The CEO of The Currency Cloud takes you on a guided tour of London’s hottest tech niche
London is the world’s financial services capital and a hotspot for tech start-ups. It should come as no surprise, then, that London is leading the way in ‘FinTech’ innovation – the term used for breakthrough technology that aims to transform financial services for the better.
But is your finger on the pulse? Here are five FinTech innovations that you should really know about:
We’ve all heard of Bitcoin, right? Well Ripple aims to be a peer-to-peer global payments network. Users can send ‘ripples’ – a virtual currency – for free to others anywhere in the world, avoiding the transaction and foreign exchange fees that come with traditional money transfers.
You can see the similarities with Bitcoin so far.
Unlike Bitcoin, however, the Ripple network keeps track of every transaction and account in a unified ledger. This means payments clear very quickly. It can also alleviate some of the concerns that Bitcoin suffers from.
Crucially, the Ripple network doesn’t aim to just support ‘ripples’ but any currency: dollars, yen, euros, and, yes, even Bitcoins themselves.
It’s a very ambitious project but Ripple is backed by some big-name investors, so it might just have a chance.
Crowdfunding is a means for projects or businesses to raise money by obtaining small investments from lots of people. You may have heard of Kickstarter, one of the best-known US crowdfunding companies. Well, London is also flying the flag for some very promising crowdfunding sites.
Seedrs lets individuals invest in start ups in return for equity.
With BankToTheFuture individuals invest in businesses for rewards, interest or equity.
There are also specialist crowdfunding platforms for particular industries: Spacehive, for example, aims to fund civic projects; Gambitious helps fund video game development; while Trillion Fund aims to support renewable energy infrastructure.
3. The Open Bank Project
OK, this is pretty geeky one, but trust me, it’s important!
It’s fair to say that banks have not embraced the digital revolution like other industries have. Online banking and apps tend to leave a lot to be desired.
The Open Bank Project aims to change that by providing an ‘open source developer friendly API for banks’. So what exactly does that mean? Well, it means that the banking world is opened up to developers who can write apps. For example, banks can implement apps written by third parties which support the visually impaired, help account holders manage their money, or even greet users with their favourite music. It really has the potential to make the banking experience better for all of us.
Stripe is a red hot FinTech firm from the States that set up shop in London in August. It aims to make it easy for individuals and businesses to accept card payments online.
If you’re a developer, it can be really difficult to set up a payments system for a website or app. Stripe streamlines that process with developer-friendly code.
It charges transparent, low fees for each transaction, and unlike traditional card processors, and there are no monthly charges, minimum charges, penalties for failed payments or the like. Stripe can be used by firms of any size but should be particularly useful for UK start ups.
5. Peer-to-peer lending
Peer-to-peer lending is a way for individuals or businesses to access finance without going through a traditional financial institution.
As peer-to-peer finance companies operate online and with relatively low overheads, they tend to offer better rates to lenders and borrowers than banks. The downside is that loans are unsecured. If the peer-to-peer lender goes bust, lenders can lose their money (although it should be noted that many peer-to-peer lenders have lower default rates than banks).
London (and the UK) is leading the way when it comes to peer-to-peer lending.
Zopa opened for business back in 2005 and to date nearly £400m have been lent by individuals to other individuals.
Funding Circle works along similar lines, except individuals lend to businesses.
MarketInvoice, another prominent peer-to-peer firm, allows businesses to auction off their outstanding invoices to institutional investors.
These are just some of the FinTech innovations to keep an eye out for. Oh, and I almost forgot to mention how FinTech is changing international payments. We’ve helped businesses send, receive and convert over $3bn in payments in 2013….
Mike Laven is CEO of The Currency Cloud, a London FinTech start-up. It launched in March 2012, delivering simple, transparent and low-cost international payments solution for businesses operating in global markets. It has grown by 50% since Q2 2012, processing a record £100,000,000 worth of transactions during the month of May. As of this year, over 250,000 SMEs and consumers became customers.
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More on London FinTech:
London’s 32 hottest FinTech companies
Meet the London FinTech firm transacting £13bn
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