2015 has already been an amazing year for disruptive Fintech. Although the US leads the way in terms of global investment in this sector, the UK and Ireland is the fastest growing region for FinTech investment globally, with a burgeoning number of new UK startups, supported by accelerator programmes such as the Fintech Innovation Lab and increasing government support for the industry.
Growth and investment in this sector over the last few years has been significant as the chart from the Economist illustrates, with investment in 2014 reaching 12 billion.
Why? Evolving disruptive technology combined with a growing public appetite from consumers for a new breed of banking and financial services is leading to what is being coined as the Fintech revolution.
People are fed-up with much of the traditional banking sector because of what is perceived as greediness and a lack of transparency. Fintech brings with it more customer-driven business models, greater financial inclusion and a pure digital focus.
Fintech, although a mere drop in the financial services ocean at present, represents a huge shift in the financial services sector. It is forcing a David and Goliath like confrontation, forcing banks to cut costs and improve the quality of their services.
A large proportion of the banking population now want to consume services digitally via a mobile, tablet or PC. They want data at their fingertips, and have a reduced need or indeed desire for physical contact with a bank. Research commissioned and published recently by Zapp revealed:
- 44% of consumers (21million) plan to switch accounts if their current bank was unable to offer mobile payments and had no plans to do so. Of these, a third (33%) say they would do so within a year
- 47% of consumers say they will actively choose to shop online or in-store with a retailer because it accepts mobile payments
- One in five (20%) say they would buy a house using a mobile payment within 5 years
This is a radical shift in consumer behaviour, where just a few years ago switching financial providers was rare. Mobile is no longer a ‘nice to have’, it is essential. Banks and other financial institutions need to address the digital and mobile needs of consumers, and fast, or risk losing them to the new kids on the block.
Indeed this week we have seen more activity in the development of digital only banks. TechCrunch reported that GoCardless founder Tom Blomfield was behind a new ‘full-stack’ Mobile-first Bank, Mondo. TechCrunch has revealed that Mondo ‘isn’t simply a mobile app piggybacking existing banking software or an existing bank in order to offer a better User Experience’ but instead is ‘applying for a full banking license in its own right — meaning that it will be able to generate revenue through lending out bank deposits — Mondo is busy writing its own full stack banking software from scratch.’
Other start-ups looking to go head-to-head with the banking sector include Atom bank and Starling, which promises to offer real-time intelligence, complete personalisation and ‘smart simplicity’, and who are also in the process of building their own technology platform from scratch rather than using off the shelf software.
Although digital banks of the future may pose a low level threat at the moment to the traditional banking sector, it is forcing them to fundamentally rethink image, service, customer relationships and technology.