Raconteur

Financial Services Technology 2015

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T he buzz around the UK's b u r g e o n i n g f i n a n c i a l technology scene, esti- mated to be worth £20 billion in annual revenues, has increased in volume at the start of 2015. In January, the Canary Wharf Group, responsible for creating London's iconic 97-acre financial district, announced it would be opening a third dedicated space for tech startups as part of its Lev - el39 initiative. It came just days after a similar announcement from consultan- cy group Accenture which said it would be running its FinTech Innovation Lab programme for a third time in 2015. The pro - gramme gives chosen startups access to venture capitalists and angel investors for 12 weeks to get a better idea of how their innova - tions can make money. The two announcements are further evidence, if it were need- ed, that established companies see huge potential in the UK financial technology (fintech) sector. Fig- ures from UK Trade & Investment estimate that the total amount in- vested in fintech companies in the UK was more than £342 million in 2014. LONDON AHEAD The reason is simple, accord- ing to Dan Ridsdale, technology analyst at Edison Investment Research. "The close proximity of the London cluster of fintech companies with the investment community naturally creates a strong gravitational pull for in - vestment" he says. "For some, the regulatory environment is also more attractive than the United States, for example, where regula - tion changes from state to state." Mr Ridsdale believes that the weight of incoming investment from the venture capital com - munity is one of the biggest in- dicators that London is winning the battle for fintech suprema- cy globally. He adds: "The key challenge for London will be to nurture more fintech companies through the startup phase, and to provide the funding environment for them to progress to IPO [initial public of- fering] and then global leadership." His comments are a challenge recognised by the fintech commu- nity. The sector's trade group, In- novate Finance, is offering advice on fintech funding and how com- panies can successfully transition from "bootstrap to IPO". ACQUISITION SPREE The excitement around the sector isn't limited to funding, however, as it is also witnessing an increasing number of acqui - sitions of smaller companies by large technology, telecoms and media companies. C h a r l o t t e Wa l k e r - O s b o r n , partner and head of telecommu - nications, media and technology (TMT) at law firm Eversheds, says London can expect to see even more mergers and acquisitions in 2015 from TMT companies that have amassed large cash balances in recent years. "A d d - o n c o m p a n i e s, w h i c h complement their businesses and take them to the next level, will continue [to acquire] with speed, particularly in the areas of social media, cloud, mobile commerce and payment, as well as security," she says. "Tradi - tional telecoms, media and tech companies will continue to be- come companies which offer all three areas, as true convergence becomes fully realised." FINTECH ADOPTION Financial services institutions have been keen to take advantage of the explosion in fintech innova- tion in the capital. In the lending community, al- ternative finance platforms and peer-to-peer lenders have created another investment and borrow- ing channel. Asset managers, meanwhile, have employed technology to help them improve investment strategies and navigate market liquidity concerns arising from regulatory changes. Andy Morgan, corporate fi - nance partner at Grant Thornton 08/02/15 #0296 The UK can lay claim to being the world leader in the financial technology sector as investment and business opportunities flood into the capital, writes Joe McGrath Financial Services Technology UK, explains: "Financial institu- tions are using the fertile London fintech community to get flexi- bility into their business models and accelerate the speed with which they can bring new solu- tions to market or address their needs in operating infrastructure of compliance. "Key areas of adoption have been in achieving improved cli - ent intelligence and analytics, and driving a more flexible and real-time enabled operating mod- el. The Holy Grail of a truly cus- tomer-centric, agile solution that brings the benefits of straight- through processing and is trans- parently compliant is gradually coming into view across a number of segments of the industry." WHAT'S TRENDING? As witnessed in the previous two years, the focus on back and middle-office trading technology at banks and asset managers will continue in 2015, although some believe that fintech groups are likely to see greater interest else - where in the sector. Edwina Johnson, chief oper- ating officer at Startupbootcamp FinTech London, says: "Greater investment will lead to more con- Investment from the venture capital community is one of the biggest indicators that London is winning the battle for fintech supremacy globally fidence and an increased number of new fintech startups being developed, particularly around innovation of the back office, fi - nancial inclusion, the usage of blockchain for financial services, and a greater focus on security and identification. " We will start to see greater transformation internally within financial institutions in order to become more agile, for example IT functions starting to become decentralised." Until relatively recently, asset managers had been willing to let the banks lead innovation on big data projects, particularly when it came to analytics. However, with both business types at a stage where they are beginning to see the value in such data trends, an - alysts believe this will be a growth area once again in 2015. Eversheds partner Ms Walk- e r - O s b o r n s a y s : " F i n a n c i a l institutions, like any sensible c o m p a ny, h ave m u l t i - f a c et e d t e c h n o l o g y st r a t e g i e s w i t h a stable of larger tech companies supporting them for core tech - nology needs as well as a number of smaller tech businesses. "Most tech companies are em- bracing selling tech products and services around the ever-popular big data area. However, the new stream of smaller startup and fast- growth companies can offer in - teresting add-ons and often have a real thirst for innovation in one or two areas of strength for them." Mr Ridsdale adds: "Big data analytics has been up and down the hype curve over the course of 2013 and 2014, but as trials mature, we expect to see finan - cial institutions start to invest meaningful amounts into these projects. This is likely to be the start of a multi-year investment growth cycle." Technology to win back customers The hottest fintech companies around What data knows about customers In this issue P06 P04 P03 Although this publication is funded through advertising and sponsorship, all editorial is without bias and sponsored features are clearly labelled. For an upcoming schedule, partnership inquiries or feedback, please call +44 (0)20 3428 5230 or e-mail info@raconteur.net Raconteur is a leading publisher of special-interest content and research. Its publications and articles cover a wide range of topics, including business, finance, sustainability, healthcare, Publishing Manager John Okell Head of Production Natalia Rosek Managing Editor Peter Archer Design, Infographics & Illustration The Design Surgery www.thedesignsurgery.co.uk Contributors DISTRIBUTED IN lifestyle and the arts. Raconteur special reports are published exclusively in The Times and The Sunday Times as well as online at www.raconteur.net The information contained in this publication has been obtained from sources the Proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the Publisher. © Raconteur Media STEPHEN ARMSTRONG Contributor to The Sunday Times, London Evening Standard, Monocle, Wallpaper* and GQ, he is also an occasional broadcaster on BBC Radio 4 and Radio 2. DAN BARNES Award-winning business journalist, he specialises in financial technology, trading and capital markets. HAZEL DAVIS Freelance writer, she contributes to The Times, Financial Times, The Daily Telegraph and The Guardian on a wide variety of subjects, but specialises in small businesses. JOE McGRATH Editor of trading and technology magazine The Trade, he has written for The Wall Street Journal and Financial Times. BRID-AINE PARNELL Science, technology and business writer, currently on the staff of The Register, she also contributes to Forbes.com. EDWIN SMITH Writer and editor, he has contributed to The Guardian, The Independent, The Independent on Sunday, The Sunday Telegraph, London Evening Standard, City AM and Private Eye. FUTURE IS BRIGHT FOR UK FINTECH RACONTEUR.NET /COMPANY/RACONTEUR-MEDIA /RACONTEUR.NET @RACONTEUR 1 i f t THIS SPECIAL REPORT IS AN INDEPENDENT PUBLICATION BY RACONTEUR MEDIA Overview £20bn UK financial technology sector £342m+ investment in UK fintech companies in 2014 Source: UK Trade & Investment 0 1 1 0 0 1 10110100101010110101001010101111010 10101011101010101010101010110101010 01111010101010101011010010101011010 10010101011110101010101110101010101 01010101101010100111101010101010101 10100101010110101001010101111010101 01011101010101010101010110101010011 11010101010101010100111101010101010 10110100101010110101001010101111010 10101011101010101010101010110101010 01111010101010110100101010110101001 01010111101010101011101010101010101 01011010101001111010101010101011010 01010101101010010101011110101010101 1101011010 10110100101010110101001010101111010 10101011101010101010101010110101010 01111010101010101011010010101011010 10010101011110101010101110101010101 01010101101010100111101010101010101 10100101010110101001010101111010101 01011101010101010101010110101010011 11010101010101010100111101010101010 10110100101010110101001010101111010 10101011101010101010101010110101010 01111010101010110100101010110101001 01010111101010101011101010101010101 01011010101001111010101010101011010 01010101101010010101011110101010101 1101011010 0 1 1 0 1 0 0 1 0 1 1 0 1 0 0 1 0 1 0 0 1 0 0 83% 9:04 AM 83% 9:04 AM 83% 9:04 AM 9:04 AM

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