Dave does a skinny latte in Shoreditch High Street
Skinny Latte for Cameron
On his trade trip to the Far East, “FinTech” was to David Cameron what “Prudence” had been to Gordon Brown.
So what is FinTech and why does it matter so much to our Prime Minister that he was flogging it all over the Eastern hemisphere?
Financial Technology is nothing new, 40% of London’s workforce, according to Mayor Boris are engaged in it and I’ve been lugging a laptop round with me since the mid eighties,
But what David Cameron is getting excited about is the new wave of financial innovators that he sees powering the British economy and leading the world.
To an extent he is right, Britain is leading Europe in developing applications that assist our activities of daily living. Europe still lags America but pound for pound Britain is boxing well above its weight.
With Cameron in the Far East were an eclectic mob of FinTechnicians, collectively known as Innovate Finance. Innovate Finance is a lobby group which I suspect spends far too much time in the Ace Hotel Shoreditch High St, Google Labs and the Innovation Centre half-way up Canary Wharf Tower.
Innovate Finance is supported by all the big UK financial institutions but it’s really about the start-ups and growth accelerators and all the flotsam and jetsum that have got first and second stage funding and may (note may) be the next big thing.
This is absolutely as it should be. Pension PlayPen would like to be on the caravan but at £1000 pa for a start up, the ticket’s too pricey, there’s a lot of financial innovation you can buy for £1000 and I’ll do my lobbying on the blog (thanks very much)!
Technology that gets used
For me, Financial technology gets exciting where it’s being driven by a genuine need. Uber came about because of the unsatisfactory state of taxis, Pension PlayPen came about because of the disintegration of corporate pension advice. The really good FinTech companies I come across, Sammedia, MoneyHub and Nutmeg are applying themselves to real-time financial problems people have, not bathing in the light of their shiny algorithms.
As the boss-man at Nutmeg told me , if my stuff isn’t getting used- it’s useless.
The vast majority of the applications that get built are pure vanity. CEOs get excited by having an app and showing it off to their fellow CEOs as a badge of honour. The best apps are not there for show , but there to get used, indeed Moneyhub build their apps for mobile use and build back to laptops and full screen PCs – which are very much secondary technology. Moneyhub’s research suggests that most people would prefer to do personal finance stuff away from the workplace in the comfort of their own hands.
Technology that is proportionately regulated
The joint paper from the FCA and the Treasury launched yesterday, is informed by the wider global debate about what can and cannot be done on a laptop and handheld device.
Without the oversite of a physical adviser, can these applications be properly used to take financial decisions?
In some markets , it seems almost impossible that they won’t. The 1.8m employers staging auto-enrolment are not all going to sit down and sort matters face to face with an adviser, there will have to be FinTechnability.
But there is nothing to stop FinTech being abused. Dick Dastardly used to stand at the junction of the wacky-races, railroad and send his rivals off to certain oblivion , by switching the points. Much the same can be done with the “UX” (user experience/employer journey) on a FinTech excursion.
This week , the Pension Regulator has a free pass and is road-testing http://www.pensionplaypen.com. Our video -while not quite viral – is well watched and at one stage yesterday we had 542 concurrent users of our workforce assessment! The latter number may have been distorted by 3rd party stress -testing, but this shows that we are receiving a degree of due diligence and this is a sign of the market “self-regulating”.
Why does FinTech matter
I suspect that David Cameron, like the CEO, is more interested in what FinTech does to the brand than how it helps the consumer. Right now it is trending.
But FinTech is simply the way to get to a better place, the better place is what consumers have their eyes on, not the mode of transport.
For intermediaries, who help in the transportation process, there needs to be proper due diligence- from Regulators and the trade bodies they rely on.
And for the entrepreneurs who create the means of transport, FinTech has to be about outcomes. The need must come before the greed.
Disruptive technologies or innovations, by their nature, mean someone else loses out.
Uber has disrupted the taxi service to the point it’s stepping on the toes of the established players and those who make their money from it.
For instance, many taxi drivers pay high fees to local government to partake in driving a car they own and insure to drive with passengers, around streets they pay taxes to use.
These fees cover legislation that allows the taxi drivers who pay them, to have a closed and controlled competition market, which essentially provides them with an environment to be able to make more money to pay those fees in the first place.
In Uber’s case the loser is the city who generates revenue from fees from taxi drivers and also allows prices to be higher than they would be with a free market system in place.
So Uber will ultimately succumb to the legislators and all the advantages it brought for cheaper taxi costs will disappear, and if Uber is the sole survivor in this transition they’ll then have the ability to control the market even more to justify the demands of the share holders who invested billions in the company and demand a good return on their investment.
I can easily see a future where Uber runs the taxi system entirely in New York, where the city makes more money, the share holders do, a few directors will make a fortune, and taxi drivers get paid less, and passengers pay more.
FinTech cannot add to GDP or growth, it’s simply the digitisation, and through that, re-centralisation of what we already have in distributed face to face systems.
What will happen is everyone will take a cut to pay a few (or just one, think LinkedIn but for financial advice) increasingly centralised players and their shareholders, and likely higher costs for legislative systems to protect the new market.
If you’re a financial advisor or expert, expect ‘disruptive’ technology to mean you’ll get paid less to do your job vs how you do now, so frenzied investors get a return on their money, within a costly state legislated monopolised captive market.
Users will not pay for their advice directly, instead they’ll give up all their financial data to a LinkedIn type company, who will monetise the data.
The greed will come before the good, at the beginning, middle and end of this transition.
If you believe there is an alternative way to how this will play out then I’d happily hear it, but so far all I’ve seen from larger and more globalised systems is worse product at a higher price, with only a few benefiting from the vast fruits of the benefits large globalised systems do actually create.
Try http://www.pensionplaypen.com !
I really admire what you’ve done with Pension Playpen and your various digital projects in the UK pensions scape.
After a decade working in a related industry and often feeling to have moved in circles, it’s been great to see rapid and effective progress in this area, focussing on what pension users need, both those providing them, and those being provided with them.
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However I’m not really sure what you’re shooting for right now is a disruptive ‘FinTech’ product/service.
You’re not really skirting the edges of legislation or completely ignoring it like Uber, to cut down vast swathes of costs and overheads, to then pass on savings to end users and investors who’ve just capitalised your rapidly deployed ‘new idea’
What you’ve done is arguably better, since you’re working in a non-disruptive way to legislators, you’re just working smarter relative to your competitors who have relied upon legislation to the point that they’ve become terminally lazy in trying to be competitive.
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I can easily see what you’re doing here being the seed for something much more like Uber though, and on the day that you look externally for capital, the road that all these types of business are motivated to travel down once that happens will probably be set.
It’ll be my absolute pleasure to be proven wrong when that day arrives, and the progeny of Pension Playpen becomes something that benefits the majority of end users over those who invest capital, operate the service, and offer new legislation barriers to protect it’s future interests.
I suppose really this is a dig at legislators, since they are the ones generating barriers to end users receiving truly innovative and competitive products from pensions/investment related businesses.
What you’ve done is compete very effectively, through passion for the end user above all else, within a stale market and industry. I can’t praise that enough.
I’m just not sure I’d call it FinTech… yet… and if it ever does become that, I worry where the motivation then lays, still with the end users, or with the investors ROI!
David
Thanks for those very kind and thoughtful words.
Legislation may be easing- the FAMR may create more scope to deliver advice without the current hindrances and I’d like to see financial services have a digital instruction manual!