1.UK - FinTech
“1. Fintech everywhere
While Fintech is estimated to represent c.14 per cent of global venture, the category is becoming at once more omnipresent, broader and more subtle, with a16z recently commenting that every start-up will eventually become a fintech company because of the need to embed transactional capabilities. Uber is often referenced as an example of this. In Southeast Asia, Grab and GoJek, originally ride-hailing apps, are offering payments. With a user base of 850m, what might Tik Tok look like if micropayments were to become a feature? The diversity of opportunities is huge, with Bain recently commenting that fintech joins the internet, cloud and mobile as the fourth major platform technology.
2. Dealing with legacy
Financial architecture is changing fast with start-ups able to build quickly and, thanks to cloud computing, at low cost. The pace of evolution of incumbent banks and financial institutions is constrained by significant regulation and dated technology. For start-ups, education on new, disruptive trends is key to building trust and changing mindsets at legacy organisations. This contrast in approaches to innovation leaves many existing financial offerings vulnerable to the deflationary effects of disruption. AI will play a key role in this, as currently observed with the disruption of Credit Rating agencies.
3. Price and regulatory arbitrage
Following from the above, this might equally be called time and efficiency arbitrage. Legacy organisations governed by tight regulations have slow and cumbersome procedures that are being displaced by quick moving start-ups – speeding up the process and reducing the costs of mortgage applications, using AI to accelerate lending decisions, pay on demand forno more monthly pay days, trade finance and working capital management, to mention but a few.
4. Democratisation of access
Access remains the preserve of the privileged and the few. Starting with banking, it is estimated that 1.7bn adults globally remain unbanked. Following this, how to provide credit for somebody with no history? AI now allows for real time measurement of credit scores. Separately, Cambridge Associates in Q1 2020 published a report recommending an allocation to venture capital of 15 per cent, reflecting the exciting, high-growth technology companies in private markets. How to democratise access to this? With real-estate prices in major cities four times the level of 20 years ago, how to democratise access to that most basic of human needs, shelter?
5. The death of cash
Already underway for some time, the death of cash has been expedited by COVID-19, primarily due to its acquired status as a transmitter of disease. The share prices of payments businesses have reflected this bonanza with Paypal alone worth close to the market capitalisation of the entire European banking sector. In a rare instance where both regulators and investors are aligned, the central banks are encouraging this migration not least because cash is the lifeblood of the black economy and digitisation enables more efficient collection of taxes. So too, the introduction of CBDCs (Central Bank Digital Currencies) is helping establish the credentials of cryptocurrencies, perhaps reminiscent of where equity markets were 20 years ago. Where institutions today own 80% of the S&P 500, this number was just 5% in 1940. The institutionalisation of cryptocurrencies is likely to be much quicker in today’s compressed time frames.”
2. UK – FinTech
“IPGL, the private investment company run by Michael Spencer, founder and former CEO of Icap and NEX, has become a cornerstone investor in trade anlytics startup tradefeedr.
Tradefeedr allows clients to query and analyse their FX trading data from participating liquidity providers and ECNs via a standardised API, enabling them to improve the quality of their trade execution.
Over the past year the startup has signed up 14 liquidity providers and a number of clients to use the platform, including Goldman Sachs, UBS, XTX Markets and Insight Asset Management.
The majority of the new $3 million cash injection comes from IPGL, with support from Seth Johnson, former CEO of NEX Markets, who joins the board as chairman.”
3. UK – FinTech
“Businesses turned away from invoice financing in the first half of 2020, triggering a 55 per cent decline in volumes at sector-leader MarketFinance.
Despite the downturn, MarketFinance today announced a 3.4 per cent increase in its total lending for the first 11 months of 2020, supported by a considerable rise in its business loans and involvement in the government’s Coronavirus Business Interruption Loan Scheme (CBILS).
To date, the lender has originated £342.4m to UK businesses in the year to November, with its core invoice financing recovering in the second half of 2020 albeit with “some way to go before we see levels return to those of 2019”.
4. US – FinTech
“Digital bank Monzo, which recently scored an additional £60 million investment, has revealed that personalized cards have now arrived for US customers.
The Monzo team notes in a blog published on December 16, 2020, that they’re pleased to announce that they’ve introduced their newly designed, personalized Monzo USA cards. The digital bank’s client can now order a card with their name on it so “no more awkwardly being called ‘Monzo Beta’ when picking up a coffee at your local shop.”
5. International – FinTech
“Mastercard, one of the worlds largest cards and payment solutions providers, has been accused of allegedly overcharging 46 million British consumers during a 15-year period. A £14bn damages claim on behalf of these brits has now been given the green light to proceed following a landmark ruling by the UK’s highest court.
The claim alleges that these 46 million people paid higher prices when paying for goods in shops than they should have due to higher than normal transaction fees charged by Mastercard, allegedly in breach of competition law
The Supreme Court ruling, made on 11 December 2020, has denied Mastercards appeal and means that the case will have a second hearing at the Competition Appeal Tribunal (CAT).
Mastercard has ” fundamentally disagreed” with this claim, advising that they know people have received valuable benefits from Mastercard’s payments technology.
“No UK consumers have asked for this claim. It is being driven by ‘hit and hope’ US lawyers, backed by organisations primarily focused on making money for themselves.
“Mastercard will be asking the CAT to avert the serious risk of the new collective action regime going down the wrong path with a case which is fundamentally flawed.”
The legal action was taken by the former UK financial ombudsman Walter Merricks, who started the claim on behalf of individuals over the age of 16 who were resident in the UK for at least 3 months between 1992 and 2008 who has bought an item or service from a business that accepted Mastercard payments.’