Welcome to The Fintech Briefing, a morning email providing the latest news, data, and insight into disruptive fintech in the UK and Ireland, the Continent, and beyond, produced by BI Intelligence.
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UK FINTECHS GET CREATIVE ABOUT FUNDING. UK-based fintechs are moving away from traditional methods of securing funding and instead employing other tech firms to raise money. This week banking startup Mondo asked its customers for funding through Crowdcube, and tennis star Andy Murray invested in a startup — through a startup.
- Mondo gives its users the chance to invest. The mobile-only bank has already received £5 million ($7 million) from VC firm Passion Capital this year, and is now planning to raise £1 million ($1.4 million) from individual investors, who will get a stake in the bank, via Crowdcube. The bank claims to have turned down large investors in order to offer its customers the opportunity to invest, viewing giving users a stake in the bank as a reward for their input so far. The offer was so popular it crashed Crowdcube’s site and the funding round was put on hold.
- Andy Murray invests in P2P mortgage lender. The tennis star invested in P2P mortgage provider Landbay through equity crowdfunding platform Seedrs, with whom he has a strategic partnership. Landbay completes more than £5 million ($7 million) each month in new P2P mortgages, priding itself on being completely transparent by publishing the full records of loans it’s provided on its website. As regulations are clarified around how P2P lenders can operate, these companies are actually seeing increased investment. This highlights the benefits of an active regulatory body that works to help fintech companies operate according to clear and fair rules.
There has been talk since the end of last year of cooling VC enthusiasm for fintech companies following a number of down rounds, and a global decrease in seed and early stage investing. The UK has also seen the collapse of high-profile tech unicorn Powa which had raised at least £160.8 million ($225 million) from traditional investors. Both are contributing factors in fintech firms deciding, or needing, to look elsewhere for funding, and in the growth of businesses built to help them do just that.
FINTECH FAILS TO TAKE OFF IN FRANCE. France saw €65 million ($71 billion) in fintech investment last year, a great deal less than close neighbours Germany and the UK, according to Innovate Finance. The country is struggling to overcome an international reputation as a hard place to start business, and with globally renowned fintech hub London less than an hour away, the fintech scene in France is struggling.
- France does have a fintech scene. Lending, crowdfunding, and payments are the biggest sectors in the country, while the startup banking industry is less developed than in the UK, and the money transfer and exchange sectors are much smaller according to an infographic from Let’s Talk Payments. The problem is not lack of startups – the landscape shows plenty of smaller fintech firms – it is that France is not conducive to those firms scaling.
- Appetite for alternative banking. Compte-Nickel which offers bank accounts that are opened in tobacconist’s shops celebrated its 2nd birthday last week. Consumers register using a special electronic terminal in the shop, pay €20 ($22) to open an account, their ID is checked by the clerk in the shop and then their MasterCard debit card is activated. The company does not offer overdrafts, but funds itself through fees for cash withdrawals and deposits. So far 240,000 people have opened accounts showing there is interest in alternative banking in the country. However, the company still hasn’t overcome the scale problem. Compte-Nickel relies on its partnership with the tobacconists’ union, which might limit its growth potential and creates a business model that wouldn’t work in most other European countries.
- Barriers to fintech expansion. French labour laws are restrictive — employees are entitled by law to 31 days annual leave and employee unions still hold a great deal of power. There is also truth to the stereotype of France being a bureaucratic nightmare, it can take up to a week, £1200 ($1700) and multiple admin procedures to register as a company, compared to about 24 hours and £15 ($21) in the UK.
REGULATORS GET BEHIND BLOCKCHAIN. Both Hong Kong and UK regulators are looking at using blockchain as a way to improve the financial services industry. The technology could greatly increase efficiency in financial industries by streamlining a variety of processes, including cross-border transfers, shareholder management, and settlements.
- Hong Kong’s annual budget had a whole section dedicated to fintech. It included a statement on the use of blockchain “with a view to developing its potential to reduce suspicious transactions and bring down transaction costs”. This is likely aimed at encouraging trust in the region by the international community.
- The UK government plans to invest £10 million ($14 million) in blockchain research. The announcement was made in October 2015 by the minister who also headed up last week’s UK Fintech Week. During a Fintech Week event, the FCA’s director of strategy and competition said that they will be looking at how RegTech principles — building technology that facilitates the delivery of regulatory requirements — can be applied to blockchain. The UK government has committed to blockchain and that means the regulatory body needs to understand how to put the technology to best and safest use.
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Around the world…
Time for global fintech regulation? Mark Carney, Chairman of the G20 Financial Stability Board (FSB), has informed G20 finance ministers that it will begin evaluating the risks posed by fintech to global financial stability in March. The FSB has the power to make recommendations on regulation to G20 members and will decide on next steps in March.
Android pay to launch in the UK in March. Google’s competitor to Apple Pay will launch next month according to The Telegraph reporting industry sources. Apple Pay has seen heavy adoption in the UK due to existing consumer payment habits built by contactless cards and the prevalence of contactless terminals, factors that should help Android Pay achieve similar traction. Android phones make up more than half of the smartphone market in the UK, although how many of those have the necessary NFC technology is unclear.
Former Google exec joins bank. Maile Carnegie, MD of Google Australia and New Zealand since 2013, has joined large Australian bank ANZ as group executive, digital banking. Australian banks generally have a good track record when it comes to digital innovation, and Maile’s appointment is part of ANZ’s plan to create an innovation culture. She will also share responsibility for the bank’s overall financial results, highlighting the importance of successful digital innovation to big banks’ future growth.
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