than a third of forecast overall lending of £40m across the UK next year, and said growth in the platform’s investor funds has been driven by the launch in February of its Innovative Finance ISA product.

He said: “The flexibility of our funding packages combined with our ability to offer a highly personalised service and much quicker turnarounds on loan decisions than are available on the high street are starting to make an impression in the Scottish market.

“LendingCrowd has seen significant growth in 2017 and is anticipating doing £18m of deals this year, versus £4.5m in 2016. Much of the growth in investor funds on the platform results from LendingCrowd launching its ISA in February this year.”

LendingCrowd, which was established in October 2014, is fully authorised by the Financial Conduct Authority. To help drive growth and scale the business, former RBS and Clydesdale Bank director Adrian Innes joined as Head of Origination in September and now leads business development activity.

Challenger banks – looking ahead

Shifting Landscapes

Over 50 banking licenses have been granted since the 2008 financial crisis and the market is becoming ever more saturated – particularly when looked at through the lens of the challengers. The Challenger’ label is now more commonly used as shorthand for a subset of the market and with such a complex and diverse ecosystem, we may need new ways of analysing the strategies of these banks.

As many of the challengers begin to mature and develop their core offerings, their futures become much more interesting that their pasts. This year’s KPMG Challenger Bank report discusses the current state of challengers, before moving onto their likely responses to the upcoming drivers of change.

Five key drivers

In the last 12 months, it has become increasingly clear that there are a number of specific trends that will affect banking in general, but the response from the challengers is perhaps the most interesting aspect for the long term nature of the ecosystem.

Brand ”“ with such a diverse and saturated market, consolidation is inevitable. Challengers have begun a personality war’, aimed at winning the trust and advocacy of customers.

Customer experience ”“ challenger banks are still predominantly focused on a differentiated customer experience throughout their operating models. This can often help drive home their offering within specific niches.

Technology – many challengers are using new technologies to diversify and hone their product portfolio. There are increased forms of platformisation as emerging technology is deployed across the industry.

Deal-making ”“ partnerships and acquisitions will likely be critical to the future of challengers. Partnering allows them to leverage external expertise but the strategy, timing and execution will be key.

Regulation ”“ challenger banks continue to come to terms with the complex regulatory environment. Open Banking, the Second Payment Services Directive (PSD2), and the General Data Protection Regulation (GDPR) may deliver as many challenges as opportunities.

Each of these, and the potential ecosystem impact, are covered in this comprehensive report.

Female tech role models ”“ We need you!

If gender issues are already a priority for our large financial institutions, our growing FinTech community also has to respond to an important reality: research by Digital Scotland reveals only 18 % of people in tech roles are female.Scotland’s tech scene is one of the country’s most vibrant and rewarding places to work. Young women can have a fantastic career in digital technology. But if we want to reap the benefits of gender diversity credible role models are key.

The Digital Technologies Skills Group in partnership with Girl Geek Scotland are looking for young women (students, professionals or simply tech enthusiasts) to volunteer as role models and mentors for school age girls.

They’ve created training and support materials (webinar, guidance materials, classroom resources, and case studies) to help volunteers with their mentoring.

Ian Hanson from Skills Development Scotland told us:

“We know there is an issue with insufficient women in tech roles. Financial Services and FinTech are no different. It’s crucial for the success of our industry and the vitality of our workplaces that we attract more talented, creative women into these roles. That’s why we’re looking for enthusiastic female role models who can inspire others to join them.”

To learn more about how to become a role model or a mentor click here