FinTech for Breakfast
Held on July 21 2016
With support from Dentons
Kadhim Shubber (FT Alphaville)
Huy Nguyen Trieu (entrepreneur)
Dylan Bourguignon (CEO, So-Sure)
BREXIT: INITIAL REACTION
You all know the story. The pre-referendum consensus within the City seemed to be that Brexit would be bad for London (and the UK more generally) as a centre for financial services/FinTech. Post-referendum, many institutions have moved to downplay immediate concerns (much, after all, remains speculative while the UK prepares its negotiating strategy). So far, we know that: Berlin, Dublin and other European cities are already attempting to woo London-based start-ups (as reported by the FT); the referendum result hasn't immediately obliterated investment in UK FinTech (see, for example, PwC's announcement that its clients remain committed, and the £7.2m that a Polish private equity firm invested in MarketInvoice); and passporting is no less a concern for FinTech start-ups as their incumbent peers/rivals.
- What might be the 'early warning' signs that Brexit is having a negative impact on UK FinTech?
- What are the key legal considerations for UK-based FinTechs observing (and seeking to influence) the Brexit negotiations?
- Which areas of FinTech may be most affected by the Brexit vote?
THE FCA & REGTECH
Last November, the FCA issued a 'call for input' on RegTech. It has now issued its 'feedback statement' following more than 100 written responses. The tone of the document very much seems to 'let's keep talking'. The statement points to the role that the FCA could play in setting industry standards and certificating RegTech innovations. It also emphasises the limits to the FCA's role, noting that efforts to move away from legacy systems are decisions for individual boards. It also throws up that one day, maybe, regulation will be machine readable.
- Will the FCA need to take a more active role in standard-setting and certification in order for RegTech to grow?
- Which areas of RegTech are likely to develop first (e.g. reporting tools, surveillance technologies)?
- Is machine readable regulation a long way off? What would be the implications if regulation were machine readable?
BANK OF ENGLAND ACCELERATOR
The Bank of England announced that it will work with a limited number of companies on proof-of-concept projects as part of a self-described 'accelerator'. The Bank emphasised data analytics, pattern recognition and vulnerability detection among its main areas of interest. Meanwhile, Startupbootcamp announced a dedicated FinTech and cybersecurity accelerator to be based in Amsterdam.
- Are central banks at risk of falling behind financial institutions when it comes to acquiring advanced technologies?
THOUGHT MACHINE'S VAULT OS
Thought Machine, the stealth-mode start-up led by ex-Google engineer Paul Taylor, announced a new white-label, cloud-based operating system for retail banks. The company is promising reduced barriers to entry for digital challenger banks, easy scalability, automated compliance and enhanced security.
- "If you just want to see the same old products then go ahead and buy the pre-existing products, but if you want to be adaptable and deliver 21st century expected experiences, then you need to own the stack. If you were to ask Google or Facebook if they could have delivered on a generic backend and built a nice front end they would have laughed."
- What do the regulators think about cloud-based services? (See the FCA's recently finalised guidance.)
MARKETPLACE LENDING UPDATE
Kadhim Shubber, anchor for this month's FinTech for Breakfast session, is something of a P2P geek. He'll be walking us through the latest developments in the sector, including what we know (and will in the future know/not know) about RateSetter's Provision Fund, and the moral of the Funding Knight story.
- Is it fair to wave a red flag around RateSetter's Provision Fund?
NASDAQ/KBW FINTECH INDEX
Nasdaq and KBW launched what seems to be the world's first FinTech index. The KFTX comprises 49 companies, including American Express, Lending Club, PayPal and Visa. From the press release: "FinTech is a relatively new industry designation garnering increasing investor attention. There is a lack of a consistent definition of FinTech in the marketplace and the term is used to describe many different types of companies classified in various industries. KFTX leverages KBW’s expertise in financial services and Nasdaq’s long history creating innovative, market-leading transparent indexes, to provide investors with the most precise index representation of FinTech available in the market today."
- Is 'FinTech' a meaningful basis for an index?
CROWDCUBE & THE EVOLUTION OF EQUITY CROWDFUNDING
Crowdcube, the UK equity crowdfunding platform, has raised over £6m on its platform. A prospectus released alongside the fundraising drive highlighted two potential growth areas:
- Secondary market services for investors. From the company's blog: "Our vision for future growth is focused on offering our investors unrivalled investment opportunities, funding great businesses through the world’s largest investor community and ultimately, delivering investor returns. With more growth stage and venture capital backed businesses turning to our crowd to raise finance, there is a real opportunity to provide early investors with returns through a secondary market on Crowdcube. Currently many early-stage investors are locked into their investment for the long-haul, a secondary offering of this nature will provide greater flexibility for equity investors, whilst further democratising investing by providing another avenue for anyone to invest in great British businesses."
- IPOs. Courtesy of Business Insider: "... Crowdcube promises investors a push into new markets such as initial public offerings (IPOs), despite cofounder Luke Lang telling Business Insider earlier in the year that it had looked at it and had concluded 'the economics are god-awful.' Lang told BI this week: 'I caveated that with if you just have a slice of the allocation. If you're just reselling somebody else's IPO you're only making a very small margin and that, in my view, isn't a very sustainable model.' This is a model that has been adopted by Crowdcube's rival Syndicate Room. Lang's comments seem to imply that Crowdcube would like to function as a traditional stock broker when a company lists, selling all its share book before the listing on the London Stock Exchange. But Lang wouldn't go into details on to how and when Crowdcube would break into the public markets."
- How important is the development of a secondary market for the long-term growth of equity crowdfunding?
- Are equity crowdfunding platforms well placed to break into the IPO market?
What should we be talking about at this round-table?
Email your suggestions for the agenda to Harry Atkinson.
If all you affronted millennial Remainers are to be believed, there are no more tech start-ups in London, everyone has gone/is going to Paris or Dublin, and Silicon Roundabout is a wasteland…
Well, maybe not – though I suppose it is legitimate to ask whether (or to what extent) “Brexit” will damage the UK’s position as a global FinTech hub. (Indeed, BankNXT has run a number of stories on particularly this issue). But there is more going on, and I don’t want our little discussion group to get fixated on bashing the “Brexiteers”.
There is, for instance, an important Citigroup report on the rapid growth of FinTech firms in China; there is the latest “blockchain breakthrough” (FT, yawn, yawn); there is Deutsche Boerse’s shiny new FinTech VC fund. And I note that JP Morgan (a good friend of the CSFI) is bringing FinTech start-ups in-house…
In other words, life goes on. Our usual anchor for the panel, Izabella Kaminska, cannot make the session this month, but I am pleased to welcome her colleague at FT Alphaville, Kadhim Shubber, who will be walking us through the by-ways of the FinTech world.
And I am delighted that he will be backed up two FinTech entrepreneurs:
- Huy Nguyen Trieu, who recently left Citi, where he was an MD, to start a new FinTech venture (his first tech company, Ukibi, launched during the early 2000s). He also writes the Disruptive Finance blog, hangs out at Oxford and is just about as grandes ecoles (X and P&C) as it is possible to be without dreaming in French. I sort of wonder what he thinks of Paris as the beneficiary of our sudden bout of europhobia.
- Dylan Bourguignon, who is the CEO of So-Sure, a social insurance service based on ‘networks of trust’. He started his career in investment management with Cognetas, Caledonia Investments and Bowmark Capital, before trying his hand in the start-up world.
Anyway, as usual, this is a caring and sharing experience. So, whether you want to contribute or listen, come along and share the pain. As usual, thanks to the generosity of Dentons, there will be coffee, tea and buns galore.