London is the Fintech capital of the world, and Xero recently joined the Fintech New Zealand delegation at the London #fintechweek conference. A number of key trends from the UK were discussed, with important implications for New Zealand as we move towards open banking.
Trend 1: Increasing levels of bank and Fintech partnering
Gone are the days of the ‘go it alone’ mentality. Most UK banks now have a division focused on partnering with Fintechs (financial technology companies) or an accelerator programme designed specifically for Fintech companies. An example of this is the Barclays Accelerator programme for Fintech start-ups, based at Rise London.
There are many bank and Fintech partnerships coming out of the woodwork as a result of new open banking regulation in the UK. These include HSBC and Bud, ING’s Yolt and Natwest and Carphone Warehouse.
Trend 2: Open banking rolling out around the world and taking UK learnings to date
The UK is the first market to have made the bold foray into the world of open banking this January. Open banking allows a customer to share their data from their bank digitally with a third party. For example, a customer might wish to share some of their financial information with a lender, in order to access capital.
Open banking in the UK was led by the regulator to encourage more competition in the market. The ultimate aim is to create a greater choice of services that consumers can access digitally. Banks in the UK are required to have an openAPI so that customer data can be shared with authorised third-party applications in a secure, common and consistent format.
The Australian and New Zealand governments are currently assessing how to approach open banking. The government in Australia is working through the appropriate model for data sharing. Minister Fafoii, at the most recent Payments NZ conference in New Zealand, discussed the need to implement open banking and get standard APIs across banks. A recent US Treasury report also backs open banking, a Fintech charter and sandboxes.
Further information on open banking in the UK can be found here at the Xero UK Open Banking Knowledge Hub,
Trend 3: New Fintech Services for SMBs, including lending and payments applications
One of the core benefits of open banking is the offering of new services for small businesses. Through the Xero Ecosystem, we see an increasing use of Fintech products and services by small businesses. There are 5.7m SMBs which make up 99.3% of private businesses in the UK.employ 16 million people and account for 47% of all turnover. Being such a core part of the economy, it’s important to provide them with the right tools for their business. At London Fintech Week, we saw lots of bright people thinking about how they engage with SMBs, particularly in regard to payments and lending.
On the lending front, companies such as Iwoca and Market Invoice can access the Xero API, and with a customer’s permission they are pulling out information to make small business lending decisions quickly and digitally.
Trend 4: London digital banks and Fintechs looking beyond the UK’s borders
London may be the heart of Fintech, but the whole world can benefit from the services they provide. There have been lots of exciting new digital banks setting up in the UK. These include Monzo and Revolut on the consumer side, and Tide and Starling to serve small business. Revolut, who have 2 million customers globally, recently announced their intention to expand into Asia and New Zealand in September. This will be the first digital bank to hit our shores.
Other companies, such as Go Cardless, are also in expansion mode. Go Cardless provides easy direct debit services to small business which seamlessly integrates with Xero. They will also be coming to New Zealand soon, giving companies which process direct debits the ability to do so seamlessly within the Xero product.
Trend 5: The rise of Fintech co-working spaces
A proliferation of Fintech co-working spaces have sprung up in London to support bank innovation and to promote London as the home of Fintech.
Barclays Accelerator and Rise London has a 13 week programme which provides advice, support and access to Barclay’s technology in order to build out Fintech solutions for start-ups. They are based at Rise London, Europe’s largest workspace dedicated to Fintech.
Level 39 is often touted as the biggest hub of fintech talent in London. It is a community of 1,250 leaders in cybersecurity, FIntech and Retail Tech, based in Canary Wharf.
Huckletree is co-located in the same building as Silicon Valley Bank in London. This is a co-working space with strong ties to Fintech, and also to New Zealand, through strong engagement with New Zealand Trade and Enterprise.
At Xero, we will be opening a new Fintech Focused Co-working space in Auckland come November, called Re-Wired.