Fintech is altering our core understanding of what it means to receive a financial service and disrupting areas once monopolised by financial and banking institutions, says Peter Tuvey, co-founder of Fleximize, the UK’s first revenue-based finance provider
Financial technology (fintech) start-ups have drastically changed the way we go about our everyday lives. From payments and investment management, to digital currency and lending, fintech is transforming how we interact with financial services – in terms of both receiving and supplying them.
The financial services sector has spent the last decade enduring volatile markets and subsequently consumer confidence in the sector is at an all-time low. It is therefore not a great surprise that businesses and the general public alike have jumped on the opportunities being offered by fintech start-ups.
The fintech industry is one of the fastest growing areas of the British economy and is generating more than £20 billion annually. The sector continues to grow, it currently employs over 60,000 people and has produced more billion pound-valued start-ups than any other British economic sector.
This unprecedented expansion has shown no signs of slowing down and the sector is now predicted to monopolise aspects of financial services once dominated by grand global institutions.
For instance, the advent of millennials constantly seeking efficiency within their work and home lives has provided a market for flexible financial products that are tech-heavy. With people constantly searching for ways to save time, fintech solutions cut out the middle man in much the same vain that innovations like Uber and Airbnb did in their respective sectors.
Online mortgage broker Trussle has just recently secured £13.6 million in funding from investors led by Goldman Sachs. Trussle, who launched the worlds first continuous mortgage monitoring service in 2017, has grown rapidly despite an overall uncertain market. It is consequently clear that fintech is an industry that can maintain growth levels even in times of political and economic uncertainty.
More entrenched and concentrated financial markets stand to be disrupted by new financial technology innovations according to the All-Party Parliamentary Group on FinTech (APPG FinTech). Mentioning examples such as WorldRemit and TransferWise, the 2017 report from the group noted that fintech provides a “meaningful alternative to… bank[s] when making a payment or moving money across borders and currencies”.
Acknowledging the worth of substitute lenders including Funding Circle and Fleximize, it also emphasised how fintech is positioning itself as a “bridge between citizens and the financial services they need and want”.
Espousing transparency and divergence from the norm, faster settlements and products tailored to adapting customer desires, fintech is creating more ways to access finance. Treating the customer as the primary agent has played a pivotal role in the increased global acceptance of fintech.
As an example, the digitalisation of financial services has created greater audit capacity, amplified payment transparency and dramatically reduced security risk. Having access to live customer data has allowed for the creation of products that are more suitable to consumer needs.
The EY FinTech Adoption Index found that half of consumers globally are currently using money transfer and payment services, meanwhile 25% are using fintech for insurance, 20% for investment and savings, and 10% for financial planning and borrowing. The study also found that almost 25% of insurance consumers are communicating with suppliers or processing transactions online.
The report revealed that what attracts consumers most is the accessibility of different products and services, as well as the better online experience and more friendly lending rates. This is a critical part of the drive towards full financial inclusion in order to establish a more diverse and transparent sector.
Substitute finance solutions are filling the void left by traditional lenders by offering businesses easy-to-access and flexible funding.
Through a combination of more flexible lending criteria and state of the art technology, alternative providers can provide funds to businesses at a far quicker pace than traditional lenders. This can be priceless for businesses that need immediate relief for a temporary cash flow hole, to free up the necessary capital to purchase stock or pitch for a new contract.
The dispersal of fintech throughout the financial services sector presents many different outcomes for the traditional institutions. On the one hand, the spread of fintech could be seen as disruptive to what has been a steady sector in the past, but it also provides an opportunity for progression through innovation.
Unleashing a new age of innovation and competition, the forthcoming years of fintech should be exciting. Nevertheless, with new prototypes being constrained by outdated infrastructure, it is critical that we create a regulatory framework to encourage a more inclusive and competitive fintech industry that works for lenders and businesses alike.
About the Author
Peter Tuvey is Co-Founder & Managing Partner at Fleximize. Launched in 2014, Fleximize offers small business loans from £5,000 to over £1 million and has supported a wide range of SMEs across the UK. To date, the company has lent nearly £60 million to businesses in a number of sectors.
