Have you thought about the risks of e-commerce?

This blog talks to those interested in Fintech and in particular the promotion of the start-ups that drive innovation in financial markets.

My digital start-up, Pension PlayPen is in terms of staff, fixed assets and profitability, a very small business.

And yet we find ourselves working with some of the biggest business software companies in the UK. Our product is a means for employers to choose the right workplace pension for their circumstances and assess their liabilities prior to staging auto-enrolment.

In terms of brand, Pension PlayPen stands for “restoring confidence in pensions”. But to get to the mass market that has little confidence in or access to good quality pensions advice, Pension PlayPen must first win the confidence of these business software organisations and their users – accountants, payroll bureaux and of course employers.

Corporate guarantees not enough.

These businesses think about the risks of e-commerce all of the time. The issues of cyber-security and the threats to data and indeed the code on which these organisations have built their reputation is very real.

The  factors that attract large businesses to start-ups like ours, our agility and energy, are based on the entrepreneurs that run those businesses being true to their brand and delivering true product. Fidelity to principles such as “restoring confidence” is part of the contract, but how can such intangibles be guaranteed?

In our experience they cannot. The guarantee of a company such as Pension PlayPen is of no value as it is based on no more than the word of its management, and that management cannot be trusted to deliver in the event of the risks that large firms think about.

The critical role of insurance

For small Fintech based advisers to thrive in the febrile e-commerce market (which my firm works in) we need the support of the insurance market.

Our experience of working with the insurance market in the UK has been a very happy one. We have worked with Blufin and Lockton, both excellent brokers and found cover for a wide variety of risks including Cyber Insurance, Intellectual Property Cover, Breach of Contract Insurance and the insurance of the algorithm on which our service relies. These insurances compliment the more traditional Professional Indemnity cover on which professional services firms depend.

We have found that there is considerable appetite in the market to provide cover to ourselves as a start-up and a willingness from the broking community to help educate our partners about the insurable risks, appropriate cover levels and how these risks are best packaged to protect not just the start-up , but its customers.

The strength of the London and American insurance markets , in terms of their understanding of our business and their readiness to stand behind us has impressed us no less.

Bridging the confidence gap

I suspect that the biggest fear of the market is the unknown unknowns. Fintech amplifies that fear by bringing together a cocktail of unknowns. Enterprise software suppliers are not familiar with the risks that professional services firms take on in advising clients on matters such as pensions. Pension consultancies are not familiar with the risks that software suppliers have to mitigate to run their businesses.

Insurers are familiar with both kinds of risk and provide a common platform that bring us together. In our dealings with the insurance market, we have found solutions to problems that otherwise appeared intractable.

I am not saying that the insurance market provides the silver bullet that Fintech needs to deliver robo-advice. However, for Robo-Advice to happen at pace, we will need the young and agile start-ups such as Pension PlayPen to drive it. We cannot rely on existing players to move at speed and with the agility needed to meet market demand.

I am saying that the insurance market can help bridge the confidence gap between those large trusted brands on which the business community relies and the delivery of services like Pension PlayPen.

I do not see this being generally recognised.

Thanks to our brokers – Lockton

Lockton is an American owned insurance brokerage that operates around Britain but is principally active in the City of London. I’d like to use my blog to thank them for the support they have given to me and to Pension PlayPen in recent months as we have expanded our business.

I am very proud to have been helped by these people and grateful for the time they have invested in my business in helping us get to a point where we can deliver to a much wider audience.

If you are reading this as a start-up and would like details of our contacts in Lockton’s cyber-risk team, I’d be delighted to make introductions and to extend this reference in any practical way I can.

This blog has not been solicited and I hope you’ll take these comments in the spirit that they are intended. We need innovation in the pensions market, we need small companies to be able to work with large companies and I believe the insurers can provide the confidence to make this happen.