Welcome to The Fintech Briefing, a morning email providing the latest news, data, and insight into disruptive fintech in the UK and Ireland, the Continent, and beyond, produced by BI Intelligence.
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FINANCIAL SERVICES FIRMS FEAR FINTECH. The global financial services industry is being disrupted by fintech, and executives at financial institutions fear losing a quarter of their business to new players by 2020, according to PWC.
- Financial services executives suspect that they could lose 28% of their payments and transfer business due to fintech challengers.
- Banks risk losing nearly a quarter of their business according to the same group.
- Executives fear that 22% of their asset/wealth management business is under threat and 21% for insurance firms.
A key driving force behind this disruption is that at its most basic level financial services is about transferring and storing information, and organizations benefit greatly from transitioning those operations to digital. Another is consumer centricity — offering solutions that better address customer needs. This is something fintechs are mostly better at than incumbents.
Disruption isn't the only option for legacy firms. Fintechs often provide a better user experience than legacy players because consumers are moving to digital and fintechs are good at tech. Over 80% of fintechs believe they are fully consumer-centric (compared to 53% of incumbents). But they're not necessarily good at the finance aspect of fintech. Further, they often don't have the funding, reach, and licenses necessary to scale quickly. That's where legacy firms have an advantage and a potential point of collaboration.
INNOVATE FINANCE WANTS TO MAKE IT EASIER FOR FIRMS MOVE ACROSS BORDERS. Differences in financial regulatory approaches between countries create a barrier for fintechs to scale across borders. This week Innovate Finance, which represents the UK's global fintech community, and US lending platform OnDeck, launched the Transatlantic Policy Working Group (TPWG) to try and address those differences between US and UK policy. The TPWG will include stakeholders from fintechs, incumbents, government, trade bodies, think tanks and academia to ensure all aspects of policy relating to fintech are discussed by the group.
Opposite ends of the spectrum. Both the UK and US boast thriving fintech communities, but the UK is a long way ahead in its regulatory approach to the industry. The US has traditionally had a more restrictive approach, thanks in part to the heavy involvement of large banks in the development of regulation. The TPWG initiative hopes to improve the environment through dialogue on different global approaches to regulation and how they encourage fintech innovation.
SOUTH KOREA WARMS TO FINTECH. The country's economy has recently suffered as a result of a drop in tourism and falling exports. The government is taking number of actions to recover, including loosening regulation in the financial services industry to encourage the growth of fintechs, according to Yonhap News. In particular, non-banks can now facilitate money transfers, resulting in foreign money transfer firms, like TransferWise, entering the country. The country also plans to lift restrictive policies to allow internet-only banking.
The strategy is working. VC firm Altos Ventures has just raised a £77 million ($110 million) fund to invest in the country and is "very interested" in putting that money into fintech, specifically mobile payment platforms and P2P lending. Permissive regulation and increased funding, combined with South Korea's vibrant technology sector and successful ecommerce industry, could lead the country to become a global fintech hub to rival Singapore and Hong Kong in Asia.
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CROWDFUNDING PLATFORM PARTNERS WITH LONDON STOCK EXCHANGE. It's difficult or impossible for many individuals to buy stock in private companies, or participate in pre-IPOs or discount placings, because brokers usually require a high net-worth in order to participate. UK crowdfunding platform SyndicateRoom wants to change that, by giving individual investors access to these opportunities typically reserved for professionals (e.g. VCs and Angels). It recently received intermediary status from the London Stock Exchange (LSE) bringing it closer to achieving this goal. This allows it to offer investors access to IPOs of companies listing shares on the London stock market, through its online platform.
MEET US AT MONEY20/20 EUROPE. BI Intelligence analysts will be at Money20/20 Europe. Sign-up to meet the analysts here and don't forget to attend Managing Analyst John Heggestuen's fireside chat with MoneyGram CEO Alex Holmes.
Around the world ...
GOLDMAN SACHS BACKS MOBILE WALLET IN VIETNAM. Vietnam-based M-Service, which operates e-wallet MoMo, received a £19.5 million ($28 million) Series B round from Standard Chartered Private Equity and Goldman Sachs, according to Reuters. Goldman Sachs had previously funded MoMo in 2013, while Standard Chartered provided the bulk of the funding in the current round. The e-wallet facilities online payments and domestic remittances, as well as in-store payments in select locations. MoMo claims 2.5 million users in Vietnam and a bricks-and-mortar agent network with over 4,000 locations.
JPMORGAN HIRES OBAMA-ADMIN ALUM TO LEAD FINTECH STRATEGY. Seth Wheeler, former economic adviser to US President Barack Obama, will join JPMorgan's consumer and community banking team to lead fintech and innovation strategy, according to Quartz. JPMorgan has been an active player in fintech over the past year announcing partnerships with small business lender On Deck, investing in P2P lender Prosper, and testing blockchain transfers between New York and Tokyo.
BARCLAYS OPENS FINTECH ACCELERATOR IN INDIA. The Rise fintech accelerator program is coming to Mumbai in the second quarter, according to Finextra. Rise offers physical and virtual workspaces where fintech entrepreneurs can meet and receive guidance from a global network of fintech experts. Rise locations are offered in cities around the world including London, New York, Manchester, Cape Town, and Tel Aviv through a partnership between British bank Barclays and network-provider 91springboard. The news adds to a growing trend of collaboration rather than competition between fintechs and legacy banks.
HITACHI ESTABLISHES FINTECH RESEARCH LAB IN SILICON VALLEY. The Japanese conglomerate announced yesterday that it will launch the Financial Innovation Laboratory as part of its Silicon Valley-based Global Center for Social Innovation. The aim of the initiative is to "accelerate research & development of blockchain technology, collaborative creation with customers, and development of solutions to support business innovation in financial institutions."