Home Business NewsTech News FinTech: what’s all the fuss about?

FinTech: what’s all the fuss about?

by LLB Editor
1st Sep 14 10:09 am

Currency Cloud’s Todd Latham on how 2014 is the year that FinTech becomes a teenager

It’s official, ‘FinTech’ has taken off as a buzzword. In 2014 ‘FinTech’ has broken out of geeky, techy start up circles and is now used by politicians and the mass media, with even the likes of the BBC getting in on the act. For those that aren’t familiar with it, FinTech is short for Financial Technology. FinTech is not brand new – the FinTech sector has been around for some years now – but it’s only recently that it has really begun to reach the mainstream consciousness.

Over the past three years or so, we’ve seen numerous accelerator programmes, incubators and labs launch to help nurture and drive firms forwards, especially in London. We’ve seen the funding rounds get bigger and bigger with Accenture reporting that global investments in FinTech reached £1.8bn last year. That’s more than triple the £545m invested globally in 2008. Furthermore, just this month, the government launched Innovate Finance, a new trade body, backed by The Chancellor of the Exchequer, who has vowed to create the best environment for budding FinTech firms with the aim of making the UK a global centre for financial innovation. So why is FinTech so hot right now?

Well most of all, it comes down to money. Although we’ve not had a big IPO in Europe yet, investment is pouring into the sector from angels, venture capitalists and private equity firms who recognise the growth potential of many FinTech firms. It’s also about money in a more fundamental sense. FinTech is trying to change the world of money. The money industry is different from any other sector because it touches everything and everyone, the economy is driven on it.

The financial industry is enormous, and there are huge opportunities for anyone with the gall to try to change it, from banks to entrepreneurs and investors to small start-ups. This is also why London itself has such a big opportunity with FinTech. Through its financial services centre, London is not just a domestic or regional hub but is a truly global city. Investors and entrepreneurs in London should be looking outwards to not just revolutionise the UK, European or Western market, but the global economy.

We believe in a world where moving money is easy. And we’re not the only ones. There is a whole wave of companies that also have global aspirations to change financial services in areas such as remittance, mobile payments, loans and business money transfers. For example, Funding Circle, launched in 2009 and Zopa in 2005, have led the way for the peer-to-peer lending market, offering lenders better rates of return and cheaper access to credit. Seedrs and Kickstarter, launched in 2009/2010, have taken the crowdfunding space by storm, offering companies big and small help to get their ideas and businesses off the ground. Other companies such as Stripe in the US are connecting economies by allowing individuals and businesses to accept payments over the internet.

Using the logic of the internet, as has been applied in other industries like music, entertainment and telecommunications, tech start-ups look at this landscape and see poor customer service, cross-subsidies and consequently room for enormous improvement. As a result, innovators in the market are changing the way we interact with money, connecting economies, redefining old verticals or even creating entirely new ones. These firms are changing the conversation around Financial Services, they are changing the way money is moving and as a result, consumers and businesses now expect more from providers. Whether its business finance or loans and funding, even the way people save money is being revolutionised.

Some traditional players in financial services might see the rise of FinTech as a threat to incumbents such as banks, big insurers or the major card schemes. However, we think the opportunities to collaborate rather than compete are much greater. This is because, more often than not, these tech firms keep their technology open to other developers through their APIs or white label solutions which can be plugged and integrated into other systems with ease. For banks and other players in the market, this means they can quickly improve on existing capabilities, rather than build completely new ones.

So, FinTech really isn’t all that new, it has just matured very very quickly. Sizeable firms are now making a real impact, investments are getting bigger, there is more collaboration and the banks and other Financial Institutions along with the government are taking notice.

If not quite an adult, then maybe 2014 is the year that FinTech becomes a teenager.

Todd Latham is VP Marketing at Currency Cloud

Leave a Commment

CLOSE AD

Sign up to our daily news alerts

[ms-form id=1]