The Fintech future is bright but is it disruptive?
10 Oct 2016
Fintech: a disruptive or adaptive technology?
Fintech is considered as a new technology which can disrupt the traditional finance industry, especially the consumer sector – see details of our Robo-Finance Agents Report . But how disruptive will it actually be?
The past seven days has seen three key pieces of news on the Fintech sector, which could provide pointers to how the sector will develop in the UK. Firstly, Innovate Finance, the Fintech, trade body reported a drop in venture capital funding for Fintech in the UK: funding dropped to $386m in the first half of 2016 compared with $580m for the same period in 2015. Secondly, Nutmeg the Robo-advisory firm reported its revenues rose strongly in 2015 (£1.7 million in 2016 compared with £0.64 million in 2014) but only at the expense of its losses almost doubling (£9 million compared with £5.3 million). Thirdly, Royal Bank of Scotland formally launched its artificial Intelligence driven personal assistant Luvo.
What collectively do this three pieces of information suggest? They suggest the big players in the UK finance industry (i.e. the High Street Banks) will play a growing role in financing and introducing Fintech in the UK, especially in the area of artificial intelligence or Robo Agents. Without venture capital and other forms of finance, UK Fintech will be less able to develop new proposition without the backing of the big players. Brexit may have made it harder for UK Fintech start-ups because overseas investors have growing doubts about the UK economy going forward. Existing players will also find it harder to sustain losses over many years without turning to new forms of finance, possibly including equity finance from the big banks. While Nutmeg says its business is on course to meet its goals, without a flow funds the sector could be slowly swallowed by traditional finance giants. So rather than disrupting the business models of the big banks, it may instead adapt them.