The combination of financial start-ups and the emergence of new technologies, like blockchain, is radically shaking up the longstanding financial services industry. SkyParlour investigates whether these fintech companies are capable of creating lasting change
Alternative banking is an obvious example. Following the 2008 financial crisis, the Bank of England set out its simplified process for opening new banks, lowering capital requirements and inviting new ideas to challenge the ‘big six’.
The new banks could build their technologies from the ground up, bypassing legacy systems and costly high street branches. New providers emerged from 2015 led by Atom bank offering mobile-first digital experiences with features like real-time balances, detailed spending breakdowns, biometric security, subsidised foreign exchange charges and simplified money transfers.
The brands too could start afresh from the reputational calamity of the financial crisis. Banking even became cool with reports of Monzo being used as a chat up line in London’s bars and clubs.
There’s a social good here too; millennials, the first demographic destined to be poorer than their parents, are now better equipped to manage their money. True, this isn’t banking’s ‘Uber moment’: the scale of disruption simply isn’t comparable – but it does demonstrate that trust can be established, if only you have the tech to woo people.
Business lending is another area that fintech disruptors targeted following the financial crisis. When the banks cut lending in 2008 SMEs suffered a spike in rejections along with the usual inflexible repayment structures, time consuming applications and long approval processes, all of which stifle growth.
Fast-forward to 2018 and alternative finance, or Alt Fi, is now a relatively mainstream option for UK businesses looking to upscale, and the options are plentiful; AltFi Data anticipates that €2.8 billion will be lent in Europe in 2018, a year on year increase of 73%.