'FinTech' is a phrase we hear a lot but what does it
mean, and is it just a buzzword?
Put very simply, FinTech, or financial
technology, involves the use of software in the
provision of financial services. That does
not sound particularly new, or particularly exciting.
But FinTech companies, which are often start-ups, are using technology
to disrupt the way in which traditional finance companies do
business. From mobile payments, money transfers, loans, fundraising
and even asset management, software is transforming the way these
This transformation has already happened in the retail sector.
Amazon and eBay, unheard of 20 years ago, are now household names.
They are prime examples of how software has changed the face of the
retail sector, with virtually any saleable item now available for
purchase online 24/7. Core to eBay's offering has been its
payment tool, PayPal, which it spun out last year summer into a
separate listed company. PayPal was one of the first and is now one
of the largest online payment companies which overcame a major
hurdle to the success of online retail – the need for a
secure payment mechanism which grabbed and held on to customer
Now, it seems, it is the turn of the finance industry. In 2008,
the global investment in FinTech was reportedly around $930
million. This had grown steadily by 2013 to about $4 billion, and
tripled in 2014 to over $12 billion in just one year.
In the UK, the financial sector is recognised as one of the main
drivers behind the country's economic recovery since the global
turndown in 2008. Statistics from the Mayor of London's Office
claim that 40% of London's workforce now works in the financial
and technology sectors. The UK Government has appreciated that to
continue this growth trajectory, tech talent needs to sit alongside
London-based company, Nutmeg, is just one example of what can
happen when tech and finance talent combine. Its co-founder and
CEO, Nick Hungerford, was previously a stockbroker who started
Nutmeg because he was "frustrated by the exclusivity and lack
of transparency in the investment world". In just three years,
the company built the UK's first online discretionary
investment management business which offers to manage your wealth
for a small, transparent fee. Some see this apparently simple
proposition as the start of a major shake-up in the world of
private banking in which economics are so compelling that they
eventually prevail over traditional banking relationships.
Clearly Schroders saw the potential when they participated in
Nutmeg's Ł30 million funding round which closed in
Part of FinTech's appeal is that it is a great leveller.
Customers, perhaps unfairly, often expect the same services from a
small firm as they do from a larger one, and technology allows
David to compete with Goliath on a far more equal footing. It makes
doing business quicker and easier, giving FinTech companies the
potential to be more nimble, adapting quickly to change, avoiding
the costs of operating a bricks and mortar business, and passing
their savings on to their customers.
FinTech also helps itself. The traditional model of a new
business turning directly to its local high street bank or a
conventional investor is no longer the only way for a start-up to
get itself off the ground. Crowdsourcing, for example, allows
people with big ideas to get funding quickly and easily from
anywhere in the world from an online community of people they have
So what does this mean for Jersey?
Given the global investment statistics in FinTech in recent
years and the crucial part the financial services industry still
plays in the island's economy, it is perhaps unsurprising that
Digital Jersey's recently published business plan identifies
FinTech as one of its three key areas of focus for 2016. Its
stated aim is to "draw together Jersey's tech and finance
industries to develop new products and services in the FinTech
space, to provide a platform for inward investment, to stimulate
domestic development and the strengthening of our current position
in financial services".
The drawing together and collaboration of the tech and finance
communities in this way will certainly be fundamental to achieving
this aim. Ensuring we have appropriate, proportionate regulation
which keeps pace with innovation and protects our reputation as a
blue chip international finance centre will also be key. But
perhaps most important of all will be the need proactively to
embrace the opportunities, and adapt to the challenges, that
technology will inevitably bring.
FinTech is more than just a buzzword: it is the future of
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