There are reasons to be optimistic about FinTech's prospects in a changing worldby Lucy Neville-Rolfe / September 14, 2017 / Leave a comment
Heraclitus was right. The ancient Greek philosopher famously said that everything changes, which was a profound observation then, since constant change was much less obvious when he said it than it is now.
Almost everywhere you look, the major, current politico-economic issue under discussion is Brexit. But in this article I also want to discuss another profound change, which in the long run will affect all of us every bit as much.
I refer to the use of computing power to manipulate data in new ways, thereby transforming traditional methods of doing things, such as we see with mobile payments, artificial intelligence and driverless vehicles. As a former Business, Intellectual Property and Treasury minister, I want to concentrate on one particular part of this new world, FinTech—short for “financial technology”—which is the application of the new techniques to what, traditionally, we would regard as banking.
So far the UK has adapted well to these new possibilities. Indeed, the UK has been independently ranked by EY and Deloitte as the best place in the world to be a FinTech firm. The sector already generates some £7b of revenue annually and employs over 60,000 people. The Financial Conduct Authority, not always popular with business, was praised for their simple and pro-innovation approach to FinTech regulation. It was the first authority to introduce a regulatory sandbox which allows businesses to test innovative products, services and business models.
The UK was at the forefront of previous industrial revolutions, such as steam power, electricity and computing. They were all strong drivers of growth in new industries and left problems in their wake for the industries they replaced: turnpikes, sailing ships, gas lighting companies and so on.
Digital is exactly the same and FinTech is creating its own winners. Take TransferWise which makes international money transfer cheap and easy. Or LendInvest which is concerned with property lending and investment. Both are transforming the experience of traditional things—money transfer and home loans—into something quicker, cheaper and easier. The losers are existing players, established banks and lenders, who have a lot of sunk costs and capital requirements and cannot adapt quickly.
The winners are the firms, their entrepreneurs, their employees and the professional services that support FinTech and, above all, the consumer:…