London is one of the world’s hubs for fintech. The sector that has grown up and around financial services and it is a hugely thriving as companies from hr very biggest banks and financial institutions through to new start-ups eye up the disruptive possibilities of employing tech to transform processes and services. Here we take a look at five examples from the many that populate the City of London and beyond. Each of these companies – Zopa, TransferWise, Finding Circle, World Remit and SETL.io - is playing its part in the transformation of the financial services landscape. We assess what makes these businesses different and look at which element of technology they are utilising in their efforts.
Zopa – P2P gets artificial
Peer-to-peer is nothing new to the gambling industry given the sector’s history of betting exchanges dating all the way back to the turn of the Millennium. In a sense, then, financial services have been some slow to take up the possibilities of matching consumers on a tech-enabled platform. Still, Zopa certainly seems to have finally built up some momentum of late; having launched back in 2005, the company said in late January that it has become the first peer-to-peer lender in the UK to break the £2bn mark in terms of cash lent. As a start-up, Zopa relied upon generic models to assess lending risks but in the intervening years it has increasingly employed its own proprietary tech and now runs models according to its own standalone Python package which it calls Predictor. A recent blog on the Zopa website (http://blog.zopa.com/2016/10/21/the-birth-of-predictor/) makes it clear that artificial intelligence and machine learnings making further strides down to road. The company says it is fascinated by the recent revolution in deep learning and is currently evaluating its usefulness in modelling time-series data.
TransferWise – the remittance revolution
If there is one thread that links all of the fintech examples we have chosen here, the notion that technology can be employed to cut transaction costs is perhaps one of the most central. This is particularly the case with TransferWise, the remittance company founded by Skype’s first ever employee Taavet Hinrikus. The firm has taken up the challenge to make financial transactions cheaper in the area of international money transfers and in the process has found itself lauded as one of the UK’s few tech unicorns, worth over $1bn. Hinrikus is a true believer in the power of technology to speed up financial processes and at the same time save consumers money. In the UK, TransferWise’s drive to succeed has been helped along the way by the Payment Services Regulator. Last year, the company was integrated into the UK’s Faster Payment Service (FPS) as a technical partner to Raphael’s Bank. In contrast from the frosty reception often encountered by startups in the gambling sector in the UK when they first encounter the Gambling Commission, the welcome given TransferWise and its disruptive offering provides some food for thought. Nick Caplan, the independent chairman of Faster Payments Scheme Limited said of TransferWise’s joining the system: “This is a concrete example of how we are working collaboratively to meet the Faster Payments Scheme’s strategic objective of becoming an increasingly effective innovation magnet for the UK and our economy.”
Funding Circle – SMEs in the money
Close to overtaking market leader Zopa in P2P lending, Funding Circle is a slightly different animal concentrating as it does on lending to small businesses compared with Zopa’s consumer lending focus. Since launch in 2010, Funding Circle has lent a total of £1.83bn to small business customers, no doubt pleasing its investors, including Blackrock, Temasek and Index Venture which have together stumped up around £250m. The company has expanded in line with its total lending figure but at heart it has a tech platform that relies upon more timely and accurate transaction data, utilising big data insights and leveraging the greater use of cloud accounting to gain a view on ‘live’ business performance.
SETL.io – blockchain is coming
One of the most exciting areas of development in terms of financial services technology is blockchain. As with other areas, the technology holds out the promise of utterly transforming areas of financial services far beyond the confines of the debate around crypto-currencies. One company already making strides in the utilisation of blockchain – and attracting some very serious investment – is SETL.io. The company was launched in July 2015 and provides a multi-asset, multi-currency institutional payment and settlements infrastructure based on blockchain technology. The OpenCSD system enables market participants to move cash and assets directly between each other, facilitating the immediate and final settlement of market transactions. It maintains a permissioned distributed ledger of ownership and transaction records, simplifying the process of matching, settlement, custody, registration and transaction reporting. The most recent news on the company shows the pace at which blockchain in financial services is moving: in November, the company announced it was working with Deloitte and Metro Bank on a number of initiatives in the UK including a test with a blockchain-based contactless card for digital payments which saw 100-plus consumers use the cards to make purchases from retailers using contactless terminals and with both the consumer and the bank seeing balances updated in real time.
World Remit – tomorrow the world
As mentioned above with TransferWise, the remittance world is one area where the cost savings to be gained by utilising technology is truly making a mark and World Remit is another firm based in London and starting to make its mark. In particular, the company is making up the most of the opportunities offered up by utilising mobile technology in the developing world – a theme that will be familiar to anyone that has attended gambling conferences talking about the opportunities in Africa and Latin America in particular. Founded by Somali Ismail Ahmed, World Remit has some serious backers, including £33m Series A investment from Accel Partners, an £82m Series B round of funding led by Technology Crossover Ventures (TCV), an early investor in Facebook, Spotify, Netflix and Slack and in 2016, another £37m of working capital facilities from TriplePoint Venture Growth and Silicon Valley Bank. There is also a gambling connection; the president of the company is one Andy Lee, formerly the managing director of online at William Hill.