DP: Can you tell us more about your engagement with the WCBI Conference here in Guildhall, London and more about Innovate Finance?

NC: Innovate Finance is the independent membership association that represents the UK’s global FinTech community. Our mission is to accelerate the country’s leading position in the financial services sector by directly supporting the next generation of technology-led financial services innovators.

More than 250 global members have joined the Innovate Finance ecosystem to date, ranging from seed stage start-ups to global financial institutions and professional services firms. All benefit from Innovate Finance’s leading position as the single point of access to promote enabling policy and regulation, talent development, business opportunity and growth, and investment capital.

By bringing together the most forward-thinking participants in financial services, Innovate Finance is helping create a global financial services sector that is more sustainable, more inclusive and better for everyone.

We’re delighted to be taking part in the WCBI conference and helping to showcase what the FinTech sector is contributing to the future of banking.

5 Ways Fintech is Changing the Banking Industry

DP: What do you think will be the big tech and regulatory trends for the banking industry for 2020?  

NC: In the U.K., disruption and challenge to business models and customer propositions is happening across virtually every segment of financial services, with FinTech fast moving from a ‘disruptor’ to the future of financial services. For 2020 we some key new and continuing themes of change and transformation.

First, further disaggregation. This isn’t new – but open banking is still in its infancy, and its power yet to be unleashed. As FinTech start-ups and BigTechs offer solutions which are closely integrated into people’s lives, it’s likely that consumer relationships with their financial services provider will further proliferate, and in more mainstream areas. In 2019 we saw some significant changes of behaviour in some segments of the population which could spread more widely – including that a third of under 37s now have two or more accounts with a challenger bank. 

Second, the entry of BigTech. This has been forecast for a long time, with many expecting a ‘big bang’ entry into banking. It’s now clear that Big Tech is far more likely to enter financial services in discrete ways which fit with their existing, retail and community-based business models – as Facebook’s LIBRA project shows, and Alibaba and Tencent’s payments dominance in China demonstrates. 2020 could be the year the entry of Big Tech into financial services really bites in the UK.  

Third, differentiation. After decades of banks’ consumer offerings all looking very similar, we are starting to see real differentiation in consumer propositions, as illustrated by the marketplace approach of Starling, or the innovative solutions that Monzo has developed to deal with real-world issues such as problem gambling or budgeting.  

Fourth, the far stronger regulatory focus on data. We are seeing, for the first time, an Information Commissioner with teeth, willing to fine companies significant sums for getting data management wrong. With data competence now a core requirement for success in financial services, the stakes are rising, both for using data for competitive advantage, and handling it safely. 

Fifth, inclusion.  We’re seeing an increasing focus on ensuring that we use our FinTech tools for good, and not to leave people behind. The concern is growing globally about the risks of a cashless society, as digital payments become the norm. Employers are recognising the impact on their staff of debt and poor financial health. Regulators are increasingly focusing on the potential of financial services to include and on ensuring that, after the £50bn cost of the UK’s biggest mis-selling scandal, future harm is prevented. Expect the regulatory boundaries to increase, with a focus on ensuring that financial services do good.

Is digital currency the answer to going cashless?

DP: In your opinion what will be the role of the Central Banks in the future as we see the demise of physical cash and move towards cashless? We know that there are countries that are actively seeking to phase out cash (e.g. Sweden). Do you think that it should be the central bank’s responsibility to issue digital currency or more of the commercial bank’s side?

NC: The UK is not alone in seeing a rapid decline in the use of physical cash. Cash represented 6 in every 10 transactions a decade ago, reducing in 2018 to fewer than 3 in 10. However, there are a significant proportion of people in the UK who still depend on cash, largely because digital payments currently don’t meet their needs. In the UK, that population is around 8 million people or just under 20% of the whole of the UK population. There is no doubt that the UK is moving fast towards a lower cash society, but not to a cashless society.

In fact, although the same trends are being seen across the globe, there isn’t any major economy which is targeting a cashless future. Instead, governments and central banks across the world are worrying about the implications of less cash, with concerns ranging from leaving significant parts of the population behind, through to the economic threat of having no physical currency in the event of a cyber-attack, or simply having their money supply effectively privatised. Central Banks are taking an increasingly active role in investigating this issue, with the New Zealand central bank currently consulting on whether to introduce legislation to require merchants to accept cash, with the UK Bank of England leading work to reform the wholesale cash infrastructure to make it more sustainable, and the Swedish central bank investigating digital resilience, and how to protect the fiat currency – exploring the notion of a digital fiat currency. Central banks are increasingly aware of the issues, and most are taking the view that rather than eliminate cash, they need to retain its viability while resolving some of the existential questions about a future cashless society. This is likely to grow as an area of focus for all central banks over the coming years.

Women in Fintech

DP: I know that Innovate Finance released its Women in Fintech Powerlist. Can you tell us why this is so important to you?

NC: The Women in FinTech Powerlist shines a spotlight on the women leading the way for change in financial services. Now in its 6th year, the Powerlist continues to grow – last year, we had over 1200 nominations, our highest total since the list’s inception. We have also introduced a new “Standout 35” category, highlighting the achievements of some truly amazing women in FinTech who have delivered so much over the previous 12 months.

There is overwhelming evidence that businesses perform best if they harness the widest possible talent pool. Women represent only 29% of the staff in the Fintech sector and only 17% of senior executives. The Powerlist highlights the contribution that women already make in the sector and highlights the wide range of role models that should help inspire others.  

DP: Also Innovate Finance launched its Fintech for Schools initiative, again what were the reasons for that and why is it so important? Do we have a skills and talent gap in the UK?

NC: FinTech for Schools is an important piece of Innovate Finance’s Skills and Talent work, which aims to support a future domestic pipeline of talent as well as showcasing the various skills initiatives of its members in one, easily accessible place.

To celebrate the launch, Innovate Finance, along with a selection of its 200 FinTech members, will be hosting a school event to introduce students to financial services and technology and demystify one of the UK’s fastest growing sectors: FinTech.

The FinTech for Schools campaign is designed to encourage young people to understand the increasing importance of digital skills in the workplace, with an emphasis on ensuring the sector is appealing to girls. It has been shown that by the age of 10, children already have a strong sense of identity of what they can and can’t do. Inspiring young girls from an early age, by providing them with a wide variety of role models from diverse backgrounds and skillsets, is a vital first step in creating a new model to deliver real change in terms of diversity.

The FinTech sector continues to grow rapidly and therefore needs to appeal to a diverse workforce to fill the many exciting opportunities within FinTech companies. We do have a global skills shortage for the skills required by FinTech – and although the UK has been hugely successful at attracting global talent, with over 40% of its employees non-UK nationals, it’s clear that the UK needs to grow its own talent pool, as well as recruit globally. It is important to target secondary school students to inspire them at this crucial point in their lives, as they make decisions between universities or more specialised further education such as apprenticeships.