Financial services in the UK have been acknowledged by leading FinTech companies as world leading. CEOs of Plaid and banks Revolut and Starling have all credited the country with forward thinking regulatory laws and an innovative climate.
In a conversation on stage at Web Summit in Lisbon on Thursday, Zach Perret the CEO of Plaid, Founder of Revolut Nikolay Storonsky, and Anne Boden, the CEO of Starling Bank were at the tech conference to talk about the future of banking. Cash was declared dead, and online banks were given kudos for bringing the price of ordinary banking down now that the industry has been forced to allow online financial products to interact with traditional banks. Open banking (PDS2) came into force in the UK on 13th January 2018 and made the leading nine banks release data in a secure form that can now be used by other online products.
According to the trio, this innovation has sewn seeds across the globe, from the US to China. Storonsky spoke on the increase in personal loans in the US vs traditional credit cards. He said, “Banks never used to give out loans because they made much more money issuing credit cards, and so now you get to borrow money for less. That was driven by FinTechs coming into the market and saying, we will lend you money for much less than it costs to hold a credit card.”
He also discussed problems with regulation in the country that made it difficult for new businesses to enter the market, essentially holding prices at unfair levels. He compared this with the evolution of regulation in the UK, saying: “In the US, there’s a lot less clarity as there are no banking charters being issued hundreds of years ago. But the regulator in the UK saw the opportunity. First came the Payment Services directive then in Europe there was an iteration of money licenses which gave rise to a lot of businesses in the UK. Now we have the second wave which is the new banks.”
However, while the panel were quick to credit the UK, the excitement in the room came from further East, mainly China. Boden of Starling said, “When we look at China we think it’s an exciting place. The question is, how do these two worlds coexist? Are we going to be all of a sudden woken up overnight and realise that Europe and the UK is living in the dark ages compared to what people are experiencing in other parts of the world?”
While Boden credits the freedom of technology in the UK, she is worried that regulatory concerns are only being developed for tech that is available now. With the rapid increase of technology in China, there is perhaps an ability to create something for a growing infrastructure. She continued, “The difficulty is the pace of FinTech innovation and non regulation can fully keep up. Although certainly the UK is doing a really good job of pushing it out.”
Cash was declared dead, and online banks were given kudos for bringing the price of ordinary banking down
The panel also touched upon the possible role for blockchain in financial technology, and using solutions where current problems exist.
For Perret, CEO of Plaid, he believes that there is a defined success where blockchain and cryptocurrencies can make an impact, but they are not dependent on the success of each other. He added, “I think one of the points we have touched upon is this concept of delivering consumers better products. We want to increase the quality and availability of products delivered to consumers to help people live better financial lives. And that’s why we’re seeing this big boom in FinTech products right now.”
When asked on where the future might take traditional banks, Boden was quick to answer that they will continue to copy new financial products launched by online financial services, but essentially, they will always be two or three years behind.
Photo credit: Harry Murphy, Web Summit.