Banks, Building Societies & FinTech: Event Round Up
The Leeds FinTech community gathered on 21st June 2019 at Nexus at the University of Leeds for the latest FinTech North Forum: Banks, Building Societies & FinTech.
Julian Wells kicked off the event with a short overview of FinTech North (which has now run its 40th event) and the current state of FinTech in the UK. He discussed a recent report titled UK FinTech State of the Nation which was released in April this year.
- FinTech sector brought in nearly £7bn of revenues in 2018
- There are over 1600 FinTech firms in the UK
- 76,000 people currently work in FinTech, expected to rise to 106,000 by 2030.
He then moved onto FinTech stats between London and the regions:
- 94% UK FinTech funding is in London, and 85% of the accelerators attended by UK FinTech firms are currently in London.
- Two-thirds of FS jobs are based outside of London
Although there is currently an imbalance, there is still a lot of opportunity in the north. If measured as a country, the northern powerhouse would be the 9th biggest economy in Europe.
What is good to see, is that bodies such as Innovate Finance are now taking a much more national view, looking to engage with what is happening in the regions.
Stephen Grimwade, Yorkshire Building Society
Stephen was the first of our speakers, here to discuss digital transformation and how established FS organisations are responding.
Stephen made the point that infrastructure, such as 5G is a key step for the next waves of technology to take off – such as Internet of Things.
With the right infrastructure, we’ll see the adoption of new tech offerings happen much faster.
Regulation is also changing, it’s now welcoming innovation.
Stephen then took us through the 5 stages of FinTech and how the conversations have evolved, originally cited by Chris Skinner of Finanser.
- Disruption – 2005-2014: Disrupting the entire banking ecosystem
- Discussion – 204-2017: Once the opportunity became more perceivable, large institutions started to invest.
- Partnership – 2017-2022: Now it’s all about collaboration and partnership business models
- Integration – 2022-2027: Possibly led by a new regulation era. Customers begin to pick their new ‘winners’.
- Renewal – 2027 >>: A new era of financial services, that looks different to what we see today.
Coming back to the areas where YBS is focusing, Stephen pointed out how different segments are evolving at different speeds:
Savings have changed very quickly, anyone can be an investor now, just through an app. While mortgages have been evolving much slower. So, disruption isn’t happening consistently.
Stephen also took us through some of the findings from their customer insight research. He highlighted that YBS customers are much more comfortable with digital channels than YBS expected. He also discussed how needs can be very different across a customer base, with customers opting for very different approaches to interact with their banks / building society.
FinTech is going to help us be a force for good, especially addressing the generational problem for homebuyers in the UK and trying to help people save.
Samantha Bedford, Head of Innovation & New Ways of Working, CYBG
Samantha was next up to tell us about CYBG’s approach to working with FinTechs. She began by telling us that the reason she joined the banking sector, is because of FinTech.
I don’t think there is a better time to be involved in this area, it’s hugely exciting and so much is changing.
There are tons of innovators out there, developing great new customer experiences that we want to plug into.
Samantha told us of the internal accelerator that CYBG runs for new propositions.
Traditionally, banks aren’t knowing for going particularly fast. We recognised that we need a new way to roll out new ideas, so we created a space for that.
The accelerator has its own ringfenced funding, which helps new propositions move at pace as they don’t have to go through the traditional cross-corporate processes.
Alongside the internal work, CYBG has been active in making itself more approachable to FinTechs. They have aimed to share knowledge where they can, make data available, and outline risks and next steps in a clear way.
Samantha then shared with us some top tips for working with CYBG:
- Talking to the CEO is great but it doesn’t guarantee you the partnership. So, consider the whole team.
- Ask the right questions to find out which problems we are currently working on.
- Remember to ask, “is there budget for this?” Think about what resource might be required at the CYBG end to fund some early discovery on a potential partnership.
Steven Marks, Business Development Director, Newcastle Strategic Solutions
Steven Marks was next up, from Newcastle Strategic Solutions, part of Newcastle Building Society. He provided us with insight into the current challenges and opportunities facing Newcastle Building Society.
The building society is a regionally based offering with 27 branches and £3.7bn worth of assets and Newcastle Strategic Solutions provides a savings management platform for FS institutions.
In terms of the current banking landscape, Steven highlighted 5 key trends:
- Technology, infrastructure and cyber-security drivers
- Collaboration, between banks and FinTechs
- Regulation – Open Banking, creating further competition, innovation and opportunity
- Banking platforms now offering customers access to a wider financial ecosystem
- New entrants having an impact: Atom, Starling, Monzo, Revolut
Steven ended by emphasising how Newcastle Building Society is passionate about the north and the northern economy, as well as collaborating with FinTechs.
Jonathan Thompson, Co-founder & CEO, Bank North
Jonathan Thompson was our last speaker, who presented the story so far on Bank North.
Bank North’s mission is to disrupt the poorly served £150bn SME lending market.
He highlighted three key areas to crack when starting a new bank.
- Regulation – You can’t run a bank without a license, and it takes about 2 years to obtain a banking license from scratch.
- Building the proposition and product – The current Bank North team is focusing a lot on their tech stack and product build.
- Funding – Bank North is still pre-revenue and is now in a fundraise for a Series A.
He then moved onto the shape of the SME lending market.
- £154bn UK stock in SME lending
- 70% provided by incumbent banks
- +70% increase in the number of commercial finance brokers in the UK since GFC
Bank North is focusing on the market that looks to borrow at least £500,000.
Not every business owner wants to go on a platform to punch in some numbers on how much they want. Face to face is an essential part of the proposition for amounts above £500,000.
Jonathan told us how the regulator actually deems SMEs riskier than consumers.
For an SME bank, you have to hold 3 times as much capital as you would if you were lending to consumers.
There has been quite a shift of capital away from SME to high volumes, consumer end. So, an SME is not getting the high level of focus, and service it needs.
Bank North is expected to launch in 2020.
Panel Discussion
The event then moved into a panel discussion which consisted of the speakers joined by Tom Bowie, Associate – Financial Services, Squire Patton Boggs.
Topics included: FS-FinTech collaboration, established FS institutions approach to collaborating with FinTechs, ethics/trust in data, on-boarding processes, peer-to-peer lending, and challenges/opportunities of cloud technology.
If you were able to attend the event this morning, we hope you found it as interesting and insightful as we did. It was great to see so many of you there and we look forward to seeing you all next time.
