FinTech: Here to stay?

All the signs are that FinTech has planted itself firmly in the global financial services landscape for good. And that, like a vigorous plant, it has propagated itself successfully, creating new variants which are starting to thrive in different parts of that landscape.

FinTech has generated InsureTech which now has its own momentum and quite different character and preoccupations. And now RegTech is getting more fully under way. Common language, assumptions and associations have emerged. The Regulatory community is meeting across the world’s financial hubs – Singapore, Hong Kong, New York, London – to hear about it, talk about it and meet the start ups, entrepreneurs and financiers who are driven to advance the technology and drive down risk. Policy makers and regulators are cheering them on.

A glance at the statistics tell the story. Global FinTech funding continues to grow with $8.4Bn invested in Q2 2017 alone. 64% of global insurers had already made investments in Insuretechs by middle of 2016. RegTech, still in its infancy, attracted $678m of investment into 70 RegTechs in 2016, 38.5% CAGR on 2012.

But how ready are the financial services industries to embrace the ‘’newtech’?

Looking at the story so far suggests that culture and leadership can be tremendously important.

In consumer banking, champions invest continuously to take their bank ‘digital’ from top to bottom, BBVA being a long-standing example. Santander, which recently announced a doubling of its Innoventures fund to $200m is another.

In insurance, Aviva leads the charge with it’s InsurTech programs and Digital Garages in London and Singapore.

China’s digital payment and social media leaders, Alipay and WeChat have enjoyed steep growth through a combination of blistering innovation and a captive market of 710 million internet users enthusiastically adopting the new.

Global investment banks are responding to the digital opportunity by launching new digital wealth management offerings, Goldman Sachs being only the latest.

FinTech is, directly or indirectly, playing its part in each of these.

Whilst innovative technology, smart skills and venture capital clearly all drive FinTech forward, Regulation itself has become, unexpectedly a new spur to FinTech growth and innovation.

RegTech dives straight into the hottest technologies – Big Data Analytics, Machine Learning and Cloud Computing – to create solutions which make regulatory compliance easier for financial services organisations through better risk prediction and keeping up with regulatory change.

Payment Services Directive 2 (PSD2) shortly to land in the European Union, places the ball firmly at the feet of banks, telcos, retailers and, yes, finTechs, to radically change the relationship between consumers and their bank.

By forcing banks to share customer and transaction data, with other regulated entities (the ‘Payment Initiation Services Providers’ and ‘Account Information Payment Services Providers’) banks will lose a unique advantage. And a new industry of ‘Concerge’ financial services intermediaries centred on payment transaction instructions will surely rise.

So, is FinTech here to stay? It looks that way. Working well? It depends on your point of view, but look back a decade and it is hard not to notice the difference. Will it run out of stream? I doubt it.