Sector spotlight: Fintech

Fact…

• Hargreaves Lansdown saw a 162 per cent increase in iPhone app trades between July 2015 and November 16.
• 14.3 per cent of people already use some type of fintech service, such as online payments or peer-to-peer loans
• More than $50bn has been invested in fintech companies worldwide since 2010
• 2015 Tech Nation report revealed that 61,653 people work in the tech sector in the Bristol and Bath region

Fintech – financial technology – is a new and fast-growing field. The term has come to represent the raft of apps and software that complement or compete with traditional banking processes to provide financial services.

Advocates believe that technological advances like smart phones and cloud computing along with a mistrust of banks can democratise the financial scene, and Bristol is muscling its way towards the front of the field.

Well established on the technology front, Bristol and Bath has a respectable fintech cluster that works with counterparts in other parts of the UK. Manchester, for example, is emerging as a centre for app and front-end development, Leeds has a tradition of customer support and back-office processing. “Bristol and Bath’s contribution is the next generation of infrastructure and analytics on which those apps and service support will be delivered,” says Adrian Shedden, senior associate at Burges Salmon who leads the team on FinTech, pointing to the hundreds of start-ups and companies in the area.

Adrian Sheddon, who heads up fintech at Burges Salmon

In fact, High Tech Bristol and Bath (HBB)’s fintech special interest group, has identified technology as Bristol’s specific area of interest, thanks to a history of cloud and high performance computing.

There’s more to be done to promote that capability. “Whilst there is a fantastic fintech cluster emerging, we need to spread the message on the cluster’s strengths, [which] should help attract talent and finance,” says Adrian.

“The future looks bright; fintech globally is maturing and there is increasingly a move from the smartphone-driven app/UX-driven approach to addressing issues with the underlying legacy infrastructure and philosophies of the range of financial services.”

To support the sector’s development, a number of the city’s largest fintech stakeholders – PwC, Barclays, Clarke Willmott and Deepbridge Capital – launched Bristol Fintech, aimed at the startup end of the market and tasked with facilitating knowledge exchange.

MAJOR PLAYERS

“Hargreaves Lansdown firmly categorises itself as a fintech business and Bristol has always been our home,” says digital director Chris Worle. “Over the past 10-15 years Hargreaves Lansdown has been incredibly successful at developing and deploying the best technology and digital experience to help people make the most of its money. We were a fintech business long before fintech was a thing.”

As the UK’s leading direct-to-consumer platform for savings and investments, using the internet as its primary client service channel for its 850,000 investors. As a result they are constantly developing new fintech solutions in their large in-house IT team. That makes recruiting the best talent a constant challenge, although Bristol serves the company well: “Where we don’t have the skills or expertise in-house, we often refer to the local area for support. Bristol has a brilliant pool of agencies, whether development based or areas such as video or marketing. We rarely have to go further afield.”

Chris Worle of Hargreaves Lansdown

“Without doubt, we have seen an increase in fintech companies appointing Moon Consulting in the last year,” confirms Simon Quinn, head of executive search at Moon Consulting. “This growth mirrors the national increase across the UK in both established and start-up fintech business requirements as technology continues to advance at a significant pace. The next phase of this development is in AI (artificial intelligence/machine learning) and we are already working with several our clients looking at big data projects and data science.”

Back at Hargreaves Lansdown, the latest innovations include a cash savings solution that will allow investors to move money between banks to get the best savings rate without going through the hassle of opening and closing accounts.

Chris cautions, however, that Bristol’s sector is still relatively small: “Like it or not, London continues to be the home of fintech and financial services. Bristol needs to continue to grow and scale. It needs to get better at attracting skilled people from outside the city and at retaining the graduates from Bristol and UWE in order to deliver the scale and momentum that Bristol’s tech businesses need.”

Elsewhere in the city, HP Enterprise is developing future generations of SWIFT, HP Labs is working on security and cryptography innovation, and in 2016 Nationwide opened a UX (user experience) centre here.

PLATFORMS AND APPS

Parmenion moved to Bristol in February 2013 to take advantage of the strong financial sector and skilled technology workforce. The platform provider now has in excess of £3bn under management, allowing advisors to manage their clients’ investments with a blend of investment styles and asset allocations.

In 2015 it was named one of the top 50 hottest financial technology companies in Europe; in 2016 it was acquired by Aberdeen Asset Management as part of its strategy to become a leader in using technology to provide investors with appropriate portfolios.

“It is also clear that there is great potential to capitalize on innovative technology as a way of opening up new markets in the UK,” says marketing and distribution director Richard Goodall. “Our goal is to make investment simple and accessible to all.”

Based at Temple Back, Moneyhub is a B2B provider of personal finance management tools for companies to share with their customers. A hatchling from SETsquared, it has enjoyed significant investment from financial services group, MMI Holdings, which also commissioned the University of Bristol to co-create the UK’s first Financial Wellness Index.

The Moneyhub app helps customers monitor their spending

“The biggest opportunity within Fintech is the European Payment Services Directive 2 (PSD2) legislation coming into play in the UK in January 2018,” says chief product officer Dan Scholey. “It will effectively open up the personal banking industry, providing consumers with more control and power over their own data, enabling them to easily move their money from one bank to another. It is the biggest shake up of banking as we know it, and it will increase competition, innovation and transparency across the industry. Technology will play an increasingly key role in how and where people ‘bank’.”

The Bristol Pound encourages the local economy to transact using its electronic currency, an opening banking platform that is more flexible and comprehensive than that currently available from conventional banks. It enables developers to experiment with the future of financial technology.

ScottLogic in King Street is a national software development business that has focused on financial services and markets as its core differentiator. It has been developing and mobile app to enable users to not only view their transactions and balance but to seek out local businesses and pay for goods and services using their mobile phone. It will allow people to search for discounts and deals, and analyse their spending.

Fundsurfer is a Bristol crowdfunding platform that allows businesses to cut out the banks and get support for new projects. It has helped businesses raise over £14m in three years. Co-founder Oliver Mochizuki says SMEs have been facing systemic issues in accessing growth funding, turning more on to alternative sources.

“It takes six to 12 months to raise equity in Europe versus four to six months in the US. Challenging this is a big part of our mission,” he says, noting new data which found that SMEs in London mostly use credit cards to finance their growth. “How can this be happening in London, a world capital of finance? This is where fintech platforms can really make a difference.”

PROFESSIONAL SERVICES

As a highly regulated industry, fintech has significant contributions from the legal and professional services sectors. Triodos Bank, Parmenion and Axa Wealth are among the organisations providing financial services to the sector.

Burges Salmon has a dedicated fintech practice that specialises in providing advice on funding and intellectual property to companies in the sector. They work with business models involving innovative technologies – from digital banks, payment services and cryptocurrencies, to crowdfunding, regtech, big data analytics and credit scoring – and have  a close working relationship with HM Treasury (soon to moving into Temple Quay) in building fintech outside London.

Clarke Wilmott has a multimillion pound fintech division. It was one of the founding organisations in Bristol FinTech. Partner Philippa Hamm says the city has a very supportive fintech community, even if it’s suffering from the same skills shortage impacting the wider economy:

“Bristol benefits from other great organisations to support and promote growth businesses, including SETSquared, The Engine Shed and TechSPARK. But there are never enough quality developers/engineers and digital marketers. The pool in Bristol is small but growing.”

Image – Shutterstock

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