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Currencies Direct Chief Market Analyst Talks Legacies, Challengers and Market Disruption

Written for the Fintech Times by Phil McHugh, Chief Market Analyst, Currencies Direct

Fintech is characterised by its drive to use emerging technologies to disrupt existing financial services, and with UK Fintechs attracting £1.35bn in venture capital investment in 2017, it’s clear that they’re here to cause more than a temporary wave in the financial sector.

Major financial institutions are all too aware that they can’t afford to bury their heads in the sand, especially which many of these Fintech firms are succeeding by offering solutions to the big banks’ own shortcomings.

Fintechs are giving big banks a run for their money – so lessons can large corporates learn from smaller and less well-resourced competitors?


The dawn of online banking was a solid step towards improving convenience for customers, helping to limit the need to physically visit your local branch.

It took high street banks decades to adjust their approach for the digital age with the introduction of online banking. By comparison, in the relatively short time since the advent of the smartphone, Fintech firms have revolutionised how customers move their money – particularly amongst millennials.

Younger generations have embraced P2P apps like Venmo, which allows direct transfers to be made within seconds. In fact since launching in June 2017, popular US payment app Zelle has already processed more than 320 million transactions, valued at around £72bn.

The success of these apps is not just due to convenience, but also a result of how simple they are to use. Making payments is as easy as sending a text message. Larger institutions would benefit from adopting this approach – keeping the needs of the customer directly at the heart of their offering and addressing these needs in as simple a way as possible. All too often, these apps are needlessly complicated, alienating users and hindering their appeal.

These institutions may find it serves both them and their customers better to strip down some of their offerings in favour of adopting a sleeker, more intuitive design philosophy, with a focus on features like one-touch payment solutions.


Another defining trait of Fintech firms is their ability to quickly adopt new advances in tech as well as adapt their services to the needs of their users.

For example, French firm Shine took note of the growing gig economy and started offering specialised services to freelancers, including helping with legal registration or making tax payments (both significant inconveniences thanks to France’s strict labour laws).

The flexibility to add extra incentives and services that actively reflect changes in technology and society is one of small firms’ major strengthens – they are not being beholden to the legacy processes that encumber their larger peers.

Many smaller firms will then build on this momentum by making these value-added services a major part of their brand identity, which in turn attracts additional users. Larger financial institutions have begun to recognise they are not nimble enough to play catch up with their new rivals and are starting to seek partnerships with Fintech firms, allowing some of the big banks to offer the same wide range of customisable services without being tied down by the possible complexities of overhauling their legacy software.


While advances in technology may have led to the emergence of Fintech challengers, their meteoric rise has certainly been hastened by the financial crisis 10 years ago. The ensuing chaos and collapse of a number of financial institutions has shaped today’s customers to expect a certain level of transparency when it comes to their money.

However (and despite their best efforts) many big banks still fall short of these expectations, leading smaller firms to appeal to consumers who have become disillusioned by the traditional institutions.

For instance, many small business owners value smaller firms’ mantra of making things clear and simple, such as providing greater transparency when it comes to funding applications and providing information on exactly why a business loan may have been rejected.

While this may be the area in which the traditional financial institutions have most struggled, by embracing challengers’ more transparent business models and simplifying their services there’s certainty a chance for them to catch up. While smaller Fintechs have stolen the spotlight in recent years, some traditional financial institutions are closing the gap at startling speed.

Those currently having the most success are exploring collaborative partnerships with Fintechs, like J.P. Morgan Chase & Co which partnered with Fintech start-up OnDeck Capital to launch a new digital lending platform using technology.


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