What’s the value of fintech?
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Improvements to financial inclusion
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Enhanced customer experience offerings
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Greater transparency
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Modernised security and compliance solutions
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Additional support and guidance.
Fintech – what does the future look like?
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a strong understanding of current business operations
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a keen awareness of the signals of change
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ability and appetite for change and understanding of the potential barriers
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aligning business objectives to the fintech strategy
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innovation activity focused on large scale paradigm shifts as well as incremental improvements.
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What will we be famous for?
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What role(s) do we want to play in our customers’ lives?
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Where should we play?
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How can we win?
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.
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.”
What is fintech and does the answer really matter?
There’s no simple answer
What’s a fintech company?
And so what?
David Ferguson – 1 year as a fintech envoy for Scotland
The government is keen to ensure UK fintech doesn’t become too London-centric and has now built a network of regional fintech envoys to help deliver that ambition. When the Treasury first asked if I might be interested in one of the positions, Graeme Jones of Scottish Financial Enterprise had already started exploring what could be achieved here, but there was still much to be done.
When I was first asked to get involved I initially questioned how much time it would consume and how it might conflict with or distract me from my full-time role at Nucleus. I discussed it with our chairman and other members of the Nucleus board and concluded it should be positive in terms of helping to position Nucleus and also in the personal learning and development opportunities for me.
Graeme’s energy and connections have been the driving force behind the creation of Fintech Scotland and I guess I’m trying to help the new organisation find the right balance between serving the needs of start-up and early stage fintechs and our established institutions. Having worked in one company for 11 years (and trying to get it off the ground for nine years before that), I’ve found it pretty tricky to to get my head around all the different players and their various roles in making Scotland a success as a fintech destination. Against that, I’ve found it hugely inspiring to listen and learn from others, whether they work for established businesses or they find themselves in the same position Nucleus was 10 or so years ago.
Progress to date has been through a steering board made up of a group of around 30 volunteers, but we are now close to formalising the entity with a more conventional board structure in the next month or so. Initially because it was a group of volunteers everyone was keen to take the project forward, and there can almost be too many ideas. What’s important now is a clear sense of focus, and the board and the chief executive will be pivotal in making this happen. There is a business plan in place, though that may be revisited once the CEO is in place as it will be their’s to drive.
What we have with fintech is an industry characterised by very small start-ups and large institutions. There can be various incarnations of that and interactions between the different groups, with start-ups being bought by the institutions, selling their products to or through institutions, mergers, or institutions taking stakes in other firms. This is about creating a culture and a system that together with universities and the public sector, starts to answer the question of how do we, in the round, make this a great place to do fintech. We already have world class universities, and a particular high spot with the University of Edinburgh’s School of Informatics. The next stage is to cultivate an ecosystem where people who are good at this stuff can go for help, access resources and ultimately collaborate for success.
If I end up better at my job as a result of this then ultimately that it is good for Nucleus. If Fintech Scotland becomes a success, then Nucleus will benefit from that as we should find it easier to attract talent. My fintech envoy role doesn’t directly align with benefits to Nucleus, but I’m hoping there could be lots of interesting spin-offs, which would be cool.
Open banking: Catalyst for collaboration and partnership
Open Banking – the challenge
Opening Banking was a popular theme at the annual Scottish Fintech conference and it was analysed from numerous angles e.g. likely changes in the market landscape that might be triggered by Open Banking, how banks are losing the control over the purchasing process of financial products, and PS2D regulation.
During the conference, Phill Gillespie from Money Dashboard and I had the opportunity to host a workshop about Open Banking and the API ecosystem in the FS industry.
The underlying challenge we face in the FS industry is plain and simple”¦for most people FINANCES ARE BORING! But it is also true that without financial products we would not be able to protect ourselves and our families, we would not be able to sustain our lifestyle or achieve our personal goals. We do not think how cool buying a insurance is and we certainly do not brag with our friends about our pension plan, but we need these products because we want to travel safely and enjoy our retirement.
The power to re-organise the industry
At Inbest.ai, we think that Open Banking will allow companies to place FS products and services where they belong, co-piloting our lives and checking that we are taking the right decisions to protect our families, maintain our lifestyles or make our hard-earned salaries go further.
FS companies must be humble and flexible to seamlessly embed their propositions into the products and services we use throughout our lives i.e. banking should be a mean to improve our lives, not a goal on its own. To deliver this strategy, FS companies should understand intimately customers’ needs and behaviours as well as collaborate with companies in other industries to distribute their products and services. If FS companies keep working in isolation, non-financial players with large Balance Sheets will be more than happy to fill this market gap, as Bill Gates famously stated, “Banking is necessary, banks are not”.
Another alternative will be reducing their front-line exposure and focusing on a core part of the banking stack e.g. trading, foreign exchange, settlement. To succeed in this strategy, these specialised banking services should be easy to consume by companies that are downstream in the value chain.
All in all, regardless of the strategic route, partnering and collaborating should be a core foundation on the way modern FS providers operate, and APIs are the technological framework that makes this possible. FS providers should embrace the use of APIs across their different teams and divisions as well as with their suppliers and customers.
Want to find out more?
Inbest.ai is on a mission to automate, simplify and personalise long-term financial planning to make financial advice & guidance accessible and affordable. APIs are the backbone of our company and we use them not only to build, market and sell our Financial Planning platform but also to manage our business.