13 Mar Fintech: reinventing the financial system or business as usual?
This week Holland FinTech attended the inaugural Innovate Finance Global Summit 2015. The summit took place in the solemn Guildhall, the ceremonial and administrative centre of the City of London and its Corporation. The Corporation is probably the world’s oldest continuously elected local government body. It is no coincidence that Innovate Finance chose Guildhall to host their Summit. The City of London Corporation is a founding member of Innovate Finance. Innovate Finance started just six month ago as an organization that aims at accelerating the UK’s leading position in global fintech. The Corporation’s goal is to work alongside Innovate Finance to foster the growth of the fintech sector and to create more jobs in London.
Money makes the world go round
In the Summit’s opening speeches the ambition to be the global fintech leader was very clearly articulated. Claire Cockerton, founding Chief Executive Officer at Innovate Office, spoke about sharpening the competitive edge and the international exposure of London. Next on stage was Eileen Burbridge, introduced as the American woman that became the queen of British Venture Capitalists. She stated that money makes the world go round and stressed that real business can be made out of fintech.
Remarkably enough, representatives of London’s vibrant community of tech startups, the engines of the fintech Industry were not on stage during the opening hours of the Global Summit. (Except of course for the inevitable pitch round). This could lead to presumptions that the financial services sector is still being the exclusive domain of the large institutions, that fintech is business as usual and that is all about making money.
Reinventing the financial system
Fortunately, after the coffee break a different vibe came up. It started with Max Levchin who wants to make the credit card obsolete with hit digital finance platform Affirm. Levchin is known as a cofounder of Paypal. With Affirm he wants to reinvent the financial system instead of just building something on top of it. Gordon Graylish from Intel Corporation also did a very inspiring presentation explaining that only 7% of Generation Y work for Fortune 500 companies and most of this generation prefer to work for startups. Graylish made a call for business to reinvent the way we work.
These speeches marked the rest of the day with speakers offering lots of information and interesting insights about how the world has changed in recent years and how difficult it is for the traditional financial industry to catch up with these changes. E.g. 40% of GDP derives from companies less than15 years old. Net creation of jobs stems from companies founded less than 5 years ago. These companies are more and more knowledge based, creating intellectual property, whereas banks provide mostly loans secured on assets to established companies.
Reaching the unbanked
Financial inclusiveness was set high on the agenda of the summit. Joyce Kim, executive director of Stellar, explained that cash still works best for most people. The aim of Stellar is to fight poverty with better fintech tools. “The unexpected tragedy of our financial system is that the less money you have, the more expensive it is to send money around.” She showed some remarkable outcomes of research. E.g. many of households in developing countries are asset heavy and have little debts. Despite their net savings it is very difficult for these households to turn this savings into necessary liquidity.
Don’t think that financial inclusiveness is solely an issue in the developing countries. Chris Pond from the Financial Inclusion Commission pointed out that € 2 million households in the UK do not have a bank account.
Technologies of tomorrow
The blockchain technology, the underpinning technology of digital currencies like bitcoin, was bringing up the rear of the Summit. Representatives of Bullion Bitcoin, Ethereum and Blockchain were called on stage to take part in a panel, all introduced as CEO of their companies. The decentralized nature of cryptocurrencies (‘no one controls it’) is highly praised by many, but apparently in the end someone needs to be in charge of the company, even if it’s a bitcoin startup. Business as usual…?
