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  1. 1. 2 · ukfintech.com AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET CHALLENGES The current state of the fintech sector L ast year Innovate fi- nance visited the US with the Mayor of Lon- don, to foster greater trade and investment connections between New York and London - the world’s biggest and most impor- tant financial epicentres. Innovate Financehelpedtoselectadelegation of leading fintech firms,whichwere ideally placed to expand into US markets,to connect with American investors and large banking organ- isations, and to foster an introduc- tion to an ecosystem of influencers, within the US.This was also an im- portantopportunityforInnovateFi- nance to connectwith a similar eco- system of key stakeholders,within theglobalfintechmarketplace. Branching out There are many reasons why the global fintech movement has emerged from the UK - our geo- graphical location provides unri- valled international connectivity; our leading academic talent pool is world-class; we have prime inves- tors and impressive business facil- ities; we promote global thought- leadership on emerging digital so- lutions;andwecanprovideasimple regulatorysystemthatbalancesrisk andinnovation.Butourjobisnotdo- ne.Fintech firms both big and small, face major innovation and growth challenges.We need to increase our exposure to great fintech opportu- nities and encourage smart, active investors to enter the fintech sec- tor within the UK. It’s imperative that we continue to foster leader- shipskillsandtalent,andweneedto ensure that those skills are retained. We need to continue examining the conditions necessary to create greater competition,to open up the fintech sector to new players, and ensure our SMEs have good access to the capital needed to grow their business.It is vital that we continue to develop and connect the fintech sector in the UK,including acceler- ators, investors, academic institu- tions,code clubs,policy makers,big techandbeautifuldesign.Thepower of international corporations, need tobeexploited. Global investment Last year alone over £500 million waspouredintofintechfirmsbyway of investment.So being open to for- eign influencers is essential.Indeed, American investors drove signifi- cant growth in the UK fintech sec- tor - recent heroic funding rounds include TransferWise (£58million); Nutmeg (£32million); Funding Cir- cle(£40million).Morerecentlyhow- ever,Digital Shadows our local suc- cess,grew from two people on Lev- el39,toover30,andisnowlaunching in the US via Passion Capital after having raised £5.2million in their latestfundinground. This raises an interesting question about the US v UK financial services sector. The recent ‘Bootstrap to IPO’ event,hosted byInnovate Finance,ex- plored the different sources of financ- ing, from angel investors, to venture capitalistsandalternativeinvestment. It also highlighted the cultural differ- ence – the attitude towards risk and theconfidencetodominateinaglobal marketplace.Itwassaidthatthatthere is no lack of entrepreneurial talent or technological innovation when we comparethetwomarketplaces.Butthe industry -- entrepreneurs, investors andconsumersalike--hassomewayto go.We need to champion the huge so- cialandeconomicimpactofthesector. Weneedtogetbehindthesenewhigh growth fintech companies, who are bringing greater choice,diversity and resiliencetothefinancialservicessec- tor.This isn’t just the responsibility of the entrepreneur,or the investor.This is the responsibility of all us, as con- sumers,to ask for and make sure this changehappens. Thesearesomeoftheconcernswe hope to address at our Global Sum- mit on March 9th at the Guildhall. This historic gathering will explore the impact of fintech on society and theeconomy,andtogetherwithover 700delegateswewilldiscusshowwe can overcome challenges to make UK fintech bigger and better - and, crucially, help build a global sus- tainable banking sector that means somethingforeveryone. AstheUK’sindependentvoiceofthefintechsector,InnovateFinanceisbearing witnesstothetransformativeinnovationsthatarereformingthefinancial servicessector. P4-5: The alternative finance expert panel EDITOR’S PICK FINTECH 2ND EDITION, FEBRUARY 2015 Managing Director: Carl Soderblom Content and Production Manager: Cary Hastings Designer: Vratislav Pecka Business Developer: Alex Williams Responsible for this issue Project Manager: James Grant Phone: +44 (0) 7789 936829 E-mail: james.grant@mediaplanet.com Mediaplanet contact information: Phone: +44 (0) 203 642 0737 E-mail: info.uk@mediaplanet.com FIND EXCLUSIVE ONLINE CONTENT AT: MEDIAPLANET UK #FINTECH ukfintech.com Claire Cockerton CEO/ FOUNDING DIRECTOR INNOVATE FINANCE “Last year alone over £500 million was poured into fintech firms by way of investment”
  2. 2. The token you can’t forget www.behaviosec.com | contact@behaviosec.com | 207 Old street • EC1V 9NR • London | +44 7487657409 We believe that the consumer should be part of the security solution, rather than the problem. Our behavioural biometric security solution allows for continuous user authentication, based on learned patterns of past behaviour. Strong security need not come at the expense of user experience. » Robust proven technology with more than 10 million active users 2014. » Scalable with more than 500 million mobile transactions processed. » High performance with more than 20 banks using the service. ELITE PERFORMANCE REPUTATIONAL EXCELLENCE Sybenetix is the leading Enterprise Behavioural institutions to transform standards of investment performance and conduct management. Leading hedge funds, asset managers and banks use our single System to improve investment decision-making skill and manage conduct and risk To learn more visit Sybenetix.com Global money transfers for smart businesses Cut the costs of your international payments today www.moneymover.com Our online foreign currency exchange and global payments platform is a secure and low cost way for individuals and businesses to make international payments. Transparency is our core value so we’re totally upfront with our fees and display our exchange rates clearly - we charge a single fee per payment and ensure clients are always aware of their payment’s progress in the transaction lifecycle. With our simple and intuitive application you can review your payment history and set up new recipients directly from your dashboard. You can get quotes and make payments quickly because we’ve designed our platform to fit into your workflow. We believe we can save you thousands of pounds in fees and commission, so if you want to cut the cost of your international payments today then visit www.moneymover.com
  3. 3. 4 · ukfintech.com AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET PANEL OF EXPERTS Investing in businesses canbeenjoyable,andbacking“thenext bigthing”hasthepotentialtoproducelife-changingreturns. How- ever,it’s important to create a diverse portfoliowhen looking at eq- uitycrowdfunding.Investinginsmallandearly-stagebusinessesis highrisk,andthemajoritywilllikelyfail.Thosethatdosucceedwill potentially deliver spectacular returns—which can far more than makeupforthelosses—butthatonlyhelpsifyou’veinvestedinthe winners.This is why diversification is crucial.Invest across a large numberofbusinessestoensurethatyourportfolioasawholehasthe bestprospectsforproducingmarket-beatingreturns. Traditionally, banksdon’tlendtoyoungbusinesseswithlittlecol- lateral,venture capital requires traction, and angel investment is scattered and inefficient.Without wealthy friends or family able to invest large amounts of high-risk capital,entrepreneurs have had fewoptions.Equitycrowdfundingchangesthat.Bymakingitsimple for anyone to invest online,ambitious businesses can access capital fromawiderrangeofinvestorsthaneverbefore.Andtheycanreceive morethanjustinvestment,like:mentorshipandadvicefromabroad investor base; long-term engagement with existing and potential customers;andinternationalexposureandproductvalidation. 1 Jeff Lynn CEO AND CO-FOUNDER, SEEDRS Investing as an individual in alternative finance (P2P) is a bit like ISA investments in shares.Firstly,you need a provider that gives you access to the stock market. Secondly,you need to de- cideonthecompaniesyouwishtoinvestin.TheUKhasnowcirca 50 alternative finance providers,mostly platforms,that are very transparent about the way they operate and how they help you managetheriskofinvestinginloansdirectly.So,thereisnoshort- age of options,but I’d recommend to diversify your investments acrossP2P,cashandshares. Alternative finance providers are filling a gap created by tradi- tional banks who (had to) reduced lending to “high risk business- es”.Theyaddressanunderservedmarket,andatthesametimeuti- lisebettertechnologytoassesscreditriskbasedontheoftenmin- imal track record and security on offer from SMEs (such as build- ings,machinery or equipment).With approx.£2bn lend last year, alternativefinancewillcontinuetoimprovetheUKfundingland- scapesobusinesseshaveamorehealthyrangeoffundingchoices, asisthecaseintheUSforexample. Rainer Plentl CEO, FINPOINT From my experience, both from working in compliance and beinganinvestorinalternatives,Ibelievetherearetworulesyou should always follow when looking to invest,especially in alter- native investments.Number 1,do your due diligence on the firm andontheinvestment.Neverfeelunsureaboutaskingquestions, it is your money and your risk.Number 2 is don’t invest in what you don’t understand. The people that don’t understand what they are investing in or how it works are the people that run the risk of losing their investment bymaking thewrong decisions.If you can invest feeling safe inyour understanding then go for it,if youcan’tthendon’t. Alternative investments allow companies to raise capital in a climate where banks aren’t lending,meaning businesses with no track record and little funds can get going more easily(just look at crowdfunding).Butitshouldbenotedthedegreeofriskinessthese newinvestmentsrepresentcomparedtootherassetclasses.Firms that are arranging finance for new businesses in this way should always be open about the inherent risks and only target those in- vestorswhohavetheabilitytounderstandit. James Dingwall DIRECTOR, THISTLE INITIATIVES GROUP 1 What would be the first advice you would offer to individuals looking to become alternative finance investors? 2 How do you see alternative finance changing the funding landscape for new businesses? Consider the security provided. Alternativefinancecoversa wide range of investment opportunities and,as with any invest- ment,balancing the security and the reward to suit your portfo- lio is essential.Equity crowdfunding provides the least security and the highest potential returns,though arguably some losses are inevitable with funding focused on start-ups and early stage businesses.Converselymarketplacelendinghaslowdefaultrates butreturnsstartfromamoremodest4percent. The big changehas alreadytaken placewith disintermediation havingopenedupmultiplesourcesoffunding.Asthesectorgrows itwillbeinterestingtoseeifthe‘hiddenexperts’withinthecrowd are motivated to support young business in other ways; perhaps providing sector expertise,business acumen or even introducing business opportunities.Platforms will need to encourage and fos- tercommunication. Angus Dent CEO, ARCHOVER Business Loans | Factoring | Invoice Discounting Money for the real economy. www.finpoint.co.uk Asset Based Lending | Commercial Mortgages Trade Finance | Alternative Finance Platforms
  4. 4. ukfintech.com · 5AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET ThistleInitiativesFinancial compliance experts As the market matures and investors start to anticipate successful exits,investors are assigning greater importance to investor protection.We believe that all investors,however small their investment,should be able to realise maximum returns on their investments.We’ve always prided ourselves on leading the way on this,which is why we operate a nomi- nee structure for each deal,include professional protections and rights in all investment agreements, and ensure that each investee company keeps their investors up-to-date. It’s nolongeraboutmakingintroductionsbutsharinginsuccess. 3 What has been the biggest development in the alternative finance space in the last year? For me the single biggest difference is the fact that the UK Government is proactive about bringing alternative finance (P2P) into the ISA fold.Research by RateSetter found nearlya third of people (31 per cent)would put their own sav- ings into a P2P platform, if they could do so through a new ISA.The outcome of the ISA consultation may translate into making P2P investments ISA-eligible as early as April. Irre- spectively,this will be beneficial for the sector and for inves- tors,providing lower associated risk than stocks but higher returnsthancash. The world of alternative investment, a vast market al- ready,has seen great growth in the areas of Crowdfunding and Peer to Peer Lending.Our firm has helped numerous clients in these two spaces and with them being disruptive industries the accompanying regulations are also developing and chang- ing.Thepastyearhasseenanexplosionwithinthemarket,with thesetwonewproductsleadingtheway.Ithasbeenaveryinter- estingyearwith‘older’regulationsbeingshakenupthroughthe foundation of Crowdfunding.The greatest change is not these twoplatformsbutratherthewayweinteractwithinvesting,reg- ulationandtheimplementationoftheoneintotheother. Our vision is to build a platform that allows businesses with international aspirations to raise capital from investors any- where;tobeaglobalplatform.Businessfinancehasbeenrather slow to adapt to globalisation,and outdated regulations in cer- tainjurisdictionshavehamperedtherateofglobalisation,toan extent.However,we have a bright team,andwe have beenvery successfulatdevelopingamodelthatisincreasinglyglobal.After launchingintheUKin2012,weopenedacrossEuropein2013.In 2014weacquiredaUSbusinessandwillbeopeningtoaccredited USinvestorsin2015. 4 Is alternative finance a truly global phenomenon and to what degree are alternative finance providers bound to their national/ local areas? 5 In the coming years, do you see forms of alternative finance and investment becoming more diverse? The industry has matured, some of our recent innova- tionsinclude: ●Funds,whichmakeitpossibleforinvestorstospreadasin- gle investment across multiple businesses chosen by an ac- celeratororthroughacompetition. ● Convertible equity,which offers a way to raise and invest moneynow,while deferring the need to place avalue on the companyuntilthefuture. ●Fundingpublicly-tradedcompaniesthroughequitycrowd- funding,whichwebelievewillbecomeincreasinglypopular. Absolutely!Alternativefinanceisatrulyglobalphenomenon that has caught the attention of many stakeholders: business borrowers who were let down by traditional banks,individual investors wanting a better return for their cash,venture capi- talfirms,financialservicesregulators,etc. The UK is probably the best place right now to be running a FinTech business,thanks to the tremendous support from or- ganisations such as Innovate Finance and the attention we have from UK authorities, wishing to support this thriving sectorinternationally. I’d say that the UK alreadyhas averydiverse alternative finance sector, which enables P2P-lending to individuals as well as to businesses.From working with the alternative lendersontheFinpoint-panel,wecanseesomearethinking of adding new,complementary finance options to their ex- isting product range.On the other hand,we have tradition- al banks on our panel,interested to wanting to get involved with alternative finance,either by investing in a business, by co-lending or through referral partnerships. So, watch thisspace! The new question is how we take our investments global. Global accesswill provide a greater platform of clients and op- portunities,but with this has come age old regulatory ques- tions of who is responsible, how to assess the risk and how muchinfluencetheycanhaveintheglobalcircuit.Wehavere- viewed the international market place and how we can make offerings to those based overseas,and have found a range of differentrequirements.Certaincountrieswillallowthesepro- vidersaccesstopotentialinvestors,withlimitedrequirements and oversight from the home regulatory bodies but certain streamsareprovingmoredifficult. This has already started, with the diversification of what is being offered and the range of platforms that are be- ingbuiltinwhichweexploretheseopportunities.Themarket anditsprovidersisdevelopingeveryday.IntheUKwearesee- ing the development,with platforms such as Crowdfunding merging with P2P platforms.The diversity is only limited by our abilityto implement the changes into the structures and howweimplementtherequiredoversight.Allnewentrantsto thefinancialmarketsneedtoprovethattheyunderstandthe regulations.Although this too can also add to growth as pro- vidersandinvestorslookforwaystodevelopwithintherules. Growth and diversification; the phenomenal growth of the sector and the increase in institutional investment has led to alternative finance lending appearing in the UK Gov- ernment quarterly figures for the first time.What really ex- cites us is the diversification of offerings from innovative platformschallengingpre-existingfinancemodels. From Moscow to Brazil and a thousand platforms in-be- tween crowdfunding is already truly global.However,it is not yet globalized,as legislation is still playing catch-up in many markets which means that platforms are often contained within their jurisdiction.As legislation develops it is inevita- ble that platforms will expand their operations and become moremultinational. Yes. Both investor demand and the desire to be noticed by fundraiserswillseemanynew‘splinter’platformsdevelop- ingawayfrombehemothcatchallcrowdsitesthatwerefirst to market.Already specialist investment sites in technolo- gy,pharmaandeducationappealingtospecialistcrowdsare uponusandnewlendingmodelssuitedtospecificbusiness- esarecroppingupconstantly.
  5. 5. 6 · ukfintech.com AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET INSPIRATION Bringing fintech innovation to the insurance market 2015hasbeendeemedtheyearoftechnologytransformationintheinsurance sector.Thespeedofchangeinanindustrylongcharacterisedasaslowadaptorof technologyisgatheringpace. 0203 021 8100 Earn from 5.5 to 7.25% p.a.* with ArchOver, the world’s first secured and insured marketplace lender *Interest subject to tax, for full product information and terms and conditions please refer to www.archover.com ArchOver is authorised and regulated by the Financial Conduct Authority under Consumer Credit Licence 663239/1 ArchOver is not covered by the Financial Services Compensation Scheme 5.5-7.25%* INTEREST EARN FROM www.archover.com LISA MOYLE info.uk@mediaplanet.com T he fintech story in recent years has concentrated on consumer facing ser- vices, but the same dy- namics that have been driving this change - le- veraging new technolo- gies and disruptive business models to lower costs and barriers to entry - are enablingdevelopmentofnewproducts and services for previously underser- ved insurance markets. According to Swiss Re,the UK popu- lation is significantly underinsured, with a total protection gap of £2.3 tril- lion.Only 1 in 3 households with inco- mes below £20,000 have life insuran- ce, one third of households have no contents insurance,rendering vulne- rable households exposed. The insurance sector shares chal- lenges with banking in the provision of affordable, appropriate products. Incumbents are hindered byoutdated, inflexible legacy systems and pricing mechanisms too complex to adapt to the underinsured.The typical product offering is too expensive for low-inco- me groups. The pricing of risk, using standard models,cannot assess these market segments. Technology is creating the poten- tial for insurance companies to ser- ve low income consumers. Advances in a range of technologies; data ana- lytics, biometric identification, psy- chometric testing and the rise of mo- bile are now being applied to the insu- rance sector, broadening the range of consumers to whom it is profitable to supply insurance products and enab- ling the creation of new,personalised insurance products. At the heart of insurance is pricing risk. A number of online platforms that use big data analysis to calculate risk are broadening the pool of people who can be assessed and provided with suitable products.Using both av- ailable and unorthodox sources of da- ta,platforms can analyse pools of data that allow for more accurate,targeted pricing of risk. Driving change in finance The data generated by telematics al- lows for a finer assessment of risk and reduces insurance premiums. Discounts in life or health insuran- ce can be offered to those who are ab- le to demonstrate healthy lifestyles using wearables, rewarding and in- centivising low risk behaviour. The growth of fintech will continue to drive change across financial servi- ces,and the insurance sector will not be immune from disruption.The need to meet changing customer demand will force the challenges of legacy systems to be addressed. Potenti- al competitors, spurred by the evo- lution of technology, may emerge. A Forrester Research report Trends 2014: European Digital Insurance, noted that European companies are falling behind and startups and com- panies in the manufacturing, utility and telecoms markets could take bu- siness from traditional insurers. With that disruption comes the opportunity to meet the additional challenges of incorporating millions of would be clients into the financial system and provide them with insu- rance products that have the potenti- al to protect them from the impact of life changing shocks. The need to meetchanging customer demand will force the challenges of legacy systems to be addressed Lisa Moyle, HEAD OF FINANCIAL SERVICES & PAYMENTS PROGRAMMES AT TECHUK WHAT’S THE TRUE COST OF DOWNTIMETO YOUR BUSINESS? 60 seconds of data center downtime can cost an organization up to £5,000. If your systems are down for 60 minutes, the cost to your business quickly becomes astronomical. Put your budgets to better use and invest in your data center staff. Give them the skills they need to guarantee uptime in your organization, saving you thousands of pounds. Increase uptime Improve performance Retain staff DCProfessional Development is a leading provider of accredited training solutions to the global data center industry. Find out more at www.dc-professional.com
  6. 6. ukfintech.com · 7AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET INNOVATION IN FINANCE The innovators in fintech have made drastic changes to finance services. PHOTO: THINKSTOCK Written by Julie Lake and Nicky Cotter, Founders, The FinTech50 TWO FREE TICKETS plus further discounts for #IFGS2015 SHOWCASE your innovation at #IFGS2015 TWO DROP-IN OFFICE HOUR SESSIONS at Level39 COMPLIMENTARY LUNCH and introductions to the Innovate Finance team at ClubLounge39, Level39’s private members’ club * Please contact: members@innovatefinance.com GLOBAL SUMMIT 2015 BUILDING A BETTER FUTURE FOR FINANCE THROUGH FINTECH @INNFIN Innovate Finance is an independent membership-based industry organisation that aims to advance the UK’s standing as a leader in financial technology (fintech) innovation. BUY YOUR TICKETS NOW BECOME A MEMBER BY MARCH 2015 TO RECEIVE. . . JOIN US AT #IFGS2015 MONDAY 9TH MARCH 2015 - 9.00AM to 5.00PM GUILDHALL - LONDON, UNITED KINGDOM NEWS How is fintech innovation benefiting payment services? Payments is a hot space in European FinTech. And it’s getting hotter. Payment innovators account for just under 25 per cent of this year’s Fin- Tech50 and VC investment in Euro- pean payments and transaction pro- cessing companies reached an all- timehighin2014. In fact, such is the abundance of innovation,it’sbecomingsomething of a challenge to find a space that is not being disrupted bythe ingenuity ofFinTechpioneers. Fintechrevolutionisingpayments According to Index Ventures’ Jan Hammer,“Payments is moving from the domain of the banks to next gen- eration platforms that can combine acquiring, processing and payment gateway services under one roof, acrossallchannelsglobally.” Indeed.Not only are fintechs revo- lutionising cross-border payments, stripping out costs, time and com- plexity,they are also giving consum- ers unwilling or unable to secure credit card services access to elec- tronic payments.They are assuming credit and fraud risk for e-stores and they are transforming the multi bil- liondollarglobalremittancemarket. They are also being viewed as the solution to financial inclusion. In a world where millions of people do not have access to traditional finan- cial services, mobile solutions and, increasingly, digital currencies, are transforming not just the way in which money is transferred,but the natureofmoneyitself. A recent feature in CityAM ex- plored the impact FinTech can have (is having) on the distribution of international aid,with its potential to reach thousands, without the need for bank accounts,internet or even power. Payments have always been about trust, convenience and simplicity - how to reliably transfer value be- tween two unknown parties,” says payments expert Roy Vella. “Tech- nology is now deeply embedded in our daily lives and it is allowing that transfer to happen more seamless- ly than ever and granting entry to many new and interesting compa- nies. As such, FintTech has become the space to watch where the speed, agilityandinnovationofstartupsare challenging and transforming the statusquo.”
  7. 7. 8 · ukfintech.com AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET NEWS AssetManagement: Thenextfrontierforfintech? In regards to asset management, the UK is the largest fund manage- mentcentreinEuropeandthesecond largest globally, accounting for over £6.2trillionnofassetsundermanage- ment.Furthermore,ofthetotalassets under management, some £2.2 tril- lionarenowmanagedonbehalfoffor- eign clients,making the UK the lead- ingglobalcentrebythismeasure. Globally, the UK is fast becom- ing recognised as the fintech capi- tal of the world.According toAccen- ture,the UK and Ireland is now the fastest growing region for Fintech investment with deal volumes here having been growing at 74 per cent a year since 2008,compared with 27 per cent globally and 13 per cent in SiliconValley. The Cloud Cloud-based service providers have helpedlowerbarrierstoentryacross many industries by reducing opera- tional costs and seed capital needed tostartabusiness. Investment management is no different and even in this highly regulated environment there are many opportunities to improve op- erational efficiencies by moving ac- tivitiestothecloud. Advances in various academ- ic fields like behavioural sciences have created an opportunity to in- troduce performance enhancing techniques into the investment de- cision making process.In much the same way as athletes training pro- grammesarenowsupportedbydata analysis,ground-breakingdatadriv- en tools developed by companies al- low managers to track, measure and improve on their performance taking into account input across multipledimensions. Big Data Big data and powerful analyt- ics tools have also helped a new breed of real time investment strategies appear. Theage-old-artofsectorresearch and analysis is complemented by tools that can analyse anything from the number of specific job ad- verts on global online job boards,to the price movement of hotel rooms in New York as a proxy for the health of a sector. Investmentopportunitiesandstrat- egies which not long ago were only available to high-net-worth individu- alswithaccesstoprivatebankingser- vicescannowbereachedonone’sown smartphonedevice. Developments in fintech As the second largest global market for assets under management,situ- ated alongside what is probably the hottest hub for the development of fintech businesses, UK Trade & In- vestment — the economic devel- opment arm of the British Govern- ment — anticipate further growth inthissegment. Developments in financial tech- nology, and the innovation pio- neered by the companies compris- ing the sector,have the potential to make a big difference to investors and long-term savers. Increased competition will bring lower costs across the investment process.Cou- pled with better distribution and greater efficiency,one could argua- bly expect that to be translated into highernetreturns. The UK is a leading global financial services centre, and the most internationally focused financial marketplace in the world, with more overseas financial institutions and investors choosing to do business in, and with, the UK than any other country. SHAUL DAVID info.uk@mediaplanet.com ABOUT UK Trade & Investment is the Government Department that helps UK-based companies succeed in the global economy and helps overseas companies bring their high-quality investment to the UK’s dynamic economy, acknowledged as Europe’s best place from which to succeed in global business. Shaul David Fintech Specialist, UKTI Financial Services Organisation PHOTO: THINKSTOCK
  8. 8. With investment your capital is at risk. The value of your pension can fall as well as rise and you may get back less than you invest. Eligibility to invest in a pension depends on personal circumstances. Tax rules may change in future. If you need help with pensions, seek independent financial advice. Authorised and regulated by the Financial Conduct Authority. Launching today at nutmeg.com
  9. 9. 10 · ukfintech.com AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET BCS DATA CENTRE SPECIALIST GROUP info.uk@mediaplanet.com NEWS Data centres at the heart T heUK,mainlyinand around the M25, is home to more than 50 per cent of Eu- rope’s data cen- tre estate. Much of which is operat- ing systems and applications for the Financial Sector. Businesses are no different from the popula- tion at large when it comes to ‘al- ways available, instant service’ and so data centres are designed and built with high levels of re- dundancy so that even very bad events cannot easilydisrupt the IT service in question. Things such as grid blackouts are shrugged off even by the lowliest facility with batteries and diesel generation standing by to supply all the ener- gy that the user needs. Data centre energy effectiveness Of course data centres consume ever increasing amounts of power that hasattractedthecriticalattentionofgov- ernments,both national and European –althoughthemaindriveristhepopu- lations’ demand for social networking, gaming,gamblingandphoto/videoser- vices.Mindyou,thegovernmentsofthe world haven’t yet woken up to the fact that rolling out ever-faster broadband onlyservestoacceleratepowerdemand, butthatisanothermatter. So data centre energy effective- nesshasbeengettingbetteroverthe lastfewyearswiththelikesofGoogle publishing their PUE (an energy metric describing the ratio of ICT energy to facility input energy) as if it is some kind of marketing cam- paign. They now run at 1.12 – so the electrical and mechanical systems thatpowerandcooltheICTloadrep- resent 12 per cent of the ICT energy itself. Clearly ‘1.0’ would be perfect butlevelsofsecurity,availabilityand maintainability without shutting offtheservicemakethatimpossible. The financial sector has some very special needs that make a Google-like PUE target of 1.12 almostimpossible–however,thisshould notbeanexcuseforeitherenergyorfi- nancialinefficiency.InLondonaPUEof 1.25isaperfectlyreasonabletarget,even for a bank and growing cost efficiency pressuresareslowlycuringthehabitof runningevendevelopmentserversasif theyarecritical trading platforms. DataCentresareattheheartoftheUKeconomy–toalargeextentbeingourfactoriesforthe digitalage—andmost,ifnotall,largebusinessescannotoperatewithoutICTand,asadirect consequence,adatacentre‘somewhere’. DATA CENTRES: CRUCIAL TO LARGE BUSINESSES PHOTO: THINK STOCK
  10. 10. ukfintech.com · 12AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET New entrants to the market, new business models,changing custom- er expectations and fragmentation oftraditionalservicesareallcontrib- uting to put traditional banks under pressure. Metro, mBank and others are all demonstrating that focusing on the newexperiences and needs of their customers is driving increased loyalty and revenue.Meanwhile ser- viceslikeBarclays,PingItandPaypal demonstrate that disruptive servic- es can significantly move customers awayfrom traditional banking offer- ings.Theappetiteforsuchservicesis clearly there, and the maturity and takeup of them can only move on an upwardtrajectory. Indeed, changes are afoot and the physical manifestation of these changes is apparent.At a macro lev- el, the branch appears to be in de- cline with most established brands reducing their footprint. Cash is no longer king,mobile payments are in- creasing in popularity and no longer is the current account the onlything one uses to manage money. Bank- ing is becoming more democratised by technology and new services are changing the way we think about banking,our moneyand the applica- tionandcapabilityoftechnology. So is the branch dead? Well who knowsforsure,butthereceivedwis- domandtheempiricalevidencecer- tainly indicates that the purpose of the branch is changing. With tra- ditional branch banking services moving online,the high streets are seeing branches of the most estab- lishedbanksdisappear.Infact,2,000 branches have been wiped off the map over the last decade and many moreclosureswillfollow. The good news is that this is not thedeathknelloftheindustry,more anevolutionthatseesthefocusshift from the noun to the adjective,from banks to banking. One where cus- tomer satisfaction, convenience and new services will feature more prominently. Where the commit- menttodigitalbankingandthesup- port for new channels and services make it easier for financial institu- tions to build relationshipswith the customer. Differentiation through added value services So howwill the banks compete in this new world of banking? The an- swer is in how they deliver servic- es and products.No longer will it be competitive to just show account balances on a page or to provide on- linefacsimilesofpaperapplications. Customerswant a more holistic and engaging experience that can span channels and be supported in by themall. Customerswillexpecteverything that can be done in the bank to be available online or through mo- bile — they will see no reasons to be forced down any particular route. Customers will increasingly look for personalised products that have a simple application and acceptance mechanismsuchas‘oneclick’tobuy. Additionally, customers will in- creasingly look for value added ser- vices,to help them manage their fi- nances and to help them to under- stand their spend. There will be a need to deliver tools that offer ad- ditional budgeting services and run alongside the capabilities they al- ready have at their disposal to man- age their finances.For example the establishment of the newchildren’s banking service from Halifax is just one indicator of the direction in which banks are heading. They are gearing their services towards a more expectant, tech savvy cus- tomer base with growing numbers ofdigitalnatives. Forthehighstreetbanksthatwill continue to operate in traditional bricksandmortarsettings,theneed for a free flow of services between channels is hugely important. Om- ni-channel retail banking will see customersinteractingwithservices in branch butwill be given access to information and services they can research and interact with further while they’re on the go.Tablets and mobiles will be the delivery system but the services they will use will need to be user friendly, genuine- ly useful and provide full fidelity of service. The right strategy, people and innovation will drive success The majority of established banks already have the platforms to de- liver new services — the challenge is in the exploitation.The abilityto join the product centric thinking into a more customer centric and focused set of offerings will chal- lenge traditional operating mod- els. It requires the skills of an IT department that takes a holistic approach to change. The first consideration should be the needs of the business to better serveitscustomers,whichisinclud- ed in the brand strategy and digital strategy.The last thing a bank needs in this new age of banking is a glut of tech-led solutions that leave cus- tomers puzzled and frustrated. It’s the reason why the technology im- plementations driven by Avanade begin with the vision of the compa- ny.The exploitation of banking plat- forms to do more should be a posi- tiveexperiencethatprovidesvalue. From our experience,we see that the most successful banks are deliv- ering a range of channels offering a full spectrum of services.In addi- tion,they’re starting to expose new services to drive innovation and dif- ferentiation.Examples include Bar- clays,which recently enabled some of the Barclays PingIt application programmable interfaces (APIs) to be used by third party developers in theprovisionofbankingservices.As aresult,customersweregivenmuch more functionality and the base of potentialuserswasexpanded. Todeliverinthisnewera,success- ful banks are looking outside of the traditional banking fraternity.They are hiring designers, customer ex- perience professionals, retailers and innovators who have an under- standing of customers’ needs and expectationsfromnon-bankingsec- tors.Thisstrategycoupledwithflex- ible product innovation is providing a formula for success in traditional banking environments which if fol- lowed will enable banks to compete with the new entrants and disrupt- ersinthemarket. In a customer-led era of banking, Avanadeworkswithitsclientstode- velop the strategy that helps banks reach their desired end goal of im- proving interactions theyhavewith their end customers.We work with firms to help define the customer experiences,the journeys and tech- nologytodeliverthenewexperienc- esneededtosucceed. Today’s digital customers have higher expectations than ever.To be fruitful,companies need to harness new innovative approaches to at- tract and retain customers through highly relevant and personalised experiences across multiple chan- nels.Although customers now have the freedom to switch banks more quickly than ever,it’s the job of the banks themselves to unlock added services and ultimately put the cus- tomers firmly at the centre of what they do.Working with the suppliers that can get them there is a positive steptowardsthisgoal. Frombankstobanking —aneweraofcustomer focusedinnovationin financialservices Nic Merriman info.uk@mediaplanet.com Bill Gates once said that banking will always be needed but banks as we know them could easily disappear. How profound this statement proves to be will become clearer over the coming years, however the current landscape certainly appears to support the sentiment. COMMERCIAL FEATURE Nic Merriman UK CTO OF FINANCIAL SERVICES, AVANADE UK “The majority of established banks already have the platforms to deliver new services — the challenge is in the exploitation”

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