Community banks play an essential role in the American financial system – they provide the majority of small business and farm loans, as well as mortgage and general banking services. ...19 April 2017
Fintech Connect Live! Seven key messages
A host of Fintech stakeholders were in attendance at the 2nd annual Fintech Connect Live! conference at Excel London this week These included start-ups, various public bodies, Fintech giants and of course, law firms.
We spoke to a number of Fintech companies who are offering a variety of innovative products, ranging from payment solutions to automated customer ID programmes. PSD2 compliance is clearly on the Fintech agenda with companies offering new solutions to help meet the upcoming strong customer authentication requirements and facilitate access for third party providers.
Members of our team hosted a number of panel discussions, workshops and presentations including an interesting discussion on RegTech. The session focussed on the challenges for both RegTech providers and larger financial institutions seeking to make use of these services. It's clear that there's a desire from both the industry and the FCA to make better use of RegTech solutions but there's a notable lack of guidance on how the existing regulatory framework applies to the RegTech industry.
There were a plethora of diverse thoughts, ideas and perspectives at Fintech Connect Live!, but here are seven key messages to take home:
- Normalisation: Fintech products and services are an increasingly significant feature of the mainstream banking market. For example, in the P2P space, we are already seeing a greater uptake of P2P lending as a viable alternative to traditional savings accounts by consumers as interest rates drop to historically low levels. From the investor side, investments via P2P platforms are more commonly being seen as an asset class in balanced investment portfolios. These trends are only likely to continue.
- Automation: As technologies improve, we are likely to see greater automation in front, back and middle-office services. The proliferation of API-driven businesses has the potential to drive this automation. As manual processes are replaced, there is an enormous opportunity for new businesses to upscale rapidly.
- Consolidation: The rapid growth of the Fintech sector has generated a host of products and services, many of which have overlapping use cases or provide similar solutions to a finite range of problems. We are likely to see activity in the M&A space, as more established players seek to acquire competitors, as well as some natural attrition of businesses in a competitive marketplace.
- Specialisation: In contrast, we expect firms in the Fintech sector to remain more specialised than banks in the range of products they offer as they seek visibility in a crowded market. Although banks traditionally have broad offerings, they cannot cater for all markets equally well, which leaves space for agile Fintech companies to specialise and plug gaps quickly and profitably.
- Regulation: Firms recognise that UK regulators are willing to embrace innovation. There is, however, need for the industry to engage in an open dialogue with the regulators to ensure that it has timely and effective guidance in what is a very fast moving sector. We spoke with a member of the FCA's Regulatory Sandbox team, who was looking forward to the challenges that lie ahead!
- Collaboration: The future development of FinTech is likely to involve collaboration between FinTech firms and incumbent financial institutions and infrastructures, rather than a wholesale replacement of old with new. We are also likely to see a continuing trend for non-financial businesses with expertise in technology benefiting from relationships with financial services businesses, as the fight for valuable customer data becomes even more fierce.
- The Future: The FinTech sector has enormous potential for growth. The global asset pool for P2P lending is predicted to reach £290 billion by 2020, which represents a massive opportunity for new and existing players alike. In fact, a new P2P lender specialising in secured lending was granted its full permission on day one of the conference. As more authorisations come through and more customers look for tailored, seamless and relevant interactions with their service providers, there will be plenty of exciting opportunities for the Fintech industry in 2017 - and beyond!
Moving onto the second day of the Innovate Finance Global Summit 2017, Hogan Lovells hosted a roundtable focussed on Making Regulation Invisible: Using RegTech to Embed Rules into Workflow. ...13 April 2017
Sandboxes featured as a common refrain at the Innovate Finance Global Summit 2017, cropping up as routes to success in FinTech innovation in various guises. Innovate Finance and MIT...13 April 2017