According to a recent study by UK Trade & Investment, since 2008 the value of fintech investment in the UK and Ireland has increased almost eight times to US$265 million in 2013. This makes it the fastest growing region for fintech investment globally. The financial technologies sector as a whole is expected to be worth £1bn by 2016, so in which clusters are companies making money today and where are there opportunities still to be exploited?
- INFRASTRUCTURE: Modern banking can be traced back to medieval and early Renaissance Italy, and some of their current technology infrastructure appears to be from around that period, too. With fresh pressure on banks from governments to get their act together, updating, securing and consolidating systems has been a top priority for some time. This has created opportunities for quick innovators, like fintech start-ups, to come in and address those needs. One example is Digital Shadows a UK-based cyber-security company focused on protecting banks from cyber attacks.
- RETAIL: Another booming fintech sector is that focusing on helping retailers bridge the gap between the online and in-store shopping experiences. These integrated solutions make it easier for the store to develop a meaningful data driven relationship with the customer, and for the customer to get a more personalised service in return. The best example here is Google Wallet in the US. It allows the owner to store debit cards, credit cards, loyalty cards and gift cards, among other things, as well as redeeming sales promotions, via their mobile phone while in a store.
- REMITTANCE: Maybe because the UK is one of the most multicultural countries in Europe, the remittance sector has traditionally done well here. Up to now they have been getting away with charging disproportionate fees for the service they have been providing, as they have not faced much competition, but that’s all changing with a range of online alternatives coming up. One example is TransferGo, an online only remittance service that completely disrupts the marketplace by offering for the first time things like next day delivery and money back guarantees, while at the same time being up to 10 times cheaper compared to the high street alternatives.
The best way to look for the ‘next big thing’ in fintech is by zooming in on the disrupters. Here in the UK we have companies like Zopa which connects lenders and borrowers directly, cutting the banks out of the equation. Disintermediating established networks is also the strategy adopted by Bitcoin; however while it is successful it is operating in a grey area, as all transactions are anonymous. Companies like Miicard, which is the first identity verification service to prove 'you are who you say you are' online, is offering a solution to address that. If you prefer to not gamble, a safer bet for future success is another home-grown talent. Monitise just started to turn over £1bn providing mobile banking apps for clients of financial institutions.
The face of banking is changing, quite literally; think less Gordon Gekko and more Mark Zuckerberg. Today the hottest bankers are not 50-year-old men in pinstripe suits, but under-30s with degrees in software engineering. They plan to save the world not by structuring another finance product, but instead by solving actual customer problems, and they are duly rewarded.