James McSharry spent two days at FinTech Week London 2022 representing Frost & Sullivan, learning from global thought leaders and meeting people and businesses. Here are his key themes and takeaways from the event.
The transition from Open Banking to Open Finance
The UK’s positive regulatory approach looks like it will drive success domestically. Huge progress is being made in the credit rating space, aiming to drive better informed lending decisions. The expectation is a significantly increased need for third party specialist data analysis companies to work with ‘Open Data.’ The biggest challenge to the UK is the current lack of ‘digital identity’ and how customers will manage their permissions.
Blockchain & Cryptocurrencies
The three most important growth factors for the industry will be regulation, UIs and education (industry and consumer). London is seen as one of the most influential global cryptocurrency hubs. Regulation of stablecoins is the presumed sensible first step for the FCA, with an ongoing conversation around the environmental impact of crypto.
Digital Banking & Inclusive Capital
A huge challenge is the risk of financial exclusion – 25% of UK does not currently have access to the tools required for services.
ESG (Environmental, Social, and Governance) is a major driving force shaping the industry:
- Employees are more purpose driven rather than financially driven than ever before.
- National ESG ratings are influencing the levels of investment into a country.
- The concept of ‘banking for good’ is becoming more centre stage.
Another challenge for inclusive capital is going to be how we get the measurement right. ESG ratings are a positive start but that is all they are – a start.
Big Tech & Big Banks: ‘Coopetition’
There is a huge need for big banks to partner effectively with big tech – this is happening much more effectively in emerging economies than the developed world. We can see big tech ‘nibbling away’ at the retail transactional, credit, and lending aspects of banking but they do not want to be banks. There are different trajectories within retail banking vs corporate banking in terms of the share of the pie for tech vs banks. The ability to collaborate effectively with big tech is what allows banks to respond to emerging customer requirements quicky, offering a huge competitive advantage.
Future of Payments
We are transitioning to an mPOS payment landscape in the UK – with over half of British merchants using the technology today. Businesses are transitioning to proprietary mobile apps to house ordering and payments in the same place. Payments are no longer limited to cash or card – mobile payments are ubiquitous (particularly in the UK) and we are now starting to see the development of nascent DNA payment technologies, microchip payments technologies, and so on.
- There are macro trends that you could be using to build or develop your corporate value proposition.
- Businesses need plans to compete with firms building out their competitive advantage using blockchain technologies.
- Developing business intelligence teams in-house, or building partnerships with third parties, will be fundamental for understanding and leveraging the new wave of ‘Open Finance’ data that is becoming available.
- The growing trend of purpose-driven capital allocation will affect fundraising strategies.
- The future payment landscape will affect your business’s attractiveness to consumers.
- Having a corporate strategy, whichever industry your business is in, that addresses FinTech themes permeating outwards, will be fundamental for protecting market share and driving future growth. This is how Frost & Sullivan can help.
If you want to have a conversation with James about any of the themes above covered at Fintech Week London 2022, you can reach out to him here.