Welcome to The Fintech Briefing, a morning email providing the latest news, data, and insight into disruptive fintech in Europe and around the world, produced by BI Intelligence.
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CAPGEMINI & EFMA’S WORLD BANKING REPORT: The two firms’ annual report on Retail Banking published today. It is based on the results of a global survey of 16,000 retail banking customers in 32 countries, and interviews with banking executives from around the world. Here are the 5 key points we pulled from the report:
- People are more likely to refer their fintech provider (55%) to a friend than their primary bank (38%).It’s because fintechs provide a better user experience. 82% of customers said that a primary value proposition of these products is that they are easy to use, 81% said faster service, and 80% said good customer experiences. Banks have largely focused resources on compliance and cost cutting instead of user experience which we think explains the discrepancy in customers’ willingness to refer.
- 46% of banks plan to collaborate with fintechs, but only 13% believe their core systems can handle the technical demands of partnerships.Many in the financial services industry believe partnering with fintechs is the best way to avoid disruption. But implementing new technologies proves difficult due to the incompatibility of banks’ legacy systems and fintechs new digital models.
- Latin America is the region with largest share of bank customers likely to leave in the next 6-months. 17% of respondents in Latin America said they were unlikely to stay. This is partly due to the fact Latin America has a younger tech-savvy population and banks in the region have not been quick enough to adapt their own products. The average across regions was 11%.
- 67% of customers in North America have complete trust and confidence in their bank — the highest of any region. While only 51% of Western European customers feel the same, having the least trust of any region. Customers in Western Europe are also least likely to trust fintech providers, suggesting a general distrust of financial services providers.
- Turkey (83%), Portugal (81%), Argentina (80%), Mexico (78%) and India (77%) have the highest fintech adoption rates. The global average across regions was 63%. The survey defined fintech as “the use of digital technologies for making the traditional financial products/services more efficient. This includes both, digital technologies that are provided either as completely new and standalone services to consumers or those which support/enable the traditional banking and financial services.”
FUNDING CIRCLE MOVES TOWARDS SECURITISATION: The marketplace lending company is likely to be the first European alternative lender to have loans from its platforms securitised, according to the Financial Times. Funding Circle has apparently met with a bank to arrange the securitisation which will be marketed next week and will allow the loans to be publically traded. Loans facilitated through a number of US alternative lenders have already been securitised.
The option to securitise loans attracts institutional capital. That provides a growth opportunity for Funding Circle because insitutions have more money to invest. Institutional and retail investors each account for about half funding for the company’s current loans. If this tips in favour of institutional investors, Funding Circle will begin to look more like a US marketplace lender. The majority of funding for marketplace lenders in the UK comes from retail investors, while in the US its institutional investors.
TRAVEL MONEY STARTUP TO RAISE £10 MILLION: London-based Revolut is a mobile app that offers foreign exchange transfers via a multi-currency prepaid MasterCard. It is close to raising £10 million ($14 million) in a Series A funding round. Users top-up their Revolut account directly from their bank, which can be located in a number of countries, and are then able to use the card to transact in over 90 currencies at the interbank exchange rate. This is the rate at which banks sell currency to foreign exchange (FX) companies. FX firms typically mark this price up a few percentage points before selling it to customers. Revolut says that it will make money from marketing to consumers through the app instead, likely in the form of advertising. It also charges a 2% fee to users who withdraw more than £500 ($700) a month. The Money Transfers & FX category accounts for the second largest share of Fintech VC funding in the UK at 19% or £171 million ($243 million) last year.
PEOPLE ON THE MOVE:
- Jason Bates co-founder of Mondo is moving on to found a fintech consultancy. Prior to Mondo, Bates was co-founder of another digital-only bank, Starling.
- Marcus Treacher is the new Global Head of Strategic Accounts at blockchain startup Ripple. Previously, Treacher was Global Head of Payments Innovation at HSBC.
- Bill Ready has been named Senior Adviser at growth equity firm Silversmith Capital Partners which focuses on technology and healthcare. Ready is SVP, Global Head Product & Engineering at PayPal.
- Jorgen Nordin is the new Chief Innovation Office at social payments firm fastacash. Previously Nordin was Head of International Product Management at wearables company Jawbone.
Around the world…
CAPGEMINI HIRES BLOCKCHAIN STAFF: The consultancy plans to add 100 “blockchain professionals” to its financial services unit this year, according to Finextra. The move follows interest in blockchain from central banks, financial institutions, and technology firms who believe it will help them improve efficiency and reduce costs. Capgemini is already working on a range of blockchain-based solutions with firms, covering micropayments, syndicate loans, asset management, and claims handling. PwC, another major consultancy firm, also announced a new blockchain team earlier this year. Both consultancies are responding to the need to turn industry-wide interest in blockchain into solutions robust enough for mainstream use.
EUROPEAN PARLIAMENT TO HOST BLOCKCHAIN CONFERENCE: The 4 day conference will happen this week and aims to educate Members of the European Parliament (MEPs) on distributed ledger technology, according to Finextra. Attendees will include representatives from the World Bank, the IMF, the UN, academics, central banks, established blockchain companies and startups. The event will consist of roundtables and presentations from attendees including Nasdaq and Blockchain.info. Major banks around the world are participating in blockchain trials because of the technology’s potential for delivering efficiency and cost savings.
GOLDMAN SACHS GOES ALL IN ON AUTOMATION: Currently, the investment bank’s main tech focus is on achieving automation across the firm, according to Damian Sutcliffe, Global Chief of Operations Technology, who Business Insider sat down with last week. Sutcliffe says automation is needed to help the firm adapt to new market conditions where scale is key. This is because of increasing cost pressures in the industry. Automation helps ensure that every unit transaction is done at a profit by increasing efficiency and reducing the possibility of human error. It will also help the firm comply with the quantity and quality of data regulators now expect. Automation is likely to be the biggest driver of job losses in the bank industry.
FED GOVERNOR ON BLOCKCHAIN: Federal Reserve Governor Lael Brainard acknowledged the potential of blockchain in the financial services industry in a speech to the Institute of International Finance Blockchain Roundtable last week. She stated that blockchain technology should not be underestimated, because it has the potential to introduce major efficiencies to the industry and huge disruptions in financial services were not unprecedented. But she also pointed out the challenges posed by blockchain, including how new systems would integrate with legacy systems, and the public nature of existing blockchain technology — which could present problems to an industry that currently heavily restricts access to its operations and data. Overall, Brainard emphasised the Fed’s position was that of other regulators — to allow innovation without risk to consumers or overall financial stability.