FinTech for Breakfast
Held on Wednesday, March 30, 2016
Izabella Kaminska (FT Alphaville)
Neil Darke (CEO, The Lifehouse.Co)
Freddy Kelly (founder, Credit Kudos)
Again, the aim of our monthly FinTech breakfast round-table is to provide an overview – for financial service professionals who need to be familiar with FinTech but who don’t actually spend 23 out of every 24 hours at the coalface – on what they need to know about FinTech developments over the last month, together with a heads-up on what is coming down the pike.
As usual, the anchor for our next meeting will be Izabella Kaminska, from FT Alphaville. I am delighted that she will be joined by:
- Neil Darke, who is the founder and CEO of The Lifehouse.Co, a mobile-first financial planning service for Millennials. He was formerly CEO of Canaccord Genuity Wealth Management, and before that served as head of institutional equities at Collins Stewart (where he also co-founded the company’s Quest service); and
- Freddy Kelly, who recently upped sticks from San Francisco (where he was an engineer with Bitnami) to start London-based Credit Kudos, which uses real-time spending data to build credit scores.
This is a ‘caring & sharing’ experience in which we hope everyone will contribute. A handful of suggested stories for the round-table can be found below, but do intervene to add any important developments that we have missed.
FAMR, robo and the 'advice gap'
What the FCA said. "FAMR has recommended a package of measures that has potential to promote a real improvement in affordability and accessibility of advice and guidance to people. For the vision to be realised, there needs to be continued commitment/co-operation not only from regulators and Government but also employers, consumer groups and the financial services industry." FCA
Advising the robo-advisers. The FCA will be setting up a special advice unit, which will support entrants into the robo-advice market with a 'general toolkit' of best practice reports. City Wire
Not impressed. "The final report published this week contains 28 recommendations but not one of them could be described as radical. Instead the report calls for 7 more consultations, 2 new frameworks a couple of factsheets plus a task force and an advice unit. The only substantive proposal I can see is to tightly couple the definition of advice to a personal recommendation and thereby align it with MiFID; helpful but hardly likely to herald a digital revolution." Kevin Okell
Cough cough, banks. "Perhaps a more honest title for the report would be ‘How to get banks to re-enter the advice market.’" Financial Advisor
Not so fast. Contrary to reports, RBS will not be offering AI/machine learning robo-advice services for its retail investors. It will, however, be cutting back its 'face-to-face' advice service for customers with less than £250,00 to invest (up from £100,00). Wired
Regulating FinTech: where the US goes...
White paper on its way. "One of the top U.S. banking regulators [Office of the Comptroller of the Currency] will issue a formal call this week for officials to start crafting a new framework aimed at governing the rapidly growing financial-technology sector—a nod to complaints from traditional banks and startups alike that current rules both stifle innovation and provide insufficient oversight for new forms of finance." WSJ
From the Comptroller's mouth. "The OCC is committed to supporting responsible bank innovation. Last August, I announced an initiative to develop a comprehensive framework to improve the OCC’s ability to identify and understand new and emerging trends and innovations in the financial services industry, as well as the evolving needs of consumers of financial services. This framework will outline our views on responsible innovation and enable us to more efficiently evaluate innovative products, services, or processes that require regulatory approval and identify potential risks associated with adoption." Thomas J Curry
2015's numbers. "VC-backed fintech companies in Europe raised $1.48B in funding across 125 deals in 2015... deal activity rose 28% on a year-over-year basis. Early-stage median deal size in Europe fell below $2M in Q3’15 and Q4’15 after a spate of larger Series As pushed Q2’15’s median to $6.7M. Corporates have participated in less than 15% of VC-backed fintech deals in 4 of the past 5 quarters, including just 10% in Q4’15. 2015 saw Asia garner 113% more $50M+ fintech deals than in Europe and 375% more mega-rounds in North America than in Europe." KPMG
2016's numbers? "From startups that need to be refinanced to newly founded companies, it will be much harder to just sell a vision, and now the metrics will be the most important criteria. Which means that the trend of down rounds will continue, we will see more startups folding, and people throwing the towel in Fintech."
Huy Nguyen Trieu
An equity/debt alternative finance pipeline
RateSetter and SyndicateRoom team up. Peer-to-peer lending platform RateSetter has entered into a unique referrals partnership with angel-led equity crowdfunder SyndicateRoom. The two alternative finance platforms will now refer businesses to one another depending on the specific funding requirements of those businesses... The dream scenario, we suspect, is that businesses that begin by taking on equity money at SyndicateRoom will in time develop to the point that a debt-based solution makes sense, which is when RateSetter comes in. The collaboration is – as far as we’re aware – the first to have been forged between a marketplace lender and an equity crowdfunder in the UK. AltFi
Putting the public back in IPO
SyndicateRoom acquires intermediary status with the London Stock Exchange. "On first inspection this looks like an innovative new offering from SyndicateRoom. In effect it's looking to bridge the divide between old finance – traditional stockbrokers – and new, alternative finance – crowdfunders. Traditionally investors would have to sign up to a stockbroking platform in order to access IPOs and private placings. For many investors this all time consuming and not a little daunting. By offering access to IPOs SyndicateRoom is in effect turning into an alternative stockbroker, with products both in the public (IPO listings) and private equity space – all held via one account, online. Crucially the IPO route echo’s many of SyndicateRoom existing ideas – IPOs involve private investors coinvesting alongside institutional money and the first IPO is in SyndicateRoom sweet spot of healthcare." AltFi
Financial data infrastructure
The IHS Markit deal. "IHS Inc., which provides data analysis for energy and automotive companies, agreed to acquire London-based Markit Ltd. to bulk up in financial services. Shareholders of IHS will get about 57 percent of the enlarged company and stockholders of Markit -- which is being valued at about $5.5 billion through the deal -- will get the rest, according to a statement on Monday. The tie-up, which will be called IHS Markit, would have $3.3 billion in revenue based on 2015 results." Bloomberg
A founder reflects. "We took data — sold it. Then we added key complimentary datasets. Then we found ways to sell it again."
Tech experience at the top
Santander appoints techie panel to steer digital transformation. "Ana Botin, chairman of Banco Santander SA, has appointed a tech-heavy advisory board in a sign that information technology has become crucial to her growth plans at the Spanish lender." Finextra
First mover. "'I can’t think of a precedent where you’ve seen a panel of this nature,' says Julian Skan, a managing director at Accenture Plc in London who advisers banks on IT issues [see this Accenture report on the lack of bank board tech experience]. 'This decision recognizes the breadth of angles you have to cover to implement a tech strategy, and she’ll now have serious people providing input to the board.'" Bloomberg
Anything in the red box for FinTech?
Not really, but expect more later this year. "Despite no explicit FinTech reference in his statement, the Chancellor reasserted his intention to make the UK the global FinTech capital, confirming that the Treasury is currently examining the recommendations within the benchmarking report recently published by EY, and will make further announcements in this space over the coming months. Indeed, perhaps owing to its keen interest in the sector, we have seen a trend in the Government keeping the conversation and any announcements relating to the FinTech sector separate from the formal Budget statements, so we expect to hear more from HMT in due course." Innovate Finance