Can the UK Become FinTech Global Central?

Banks are transforming at an unprecedented pace. Smartphone apps, online services – even offline services teaching babyboomers to use the Internet – they’re taking new technology on board.

On the surface, the façade seems to be keeping pace. But the thinking behind the way banks should work is turning slower than a fully-laden oil tanker against the tide.

In the week when Innovate Finance sets out the UK FinTech 2020 manifesto, other commentators are asking whether traditional banking truly has the power to change.

It’s not only the services they provide, given legacy infrastructure, software and people raising concern. But also regulation that governs the traditional banking sector is in question.

Adapting rules in a quick enough fashion may be the additional undercurrent that prevents a total turnaround. Or if not total, one that’s facing enough in the right direction to see the wake of the FinTech startups disappearing into the sunset.

But it’s not just Britain

A month ago, John Cryan succeeded Anshu Jain as Chief Executive of Deutsche Bank. Less than a month into the role, he described the bank’s performance as “nowhere near good enough”. This, despite the bank’s:

  • asset and wealth management returning €422m pre-tax profit this quarter;
  • investment banking increasing its pre-tax profits by 45%;
  • retail banking up 27%;
  • global banking up 28%.

True, the gloss was taken off the results by a €1.2bn litigation charge. But Cryan warned that the bank will not put itself in a position to suffer such hits again, if it can help it.

In order to achieve the €3.5bn reduction in the bank’s running costs, discipline will be at the heart of progress. The plan to achieve this reduction was laid out as long ago as April, with the retail division Postbank sidelined for jetisoning, along with assets held in the bank’s investment arm.

To compliment these moves, Cryan wants a more efficient balance sheet. This the bank will deliver by choosing whom, how and where to do business.

Meanwhile in America

To add fuel to the fire, an in-depth article over on The Financial Brand asks:

Is the Banking Industry Living on Borrowed Time?

Citing Adaptive Labs feature/research for the new book, Bye, bye banks?, it questions whether traditional banks can compete with FinTech startups, disrupting finance through digital innovation as they are.

There’s a mountain of research gone into the book. For those who’d like to see the topic laid bare but not necessarily get into bed with it, there’s a 5-minute TL;DR version, too.

Summary

The UK can become the world’s FinTech hub, the title currently held by Silicon Valley. The equality and adaptability of regulation will determine whether it’s start-ups who rule the roost or the big banks have a chance of competing.

As Bill Gates once alluded,

We need banking; we just don’t need banks.

He might just be right.

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