The future of UK finance as dictated by AI, Brexit, VC funds and more.
London Fintech Week (LFW) brings together multinationals, disruptive start-ups, governments and investors for hackathons, workshops and more. This increasingly important conference has a focus on new technologies and innovations that aim to compete with traditional methods in the delivery of financial services. Here’s THE STAND’s round-up of the key take-aways from 2017’s event.
Blockchain and Cryptocurrency
These two would win a LFW ‘Most Discussed’ award. Opinions ranged wide, including some predicting a disappearance of regulators and central banks as a result of the likes of Bitcoin and Ethereum, although any such developments would be many years away. Blockchain in fintech goes beyond payment services (See: Blockchain Tipped to Revolutionise the Financial Sector). For example, Tallysticks uses the technology in its platform for automating and streamlining supply chains. At the other end of the scale, financial multinationals are looking at how they can implement blockchain tech. And yet, there is scepticism. Nigel Verdon, CEO of banking platform RailsBank, told delegates that the technology isn’t fast enough to do real-time transactions on a global basis, while Brendan Blumer, CEO of block.one, a blockchain facilitation company, believes that the regulatory frameworks in place around blockchain are insufficient. So, while clearly useful on some level, blockchain is not yet the ‘future of finance’, as its supporters would claim.
London Fintech Week discussions turned to a third sector in UK retail banking, alongside start-ups and established firms: internet giants Google, Apple, Facebook and Amazon
Challenger Retail Banks In the UK
Innovation is inherent in fintech, and one outstanding leading-edge company at LFW was the UK-based Starling Bank, which is mobile-only. However, the key differentiator between challenger and existing brands isn’t necessarily the core technology – most UK high-street banks have apps, too – it’s the business model. Start-ups can innovate more quickly, adapt to new methods more swiftly and work in a more agile way. However, LFW discussions frequently turned to a third operator in this space, alongside start-ups and established financial institutions: internet giants. Much of this conversation was driven by a recently published study from Peru Consulting, which says that 57% of IT leaders believe it’s likely that Google, Apple, Facebook and Amazon will join the UK retail banking sector within five years.
London Calling – For Help?
Speaking during LFW, Christina Hamilton, head of partnerships and international expansion at Western Union, said that ‘protectionism’ – as a result of Brexit and President Trump’s administration – would lead to a slowdown in fintech investment. However, many of the speakers at the event came out in support of London as a fintech city, including the Deputy Mayor for Business, Rajesh Agrawal, who said that the city has a unique ecosystem of diversity, talent and capital. Other speakers relayed their fears that talent in the fintech space will be harder to recruit for after the UK leaves the EU, and called for a strong regulation and tax regime to ensure the UK remains attractive to start-ups.
Global Growth (But Brexit)
Despite several years of growth, fintech investment shows no signs of slowing. It was announced at LFW that fintech investment worldwide in 2017 would pass £23bn, with the first six months of the year more buoyant than any other first semester in previous years. About half of this investment comes from the US, followed by China, with about 18%. Europe and the UK are fourth on the list, with 8-9% each, with India fifth. Brexit has had a detrimental effect to investment in the UK, which is slightly down on the 2015 high of £1.7bn. However, according to a report in City AM, quoting research by London & Partners and Pitchbrook, UK fintech start-ups attracted £177m of investment in the first quarter of 2017 – more than in any quarter in 2016 and the best three-month period since Q2 2015.
Love AI; Beware AI
Artificial intelligence has been used by financial industries to prevent fraud for many years, but its increasing sophistication means that forthcoming technologies could outperform intelligence agents and investigators. However, experts at LFW confirmed that AI in fintech remains in its infancy, and that likely future scenarios will combine machine learning, data science, deep learning and analytics with valued human input. Many panellists asked for classification on exactly what AI is, since any new algorithm or development in automation seems to be labelled AI. For fintech, came the answer, AI is about the ability to act on insight without the need for human intervention. The time when that insight can be provided by machines is still several years away.
Sooraj Shah covers the tech industry for Forbes, New Statesman, Computing and more.