The Westminster Business Forum took place at the Royal Society London on Wednesday 13th of January past. The topic of the forum was the future of FinTech in the UK - competition, regulation and opportunities for growth, with a focus on the future of the FinTech sector in the UK, and the opportunities it presents for the future development and delivery of financial services.
This conference brought together policymakers and regulators with a wide range of stakeholders - including banks, business lenders, payment service providers, technology providers, economic and other experts, business groups and consumer bodies.
On the agenda was assessing the next steps arising from the Government Office for Science’s recently published review into the future of FinTech, and an opportunity to consider the Financial Conduct Authority’s recently launched Project Innovate.
There was an impressive line-up of keynote speakers including Katharine Braddick, Director of Financial Services (International and EU), HM Treasury and Bob Ferguson, Head of Department, Project Innovate, Financial Conduct Authority. Giles Andrews, Chief Executive Officer and Co-Founder, Zopa.
Eileen Burbidge, Partner, Passion Capital and UK Government’s Special Envoy for FinTech; Richard Carter, Chief Executive, Nostrum Group; Tony Craddock, Director General, Emerging Payments Association; Imran Gulamhuseinwala, Partner, FinTech-Strategy, Ernst & Young; Angus McLean, Partner and Head of International FinTech Team, Simmons & Simmons; Jeff Salway, Member, Financial Services Consumer Panel; Eddy Travia, Chief Executive Officer and Co-Founder, Coinsilium; Professor Patrick Wolfe, Deputy Director of the Alan Turing Institute and many more.
I was fortunate enough to catch up with Richard Carter Chief Executive of the Nostrum Group which is a provider of automated loan management software and processing to the lending industry after he spoke at the forum for an interview.
CTUK: Hello Mr Carter and thanks for the opportunity of this interview. The forum today was entitled the future of FinTech in the UK - competition, regulation and opportunities for growth; can you give me any insight into what the future competition is looking like? What regulations the government are planning to implement into this industry and what areas they see as opportunities for growth?
Richard: We expect competition within FinTech markets to continue to grow, as the barriers to entry have come down in a sustained way - capital is cheap, technology is there with a variable cost base and generally policy is accommodating. Consumer adoption is also growing, especially amongst urban dwellers with disposable income, creating good demand for continued growth.
The challenge for FinTech will be around loyalty; the increase in the number of providers also delivers greater choice and competition for customers. Some of the discussion has been around financial services institutions providing access to data and what this could look like; this is likely to become clearer in Q1 2016.
The FCA has said that there are no short cuts for FinTech businesses and that innovation is not an excuse to cut corners. That being said, the FCA will continue to help navigate requirements. We expect regulation to continue to adapt and address the ever changing face of FinTech to ensure the interests of the consumer and industry reputation are maintained.
CTUK: Another important schedule of the forum was to assess next steps arising from the Government Office for Science's recently published review into the future of FinTech - looking at the technologies, enablers and barriers that are shaping the sector - and what more policymakers can do to provide a competitive regulatory environment, develop an effective framework of taxation and attract inward investment to the sector. What can we see develop from these areas throughout 2016 in regards to making the UK the global centre of FinTech?
Richard: There was a general consensus that 2016 will be the year of RegTech, i.e. regulatory technology and it is likely that the underlying regulatory framework will need to be revisited in the light of ongoing financial product innovation. We expect more guidance on crowdfunding and peer to peer lending as the market continues to grow globally. The U.K. market performs well under self-regulation, but we have seen examples of companies folding in Europe and Asia so we expect to see this as an area of focus.
The question was asked today about standardised regulation across Europe, which so far has not been pursued. The general view in the room was that the UK was the largest and most successful P2P market in Europe, so the UK regulations and self-imposed standards should or could drive a large proportion of a European regulation.
One other key area of support needed for all financial services markets is around education. More could and should be done to educate the population on the basics of financial management and available financial products. In turn, this will enhance the take up of FinTech products that are often designed to deliver speed and transparency for consumers.
CTUK: Also being discussed was the Financial Conduct Authority's recently launched Project Innovate, aimed at helping established businesses and start-ups to bring innovative financial products and services to the market; can you tell the latest thinking today on key technology advancements such as digital currencies, Blockchain, and mobile payments from the FCA?
Richard: The discussion today highlighted the FCA appetite to help and support FinTech businesses navigate regulations. Project Innovate was created to provide additional assistance to new and emerging technologies in the financial services market, where perhaps the translation of regulation is not clear. The FCA aims to deliver guidance for these businesses as an additional service and is recognised globally for their support of FinTech.
There was overwhelmingly good feedback from most contributors with regards to the support offered to FinTech projects by the FCA, although there was less feedback around the support offered to the Blockchain and crypto-currency markets generally which is maybe reflective of the extent to which the technology is understood.
CTUK: Mr Carter your company the Nostrum Group is described as providing digital lending technology to banks, finance companies and retail brands, enabling them to exceed their customers’ expectations, will you be using digital currencies or its underlying technology the Blockchain in the future with your business model?
Richard: We’ve has taken a keen interest in the progress being made and the potential applications of Blockchain technology. There is certainly potential for it to impact the lending market, though at the moment we’re continuing to focus our R&D efforts around improving the customer journey, security and financial inclusivity.
CTUK: Finally your company’s mission is to revolutionise lending, making it cheaper, faster and safer for your clients and their customers, what if any are the alternatives or enhancements discussed today to digital currencies and its distributed ledger that can make lending cheaper, faster and safer for your clients and customers?
Richard: Transactional areas of the lending lifecycle e.g. remittances, payments, debt sale or even collections activity could utilise the Blockchain, but there needs to be a recognition of the benefit in the mainstream lenders to enable its use.
As a technology provider Nostrum undertakes reviews of capability in different focus areas, and we believe that the emergence of the alternative credit bureau is likely to come to the fore in 2016. Historically lenders use credit bureau to review old credit performance, but what happens to applicants with no history or new to country. There is a vast amount of structured and unstructured data available that can, not replace, but supplement a traditional credit evaluation; for example, using your mobile phone number to validate your address, type of phone contract and where your account originated can be a strong risk indicator. Other advances include allowing temporary and secure access to your transaction history, via granted access to consumers’ online banking, automatically assessing financial health and income/expenditure. All these and many more structured and unstructured data points can be added to make an improved and inclusive credit decision using FinTech businesses integrated into Nostrum technology.