Home Business NewsFinance News Mike Laven: London's FinTech revolution is changing finance forever – now companies large and small must collaborate

Mike Laven: London's FinTech revolution is changing finance forever – now companies large and small must collaborate

by LLB Reporter
6th Aug 13 9:26 am

The digital finance market is expected to be worth £1bn by 2016. Who and what will drive these radical changes to money and financial services?

It’s an incredibly exciting time to be part of the London FinTech scene. For those of you who haven’t heard of “FinTech” before, it is a term referring to the group of technology companies that are developing innovations and spear-heading change for the financial services industry.  London is the central hub for FinTech companies to grow and lead the charge – 32 of the most successful companies in the FinTech 50 Europe watchlist are London-based.

Tech City is booming with innovators who want to revolutionise how we handle money. Firms such as Funding Circle, Zopa and Wonga are not just well-known in financial services circles but among the wider population now as well, with the British government recognising the successes of Funding Circle and Zopa last year.

London’s FinTech presence has grown hugely throughout 2012 and into 2013. This is reflective of the new FinTech incubators, such as Level 39 and FinTech Innovation Lab, calling for more collaboration between start-ups, tech companies and entrepreneurs to help digitise financial services. Creating locations which merge the talents and the minds of FinTech supporters moves financial services forwards, and creates a buzz around the solutions we provide.

We want to replicate the successes of the likes of Nutmeg and GoCardless, and the future is looking positive for more FinTech start-ups to do so, especially with the help of these new initiatives. 

I truly believe that in order to accelerate this movement, more partnerships need to happen. Banks are already feeling the pinch from FinTech firms, purely because we can execute concepts which their IT budgets are not equipped to accommodate.  Let’s face it; businesses are more likely to want to side-step banks if they can to avoid high fees and inefficiencies.

Nevertheless, banks should also seriously consider partnerships with FinTech start-ups to optimise their legacy platforms without heavy investment. Our technologies can become a layer in their current software infrastructure to support existing customer-facing services. This is a win-win for both sides, working with each other rather than against one another.

A great example of this collaboration is our relationship with Fidor Bank in Germany, a 100% online bank. Fidor uses our API to rapidly expand into foreign exchange without having to invest in costly infrastructure. Another example of these partnerships can be found in mobile money service-provider Monitise. Monitise underpins services for Royal Bank of Scotland and Lloyds Bank to help manage their customers’ finances on the move.

Businesses need to be more familiar with alternative finance, and the innovations coming out of the London start-up circuit.  Businesses have been short-changed by banks and nothing has been done for decades. Official figures released by the Bank of England on July 1st revealed that loans and overdrafts to SMEs shrank by £452 million in May. Because of this deficit, there is a clear market for alternative finance firms.

Let’s look at peer-to-peer lending, for example. Recent stats from the Open Data Institute show that the UK’s peer-to-peer lending market has trebled in size in just three years, with the digital finance market set to be worth £1bn in 2016. This growth has mainly been attributed to the lack of services found within our normal banks.

The new FinTech ecosystem is sending a unique message, pushing for a future which digitises money. As a unit, these firms are stronger and a more disruptive force. This means that we all need to collectively work together to make change happen.

Collaboration is key. By working with one another, and with bigger companies, FinTech start-ups can extend their services to more businesses on a global level.

I’m proud to say that London has been the birthplace of many of these ideas. I am sure we will continue to see more of the same in other cities throughout the next decade.  

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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