What we learned at: The International Fintech Conferenceby
Fintech is hot right now. The sector even has the stuffy suits at Westminster and Whitehall taking notice. We attended the Treasury's International Fintech Conference to figure out what's happening. Here's what we learned.
Philip Hammond is building a bridge to Australia. Okay, that’s an oversimplification: it’s not a literal bridge, it’s a fintech one.
Speaking at yesterday’s International Fintech Conference, the Chancellor announced he just inked a deal with his Aussie counterpart Scott Morrison to harmonise policies in both regions with relation to fintech.
Hammond called the deal the UK’s “most ambitious” to date, “connecting the UK to a market of 24 million people and ensuring stronger commercial ties with Australia’s rapidly growing fintech sector".
Bridges to the Antipodes aside, the Chancellor further unveiled the government’s ‘fintech strategy’. A core focus is simplifying the regulatory regime that startups face.
The FCA and Bank of England will begin automating regulatory compliance. That is, the newest buzzword on the block: ‘RegTech’, or regulatory technology in normal people speak.
It is, as the name suggests, the use of new technology to facilitate the delivery of regulatory requirements.
Regulation costs the financial services sector approximately £1bn per year, with indirect costs many times that figure. It’s a crushing burden for newer, smaller firms.
So the aim is to make the rules firms need to comply with “machine executable”, creating the potential for “automated or straight-through processing of regulatory reports”.
Another tidbit from Hammond’s speech was the formation of a cryptoassets task force consisting of HMRC, the Bank of England and the FCA.
This regulatory triforce will “explore the risks of cryptoassets and the potential benefits of the underlying distributed ledger technology”. Regulation will also be looked at.
Other than policing crypto (and stripping it for parts), regulators at the conference seemed disinterested in catering for digital currencies. Asked about crypto’s role in the fintech strategy, Paul Horlock, CEO of the New Payment Systems Operator, stated that Sterling is currently the sole focus.
Middleware, or, Open banking-as-a-service
I’m sorry to deploy the “as-a-service” formulation here, but it sums up so much of what was happening at the conference.
New startups like AccountScore, TrueLayer, and Yolt are focused on making Open Banking useful. TrueLayer, for instance, has developed a compliant, simple development platform offering businesses easy access to bank APIs.
Stevie Graham of Teller is doing something similar, but as we’ve covered before he’s completely sidestepping the government’s patronage.
But the point is, a plethora of startups are racing to make banking, lending, and payments simpler for you. Many of them, probably most, will fail. It’ll be interesting to see who survives.
Out of the grey
Open Banking’s most immediate impact has been to legitimise what the market has been asking for. Account Technologies, for instance, isn’t a scrappy startup: the business has extended over £870m in credit.
But what’s changed, it’s CEO Rob Ashton told me, is that it can now easily access the transactional and credit card data it needs. Before now it was all about screen scraping, a practice that the regulators tolerated and the banks openly discouraged.
“It was a bit of a grey area,” Ashton said somewhat sheepishly. The change will now allow him to look up the food chain at businesses and their credit needs, too. And now that their data belongs to them and not the bank, they’re entitled to share their data with businesses like Account Technologies.
This is happening
Whatever your view on the prospects of Open Banking, and fintech more generally, there can be no denying that the sector is cooking. As the International Fintech Conference’s nearly 200 page event guide will attest.
Yesterday’s selection of businesses was a thin sliver of the sector as a whole. It’s early days, of course, but there are many hungry entrepreneurs tilting at windmills.