The UK’s financial services sector is at last beginning to enjoy the benefits of the long awaited economic recovery, with the industry reporting a growth in profits, turnover and optimism.
While key players are breathing a much-needed sigh of relief, now is not the time for complacency as a new generation of lean start-ups continues to unroll a wave of complementary digital services.
Making up just over a tenth of the entire British economy – and yet to undergo true radical innovation – the sector is ripe for disruption. Over the next decade participants face a stark choice between collaboration with nimble new entrants and the innovation they bring to the table – or risk the fate that befell the likes of Kodak.
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But the transition has already begun. With data at its core, financial services are becoming ever more tech dependent. Technology is becoming the middleman, replacing financiers and handing more control to the individual.
An example of the way technology is by-passing traditional players is evident in the increasing number of platforms offering crowd funded finance. Lendinvest offers peer-to-peer mortgages. Crowdsurfer aggregates crowdfunding options. Now there are enough crowdfunding platforms to justify an aggregator. Who would’ve predicted those two years ago?
And tech start-ups are taking bites out of other traditional – and lucrative – areas that have long been the domain of bank. With the global remittance market worth $550bn, young companies like Azimo and Transferwise are now offering the public vastly cheaper ways of transferring money overseas.
However, as in all forms of business, the ability to connect with and make deals is the key hurdle faced by new entrants – but fortunately FinTech start-ups are starting to get a lot more love and attention from the established players.
Two years ago Accenture was running one of the few FinTech Accelerators in London, providing mentoring and helping prepare start-ups to work with large banks. Today the number has been swelled by a new range of new programs provided by the likes of Level 39, The Barclays Accelerator and Startupbootcamp FinTech, effectively vetting the best start-ups for investment.
But this represents the mere tip of the iceberg. London’s financial services traditions extend into dated computer systems that are difficult to work with and overdue for an overhaul. Banks and insurance companies have more data than they can currently handle – a perfect recipe for mass disruption.
Over the next few years FinTech start-ups have a lot of maturing to do. Unlike normal tech companies that can scale at lightning speed, FinTech start-ups have to deal with heavy regulation.
Achieving scale in this industry requires working with the large enterprise players and to navigating the legacy systems that are holding progress hostage. Some can carve out niche sectors, but to really be disruptive, small start-ups and large dinosaurs need to play nicely together.
This year for the first time, they’re getting together at London’s inaugural FinTech Week. The ground-breaking event will concentrate on five key areas:
- money and payments
- markets, trading and investment
- big data and enterprise solutions
- banking and financial services
- start-ups and future funding
Over the week a range of interested sectors including banking, insurance, accountancy, law firms, marketers, retailers and VC will be able to meet, connect and assess the worthiness of the digital innovation that’s about to impact on their business.
Seven years ago the social media sector was at a similar stage of development. But the dynamic quickly changed with large companies were outbidding each other, paying hundreds of millions for a piece of the action.
I predict the same, but in two years time. It will be a jungle out there. Watch this space.