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The great financial earthquake and fintech evolution

Updated: Feb 11

Ten years on since the last great financial earthquake and the collapse of Lehman Brothers, last week alone saw masses of articles in the press reflecting on the past decade. While there is nothing wrong with looking back, shouldn’t the focus be on going forward, particularly when JP Morgan makes a rather timely prediction that the next financial crisis is just around the corner and can happen as soon as 2020. The good news is that, apparently, it is not going to be as bad as the last one, so no need to be anxious…

According to Bloomberg the financial system remains too fragile, although in fairness the system is probably safer in many ways today than it was in the run up to the last crisis, or one would hope so. There are stronger capital requirements and greater transparency among a myriad of measures that have been put in place, be it regulatory or corporate. The landscape has certainly changed and is continuing to change.

Fintech undoubtedly is one of the major contributors of that change, transforming the way the banks operate today. The recent visit to Rise London a.k.a #homeoffintech – an innovation centre launched by Barclays showed a great example of how banks are not only embracing but also encouraging innovation.

The initiative is an evidence of a shift that has occurred in the relationship between #fintech #startups and #banks. While only a short while ago it was startups against banks, now this has transformed into a collaboration piece allowing both sides to rip the benefits. The likes of Revolut, Monzo and Glint are few of the names to prove this.

According to the panel at the Fintech Trends 2018 event hosted at Rise London last week, the onboarding process had become faster, mainly because the dialogue has changed from technology to consumer level. Where 18 months ago startups would use the fancy tech jargon to gain attention of the banks, today the conversation and the proposition is heavily focused on consumer. At the end of the day, it could be the most innovative product but if it does not solve a problem and has no user logic then it is not going to get very far.

While this all sounds great from a consumer point of view, wouldn’t it be equally interesting to see how fintechs are helping the #financial institutions to build more robust systems to be able to calculate risks more accurately and quickly – a system that would enable a financial institution to be more resilient and prepared for any future crises.

The technology advancements have also changed the way trading and investment industry works today. Hedge funds and asset/#wealth managers who were traditionally very apprehensive towards technology seem to have changed their minds and are gradually embracing the advancements. These businesses usually buy large data sets and to have an in-house analyst to sit and sift through it is simply not feasible, so if anything, it is the realisation of the level of efficiency that can be achieved that ticks the box.

Fintech "enabled" social impact was one of the other interesting areas touched on at the event. The positive change and “green finance” element of fintech is certainly a growing area, particularly with the ever more connected millennials and Gen Z being increasingly inquisitive of environmental and social impact (more on impact investing in our next blog). Many businesses have various initiatives to this respect, and Lemonade is one great example of a tech driven insurance business with a great social impact success story. Its Giveback initiative allows policyholders to choose a charity of their choice. The company charges a flat fee for the policy and uses the rest of the money to pay claims and give what is left to the charities chosen by policyholders.

All in all it has been a good year for fintech and it is great to see that London (alongside Singapore) is one of the best cities in the world for fintech for doing business, financial competitiveness, innovation and favourable regulatory environment, according to a ranking by Deloitte. Whether this will still be the case post Brexit is another question, let's see...

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