By Krzysztof Trojan, FinTech specialist at SMT Software
1. placed above or over: eg. superscript
Collins English Dictionary
With a mixture of hope and concern, the FinTech world awaits the introduction of open banking APIs. The PSD2 and The Open Banking Standard promise that exposition of the API will no longer be just an unfulfilled vision, or futuristic solution for banking industry, but a must.
The impact of the APIs will surely be different depending on the scope the industry settles on – smaller, if we just stick to plain access to account (XS2A) and payments; much larger, if product information and origination is also exposed.
One of the results expected is the golden era of intermediaries and aggregators – services such as Mint.com which cannot wait for the APIs being exposed universally. It would be a convenient thing to manage all accounts from a single app.
But the true potential to be unlocked is different, possibly understood by most, but somehow hardly explored. The true benefit is the dawn of composite, multi-provider products. The banking superproducts.
Imagine you are on holidays in sunny Italy, and want to buy a family boat trip. You could have bought some Euros back at home, at a decent exchange rate, but, of course, you have spent all of it already on pizza and gelati. So you take your MasterCard out of the wallet, and pay with a loud sigh – you already know you will be charged an extra 10 per cent for this type of transaction. After returning home you may find out it was actually 20 per cent, as your salary was a day late and you entered overdraft.
Think about the same scenario in an API enabled banking super-product heaven: you have never bought any currency, you took your multi-currency virtual MasterCard with instead. Actually, there is five euro left on it, and no pounds altogether. So, you do pay with it for the boat trip, the payment request hits the card just to discover there is nothing left there. No worries, you have a euro account connected by API … but it’s empty as well! OK, let’s buy some euros for pounds! Who offers best price for 162.45 Euro? Hmm, TransferWise’s rate is looking good, let’s get it for GBP 135.37! Oh, but there is just 120.25 pounds left there on the current account. Any ideas? 2000 pounds limit left on the credit card, and the billing period just started, let’s get some limit from there. Paid!
Sounds impossible? Yes, but, if all those banking products were API enabled – and some already are –it is perfectly feasible!
Opening access to accounts is perceived as a threat by many banks. Definitely there are challenges such as security or fraud potential. Companies regulated by less stringent regimes become competitors. But from the business perspective, the benefits outweigh the risks. Banks do spend a lot of effort and money on developing their channels, playing catch-up games with the competition, and actually having difficulties producing applications as good as the best web and mobile apps out in the market. APIs allow extending the number of channels to reach the customers without the hassle of developing and maintaining them.
Looking beyond the risks and challenges connected to open banking it is plain to see that there is a huge business opportunity. Super-products are going to favour specialized offerings – great current accounts, cheap mortgages, good savings rates. If done well, opening access to accounts can increase cross-selling and actually make customers use less popular products they would normally not bother with, as part of their portfolio. The banks have the scale and credibility needed so much in financial domain. Partnering with innovative start-ups, already visible trend, have the potential of benefiting both worlds. And banks can be providers of super products, too – it’s not too late to build strategy based on the assumption the bank does not need to offer best products in every category – it’s enough to offer best product in one, and ability to build a super-product on top of it.
Come and meet SMT Software @FinTech Week, or mail email@example.com, and we shall have a chat about the impact of APIs, and the ways SMT Software is helping organisations to address it.
By Nick White, Senior VP Group Product and Marketing at Monitise
According to PwC, 95 per cent of traditional banks are in a transitional phase and believe that they could lose part of their business to fintech companies. Yet, 25 per cent of the banks questioned said that they don’t engage with this section of the market at all. The financial services industry is one that is built on legacy technology systems and constrained by compliance and regulation. These factors can make it difficult for banks and fintechs to enter into collaborative partnerships – but it needn’t be impossible.
Banks and fintechs have much to gain from working together. Traditional retail banks get access to the latest technology and have the opportunity to digitally innovate, while fintechs get access to their biggest potential customers and a valuable distribution network. Our work connecting fintechs and retail banks through our FINkit platform, and our experience working in this sector over the last decade, has certainly given us some insight into the potential hurdles on the journey towards collaboration – and the routes around them.
Fintechs need to think in terms of long-term value for banks
From their conception, fintechs need to think about the commercial case for integration – how does their business model help banks open up new revenue streams and reduce operating costs? Banks will value flexibility in a commercial model: SaaS and PaaS ‘consume on an as-needed basis’ propositions resonate well, for example. As early stage businesses, fintechs often prioritise their next funding round, and are driving towards this or an exit rather than actually selling a long-term proposition to help banks get ahead of the curve.
Fintechs must also keep in mind that what concerns them is very different to what keeps a bank’s CEO up at night. For banks, Net Promoter Scores (NPS) are of upmost importance. Regardless of how an app or service looks, if it doesn’t instantly do what it needs to do, customer satisfaction will be affected. When adopting new technology, there is a huge amount of risk for a bank: if it fails in any way, the penalties are huge. Customers will expect the latest features, but even more so they expect their banks to keep their money safe and secure. Anyone developing new services must keep this relationship between bank and customer at the forefront of their mind.
Innovating to solve consumers’ small daily challenges will be the real differentiator. Customers are demanding ‘life-enabling’ tech functionality from all the brands they interact with, and banks too should look to deliver services that mirror consumer behaviour change. Most customers don’t tend to care about data privacy as much as regulators do, so fintechs can show banks how to use the vast amount of consumer information they have access to.
Our experience tells us that bank boardrooms are united in their mandate to innovate, yet practicalities are still a challenge. Fintechs need to demonstrate a use case – developed on the edge of the legacy system, brought to market quickly, and showing ROI and customer engagement.
Banks should aim for a cultural shift and empower tech talent
Startups are used to this agile approach to development. They create something that works and get it to market for testing quickly. Culturally this is very different to banks, who will go through a lengthy testing procedure that can put years between an idea and the product in the customer’s hands. One option for banks to consider is a ‘separate but together’ approach that would allow them to fulfil their regulatory demands and compliance requirements on the one hand, while on the other enabling smaller teams to innovate, create, make, and break interesting digital ideas. At a personnel level, banks can empower each employee to fix small problems immediately rather than always pushing them up or down the chain of command. Like startups that empower employees across the board, banks can encourage agility throughout the organisation and make sure the right people are in the right places to leverage skills effectively.
And tech talent within retail banks isn’t a rarity. Even the oldest of financial institutions now put a heavy focus on their technology teams: the workforce at Goldman Sachs is roughly one-third IT engineers. A bank’s in-house team knows better than anyone how customers use the technology, its potential, issues, and solutions, and can combine their insight with the customer data that they are continuously collecting to deliver valuable services.
It’s time for change
Consumers now expect a 24/7 on-demand, personalised service in every aspect of life – which compared to developments in other industries the banks have somewhat struggled to provide. This is understandable due to regulatory restrictions but if fintechs can approach banks with understanding and consideration and banks can embrace the best parts of fintech culture, all parties should be able to benefit from much needed innovation and consumer behavioural change.
By Pavel Matveev, co-founder of Wirexapp.com
Fintech is big, no doubt about it. As a Bitcoin startup co-founder who have been in the scene for a couple of years, I have attended plenty of Fintech events and conferences. One of the latest events I attended, Phoenix 2016, was an ‘exclusive platform for innovators in Financial Services across the CEE Region’. Representing Wirex, we entered the Quick Pitch Competition against 20 other startups, pitched our business model and successfully claimed second place for our hybrid bitcoin-fiat online banking platform.
Here are 3 things I observed from my last Fintech conference.
Observation #1 – We attract the attention of banks and the traditional financial sector
Not surprising, but definitely worth mentioning. If you attend banking conferences, the number one topic for all bankers is disruptors and Fintech. Amid that, blockchain and bitcoin startups (like us) attracts a lot of attention. Blockchain and bitcoin are so trendy right now, even the International Monetary Fund published an article examining how bitcoin’s blockchain can benefit the banking and trading sectors.
Because of this, financial conference organisers all over the world are inviting more and more blockchain startups to attend, to keep themselves up to date. There are so many innovations in this field that even I have to actively keep track of the news. Many banks are conducting their own internal POCs to try and monitor the industry. Some banks are already collaborating with blockchain and bitcoin startups, but most are still observing the development. From what I know, in the UK, Barclays is ahead of other banks in terms of collaborating with blockchain and bitcoin startups.
Observation #2 – We need to improve on blockchain/bitcoin regulations if we were to flourish
So if blockchain and bitcoin startups are all the rage right now, why are some big players not playing this game yet? Simply speaking, risk management. In a world where black and white have been clearly defined for years, the lack of regulations and standards that came with the Fintech industry (especially in regards to blockchain and bitcoin/cryptocurrencies) is a major deterrent for the traditional financial sector. At the moment there are no standard procedures on how to do AML/KYC for blockchain transactions. Minimising criminal activities on the blockchain is something all of us are concerned with.
Alas, the nature of regulations is usually a slow one. It will probably take years before we have a working framework. However, that doesn’t mean the progress is halted – some startups such as Elliptic, the blockchain intelligence firm are already providing forensic services to detect illicit activities on the blockchain.
Observation #3 – We need to emphasise how Fintech startups and traditional financial sector can work together, not against each other
From my experience, VCs still invest in traditional Fintech startups rather than blockchain startups. One reason is perhaps lack of understanding on the blockchain technology – it is, after all, a very young technology. However, it cannot be denied that the blockchain’s reputation as the disruptor makes the traditional financial sector naturally cautious. It doesn’t help that some cryptocurrency evangelists are staunch and vocal anti-bank advocates, and the media likes to position Fintech and traditional financial sector on opposite sides. This is, at best, an inaccurate view of the whole financial services ecosystem. Fintech and traditional financial sector do not work separately – it works in parallel.
There are plenty of opportunities for both sides, and there are so many applications from the blockchain and bitcoin technology that have not been fully explored. The benefits it can bring to the traditional financial sector is endless. For example, the rise of smartphone ownership makes mobile payments more accessible – social money transfer platforms such as weChat and Circle shows how it can be done via blockchain and bitcoin in a cost-effective way. For Wirex, we work very closely with partner banks to help bring financial services to many, including the unbanked. It’s a symbiotic relationship that we’d like to continue for many, many years to come.
By Yvonne Dunn, Partner at Pinsent Masons
Financial Conduct Authority chairman John Griffith-Jones has recommended that firms set out their vision for the best way forward for UK financial services and the economy more generally in an industry strategy following the referendum result.
It is an opportunity for UK-based fintechs to lobby the government and regulators to maintain regulations in line with EU rules in the short term to allow for a period of practical equivalence between the two legal and regulatory frameworks that will exist when the UK formally exits the EU.
Such an approach would establish a stable regulatory environment to continue business as usual, as far as is possible, and avoid double regulation of firms. It would help retain the attractiveness of London as a base for European and international financial services operations.
In the longer term Brexit offers the UK the freedom to adopt business-friendly approaches to regulation to support innovative new products, services and business models, and build on existing initiatives the FCA has already developed to facilitate the rise of fintech.
The UK could also position itself as a leader, working alongside countries such as Singapore, Australia and the US to influence the EU’s strategic direction in relation to financial regulatory matters. This could include, for example, taking the lead on developing a global system of ‘passporting’ that makes it easier for fintechs to expand into international markets from their base in the UK.
The FCA has already developed strong ties with sister regulators in non-EU markets, such as Singapore and Australia, on fintech authorisations as it expands its Project Innovate initiative in both its scope and ambition.
One longer term opportunity might be for UK legislators and regulators to cherry-pick which EU regulation to apply in the UK and to develop different interpretations and approaches to issues from EU counterparts that might help support greater digitisation and innovation in financial services.
For example, cloud computing: at the moment EU laws require financial firms to ensure effective access to data for auditing purposes, including physical access to premises, when outsourcing services. This serves as a barrier to the adoption of cloud services by financial firms as data hosted by cloud providers is often stored on servers based overseas in multiple locations.
The FCA published draft guidance on the use of cloud computing by financial firms last autumn. It said at the time that cloud customers must ensure that they, their auditor and the FCA have “effective access” to its data as well as the cloud provider’s “business premises”, although it explained physical access rights may not be necessary for all business premises and that a regulator’s visit to cloud providers’ premises “can be qualified so that it only takes place if the regulator deems it necessary and required”.
The FCA has still to issue its final guidance. In future, with UK acting independently from the EU, it could support remote access audit rights for cloud use, cutting the cost and complexities involved in adopting cloud services.
The future for fintech in post-Brexit UK
The UK, with London as its financial capital, will remain an attractive place for fintechs to develop their business in future.
KPMG and CB Insights reported earlier this year that fintech companies in the UK raised $962 million in venture capital (VC) funding deals in 2015, up from $409m in 2014. The UK market for VC fintech investments dwarfed Germany’s, where VC deals raised $193m for fintech companies last year. The research represented increasing global confidence in the UK as a fintech hub with opportunities for innovators and investors.
Brexit has created short-term uncertainty but, whilst it may not be the result the fintech community wanted from the referendum, the UK remains well-placed to serve the interests of fintech companies and investors.
London will continue to be a major business hub for global trade and boast expertise in financial services unrivalled elsewhere in Europe and perhaps the world.
The UK also already has a deserved reputation as a financial centre with a regulator that supports innovation and the digitisation of financial services by both incumbents and new entrants to the market.
The FCA is at the forefront of fintech initiatives, including supporting the development of automated advice tools, the use of technologies that help firms meet regulatory obligations, and the testing of innovative products, services and business models in a lighter-touch regulatory ‘sandbox’ environment. The UK government is also backing the development of open APIs in banking in an initiative that goes beyond the ambitions of the EU’s new Payment Services Directive (PSD2) in opening up the payments market to increased competition and innovation.
These are solid foundations for a post-Brexit UK to build on. Together with the opportunities for global passporting and smarter regulation, there should continue to be fertile ground in the UK for fintechs to establish themselves and expand.
By Max Yevdokimov, VP of Mobile at Tinkoff Bank
Fintech has become quite a buzzword today: fintech, bioengineering, and near and deep space exploration are the most exciting tech trends at the moment. Unlike the last two which require expert scientific knowledge, fintech is a field that affects everyone who uses online banking or any kind of payments. As young people across the globe continue to move away from brick-and-mortar banking and finance, more and more start-ups, mobile apps and innovative financial solutions are popping up. However, these are mainly about altering or improving user experience and we haven’t seen any real breakthrough in fintech besides bitcoin and the blockchain.
When banks first set up their branch networks, they were focused on optimising and designing their layout. Then cash machines appeared, and they then rushed to streamline the user interface for those. Now that online and mobile platforms have become mainstream, banks are obsessed with improving the interface of online and mobile banking. But the problem is that most banks approach this from within and don’t properly consider users’ needs. This is exactly why fintech start-ups have emerged because they view the personal finance universe from the perspective of the user. So, it has become obvious that what traditional banks are offering is driven either by their inside understanding of their own processes (no matter how user-friendly those are, if at all), or by their IT infrastructure capabilities. Most initiatives deal with product interface upgrades or new form factors of connected devices.
The winners are those market players who can look at their product from the user’s perspective and anticipate the service they need and the form the user wants to receive this service in. And that’s where we come in! We started off back in 2006 as the first online-only bank and are developing this model to showcase the bank’s role as a fintech disruptor. We develop web services and mobile apps to be used not just within our customer base, but also in the broader market. A good example is our Traffic Fines app, where people can sign up for notifications and pay any fines they receive directly through the app. Traffic Fines has hit more than 3.5 million downloads to date.
By Mark Tate, Managing Director UK and Ann Wong, Director Corporate Communications & Investor Relations at Opportunity Network
Like it or not, Brexit is a history-defining event that will change the landscape of our financial market and bring lasting impact to the world economy. While some individuals and companies are still stuck in shock and disbelief, many are already proactively carrying out a series of post-Brexit initiatives. Certain banks are now considering moving their European hub out of the United Kingdom; European cities are prowling for the opportunity to replace London as the Fintech capital of the world; UK businesses are hastily exploring how to retain access to the EU market and talents. While no one has the crystal ball on what lies ahead, we know for sure that sit-and-wait is not the right strategy for banks that are searching for growth and profitability.
Many banks have now embarked on the journey of digitization; for banks that are in the process of evaluating Fintech partnerships in or outside of the UK, it is important to understand the implication of Brexit to their Fintech partners’ business operations, corporate structure, tax and regulatory environment. Many Fintech companies based in the UK have a business model dependent on the benefit they gain from being in the EU, the rights to “passport” their products and services across the European Economic Area subject only to the UK regulation. The UK is for sure an important financial market that should not be abandoned, but Fintech companies should also equip themselves with the capability to expand into the EU and internationally post-Brexit. It is therefore desirable for banks to partner with Fintech companies that have the option and flexibility to co-locate or relocate business activities to a continuing EU country, which will ensure business continuity whichever way the regulatory regime evolves.
Secondly, banks should also ask themselves: “will this Fintech partner help me achieve digital simplicity and create new growth frontiers?” Brexit is adding complexity and burden to banks and their clients’ businesses, the share of mind and wallet that clients can offer to digital products will definitely be compromised although their appetite for that will not change. The geopolitical uncertainties are also causing many to retrench their business operations and put their expansion plans to a halt. In such turbulent times, it is especially important for banks to deliver digital offerings that are simple to use, enabling their employees to serve different client segments effectively, improve salesforce productivity and originate new business with speed and scale.
Last but not least, think global. As the old saying goes, “don’t put all your eggs in one basket”. Brexit has now triggered the reshaping of the entire international trade framework; banks will have to look for even more solutions to connect British companies with the rest of the world. Brexit also makes it necessary for banks to recalibrate their business risks, adjust their revenue models and diversify the systematic risk pertaining to different markets, be it within or outside of the EU. The event was inevitably a shock to the system, but we are convinced that it will not change the course of the global digital banking evolution. Banks should now seize this timely opportunity to take advantage of the adaptive nature of Fintech companies to grow the banks’ business footprint and to strengthen underserved client segments, transforming the Brexit challenge into an aggressive play opportunity.
By Paresh Davdra, co-founder and CEO of RationalFX
Millennials are the most widespread, educated and financially powerful generation that humanity has produced – they are transforming nearly all industries beyond recognition, with the world of Fintech being no exception.
Global society has been dominated by baby boomers for the past 50 years, with members of the generation wielding massive influence over issues ranging from cultural norms and behaviour to the legal and property industries. If the 20th Century was etched by the hand of the baby boomer, the 21st Century now belongs to the millennial. It is these complex beings that will, in the same way, define the way that the world is run for the next 50 years, shaping the future for generations to come. The transition between the two generations is therefore an important process, with companies vying for the right to plant a flag in the massive potential of millennials.
The ferocity with which businesses are currently competing for the attention of the millennial generation is due to the huge market they have generated, resulting from their adaptability to new technologies. Take, for instance, the trends in the financial world at present; the lines between the banking and the digital worlds are now blurring more than ever, with banks staggering under pressure to cater to younger customers. Today, almost a third of 26-36 year olds would switch banks based solely on the strength of the mobile app. In fact, 33% believe that they won’t even need a bank in the near future, and perhaps most interestingly, 73% of millennials would be more excited about financial innovation from one of the tech giants – Google, Apple etc. – than from their bank. As a result, being out of touch with the technologically sophisticated younger generation could spell death for the banking world as we know it – cue Fintech.
There is perhaps no better demonstration of millennials’ power over the financial industry than the rise of Fintech. The main driver behind recent developments in the field has been disruption, which spawned from the generation itself. Advances in Fintech have been a microcosm of the growth of our society recently – with a generation of people lacking borders or allegiance to the established norms of the previous generation, enterprise has flourished. Millennials create demand for new, low cost financial services that place customer satisfaction on top, and in doing so, encourage the progression of Fintech. In fact, three quarters of millennials now say they want to get their advice from tech companies rather than mainstream financial firms.
Mobile technology and millennials have simultaneously grown together over the years. Smart phones are as ubiquitous as anything now, and technological advancements mean that each person now has a computer in their pocket – a computer capable of carrying out financial transactions, checking your bank balance, and even getting a constant stream of complex financial advice. All of this begs the question: why would you go into a bank to check your account, to carry out a transaction or to seek financial advice, when you can do it anywhere from a mobile device? Traditional banking is more expensive, more time consuming and less consistent.
Perhaps the only reason people use traditional banking methods is trust – how many consumers trust an app on their phone as much as a qualified person standing in front of them? The issue here is that after the financial crash of 2008, negative perceptions of banks and bankers have run riot in our society. Many of the younger generation have completely lost faith in the banking world – and who are we to blame them? They need an alternative solution, and what they understand is technology and relentless innovation – a gap in the market which Fintech has now filled.
All this means that now is an extremely exciting time to be in the financial services industry. Innovation is the name of the game, with new tools creating products every single day and inventors becoming the entrepreneurs of tomorrow. This is not a temporary change either – not a revolution to be undone, but rather a process of evolution.
The financial world has changed forever, with technology and customer satisfaction becoming more important every day. With the millennials moulding the world, Fintech is a product of evolution, not revolution, and that’s why it is here to stay.
By Joe Hall, UK Managing Director of eToro
From crowdfunders to P2P lending and mobile banking to social trading, fintech companies are levelling the playing field by lowering the barriers to entry for traditionally high-level, top of the market financial services, to the benefit of a huge array of customers.
Research that we’ve done previously revealed that millennials, those aged between 18-24, are more likely to place trust in new fintech platforms and digital services than older generations.
As children growing up against the background and aftermath of the financial crisis, millennials embraced fintech faster than the economy recovered, embracing solutions that streamline finances faster than any other generation. Smartphones became the catalyst for greater interactions with their personal finances from checking bank balances, making money transfers or paying for things.
Spurred by the success of first movers, such as Mint, a new wave of apps tracking consumption patterns came onshore, assisting with boosting savings, without the needs for constant monitoring and adjustment.
The new abundance of ways to invest, became a solution to the heavy student loan. From crowdfunding to P2P, this generation made clear that they didn’t need to settle for the bank’s BS – by which I mean, business services, of course.
And cost of entry was lower. When we look at the traditional fund management industry where fund managers and private banks routinely demand £250,000 or more to open an account with them, fintech providers like ourselves completely removed this unnecessary barrier to entry. On eToro, people can bypass highly paid fund managers and opaque fee structures and start trading with as little as $200.
Growing-up around the social spheres of Facebook and Myspace, millennials are naturally drawn towards the digital land of online information sharing. They are the generation of globalisation and are the future leaders and consumers of this world. As the internet brings to life the opportunity for international investments, the basic ISA platter on offer at the local bank loses appeal in comparison to the global financial markets now open to investment.
As part of the finance industry and the fintech ecosystem, we need to keep the future consumers at the heart of what we do. New innovative offerings attract attention, but it is only those that meet customer needs that cut the cheque. eToro defines every new innovation with such purpose.
So why would millennials trust the shiny -suited asset manager, hiding behind a closed portfolio, when transparency is possible? Why deal with a greasy salesman, when they can see the best deals on comparethemarket? Why settle for the low cash ISA rates, when crowdfunding options are on offer with higher returns?
The customer is always right. Millennials know the way to invest.
By Charles Green, thought leadership director at Belatrix Software
Amidst the chaotic economic and political aftermath of Brexit, and a shifting landscape for Fintech, it’s easy to get caught up in the events of today, and lose sight of the fundamentals underpinning the Fintech revolution. So in this blog I want to examine the methodologies that enable nimble, disruptive Fintech firms to run rings around their banking and financial service competition. Is it just that they have a different mindset and a lack of legacy systems to contend with? Or are they using and applying technology and software in fundamentally different ways to meet the needs of customers and drive innovation in their businesses?
Traditional banks benefit from scale, experience, strong brands, and a broad product portfolio. For Fintech upstarts to challenge these banks, they simply can’t do things in the same way. Successful Fintech firms rely on a different set of strengths such as their disruptive mindset in order to compete. But they also apply methodologies such as Agile software development, Design Thinking, and strong user experience capabilities to differentiate themselves from the competition:
- Agile development and continuous delivery drive flexibility and responsiveness to customers. Agile development and continuous delivery provide the frameworks to iterate rapidly, and release software constantly to keep up with changing customer demands. Meanwhile creating great software requires attracting the best developer talent, and today’s developers expect not just to work with the latest technologies, but also with modern methodologies such as Agile.
- Design thinking brings the customer to the fore. Traditional banks may have the scale, experience, and expertise, but all too often the end customer was placed too far down the list of priorities. Fintech start-ups with their disruptive mindsets, have looked to Design Thinking to change this. Ultimately Fintech is about human-centric design, and using that design to provide powerful, seamless customer experiences. It reflects the shift to what Forrester Research calls the “Age of the Customer” where customers, armed with information, have greater power than ever before to decide on which products and services they use. Design Thinking involves the use of a range of techniques such as customer journey mapping, rapid prototyping, storyboards and personas.
- User experience and design skills to deliver powerful customer experiences. Mobile is a key driving force underpinning the need for better experiences – indeed for many organizations the only interaction point they have with their customers is via their mobile app. To create this next generation software, leading Fintech firms have prioritized investments in UX and design. And to deliver this level of consistent UX, design skills also need to be complemented by technological expertise in DevOps, microservice architectures, Agile, and continuous delivery.
To give an example of this in practice, Belatrix Software worked with a leading financial services organization aiming to develop new ways for customers to withdraw cash. The brief was to reimagine the ATM and how customers withdraw crash. Via a combination of Design Thinking, Agile development, and UX skills to rapidly create prototypes, Belatrix created a mobile app which could be used instead of a credit or debit card at an ATM – so-called “cardless cash”.
Many traditional banking and financial service organizations, from Barclays to BBVA, are trying to catch-up with their Fintech competition via such methodologies and frameworks. However, what is clear as we move forward through 2016, is that to serve ever more demanding customers, thriving Fintech firms will continually develop innovative product development strategies and use specific methodologies and frameworks to foster this innovation.
By Andrew Firth, CEO at Wealth Wizards
In both the US and UK markets, our mutual appetite for transparency and real-time information has given life to a vibrant and rapidly expanding digital ecosystem, altering the way we store, consume and use financial information.
Moving far beyond the accessibility of day-to-day banking and payment apps, the fintech industry is growing swiftly with robo-advice at its core.
The term is used to describe automated services for investment, asset, pensions and insurance management, robo-advice allows individuals to tailor their financial products via online tools and mobile apps.
Obstacles of traditional advice in the UK
Robo-advice is a convenient and lower-cost way of accessing advice and investment expertise for the masses, who have been largely priced out of the UK advice market.
In 2013 the Financial Services Authority (FSA) banned financial advisers from offering free advice to customers while earning commission from the providers of the products they recommended. Since then fees have steadily risen, pricing out many with smaller savings pots.
A poll from Unbiased.co.uk found that financial advisers increased their fees by as much as 16% in 2015 alone, with the average cost for pensions advice now totalling around £1,490. Resulting from this the Financial Conduct Authority (FCA) and Treasury claim that up to 16 million people could be trapped in a “financial advice gap”.
The FCA’s Project Innovate is helping the wave of Fintech innovation to navigate the way to providing regulated services. There are a range of ‘robo-advice’ services in the UK including those offering help and guidance, investment management or personalised recommendations, with more expected to enter the market imminently.
The US market
Changing the advice landscape in the US since the mid-late 2000s, consultancy firm Deloitte found that robo advisers currently cover less than a billion pounds of assets in the UK, compared with $19 billion in the US.
According to research from consulting firm A.T. Kearney, the robo-advice industry is flourishing in the US, where there are now more than 200 platforms. It’s estimated that 1 in 5 customers that use banking services in the US are aware of automated online investment services, and research suggests engagement is high among those with small and large investment portfolios.
Platforms from Wealthfront, FutureAdviser, Charles Schwab, Vanguard and Betterment have proved hugely popular in the US, and now major institutions such as Morgan Stanley and Bank of America are looking to enter the marketplace.
The UK market
New entrants such as Nutmeg, Wealth Horizon and Money Farm are focused on helping people make and manage their investments in a similar way to many of the US robo-advisers.
Among the high street banks, Royal Bank of Scotland (RBS), made headlines earlier this year when it cut the jobs of 220 face-to-face advisers in favour of the future introduction an online service. RBS’s claims its new online investment platform will enable the bank to help a new group of customers with as little as £500 to invest. Customers with more than £250,000 to invest will still receive personalised face-to-face advice.
Following RBS’s announcement, speculation has been building that Barclays, Lloyds and Santander UK are also developing online services.
Large insurers are also interested in robo advice and one – LV= has already launched a service offering automated personalised at-retirement advice, using Wealth Wizards robo advice platform technology.
Wealth Wizards, which aims to make financial advice affordable and accessible to everyone, has pioneered the development of robo-advice in the UK. Founded in 2009, Wealth Wizards offers the leading robo advice platform in the UK.
Combining three key competencies; investment expertise, chartered financial planning and software engineering, Wealth Wizards platform can support multiple advice services.
The potential of robo-advice
A 2015 US market report from research firm Cerulli Associates claims robo-advice platforms are expected to reach $489bn (£323bn) in assets under management by 2020, up from $18.7bn.
With the London fintech scene increasingly described as a hotbed of innovation and advances made by UK robo-advisers becoming more and more sophisticated it is no surprise that the UK regulator stands firmly behind the fostering of development in the UK market. Though it may currently be smaller in size, this powerful combination may well allow the UK to take the lead.