As one of society’s more traditional sectors, the financial services
industry has long been ripe for disruption. And as the pace of
technological change has accelerated across the entire finance landscape,
we’ve seen plenty of opportunities and challenges emerge for the financial
services ecosystem. One of these has been the impact and influence of
startups – namely

fintech firms

.

Whilst typically associated with the modern era, fintech’s history is
expansive and includes transatlantic cables, credit cards, ATMs and
crowdfunding. However, it wasn’t until the 2010s that the word ‘fintech’
became part of the common vernacular, when speed, precision and

automation really took hold of the finance market

. Now, when people talk about the finance industry they no longer think
simply of banks and financial advisors; they are as likely to consider
their online investment platform, pension app or open banking-driven money
management tool. We’re taking a look at how

successful fintech startups

are disrupting and influencing the traditional financial services
landscape.

Long regarded as being resistant to change, banks have been forced to
upgrade and modernise their services in recent years thanks to increasing
pressure from fintech companies and digital disruption. Big-name banks have
traditionally had a stranglehold on the market, but in recent years we’ve
seen agile, tech-driven start-ups challenge this model by taking advantage
of consumers’ appetite for change, technological advances and industry
regulations to usher in fresh competition. Startups have eschewed the need
for fixed assets – such as branches – to be able to scale, running entirely
virtual operations that serve customers directly. This has seen the
ushering in of neobanks, such as Revolut and Monzo which operate without
live customer-facing functions.

Facing increased competition from fearless, aggressive startups, many banks
have incorporated digitalisation by partnering with the enemy. In fact,

Finextra’s The Future of Payments 2019 report

suggests that 81% of bank executives believe that collaborating through a
partnership is the best digital transformation strategy, reflected in
partnerships such as Lloyds Bank and machine learning-driven Xelix, as well
as JPMorgan Chase and Plaid, which are working together to help customers
control personal data.

Open banking shakes up consumer financial services

The impact of open banking on the UK’s financial services market has been
significant. The second Payment Services Directive brought with it all new
regulations in January 2018, providing a secure way for consumers to give
third party providers access to their financial information and bank
account data. This has paved the way for new products and services that
help customers better understand and get more from their money. Some banks
were quicker to embrace open banking than others – Starling and Monzo had
been excited about its potential long before 2018, while five of the UK’s CMA9 banks were issued with warnings after failing to implement open banking
functionality by March 2019. Meanwhile, financial assistance apps have
thrived, with the likes of Emma, Plum and Yolt providing consumers with new
levels of financial insight and freedom.

The global blockchain technology market size is expected to be worth more
than US$25 billion by 2025, representing the enormous potential for the
financial services market. Blockchain can be used to create a decentralised
electronic ledger that allows users to securely access a single source of
information. As such, banks and financial service providers are using it
for back-end functions such as money transfers and record keeping, and in
particular for fraud reduction. Blockchain’s connected ecosystem means it
is extremely secure and helps transactions become safer and more traceable.

Blockchain startups are focusing on everything from decentralised cloud
storage (Storj Labs) and cross-border money transfers (GeoPay) to trade
finance (dtledgers). Blockchain offers enormous levels of security and
efficiency, and we can expect to see it being used increasingly within the
financial services space.

The retirement planning industry has benefited from fintech disruption,
with digital investment products offering low-cost solutions with easy
onboarding, low fees and minimum investments, and user-friendly interfaces.
Pension provision and management have long been thought of as confusing,
something some fintech startups are tackling through new apps and services.
Savings and investments platform Raisin has acknowledged the demand for
clearer, more manageable pension programs,

acquiring German pension startup Fairr

in 2019 in a bid to enter the €12 trillion European pension and retirement
savings market. By doing so, Raisin hopes to offer consumers an
all-inclusive online marketplace to purchase savings, investments and
pension products. Then there’s PensionBee, the app designed to bring
multiple pension plans under one umbrella, which has more than 200,000
customers and more than £600m assets undermanagement.

If you’re looking to incorporate new technologies into your business – or
simply want to upskill your team and keep one eye on the horizon, Hanover
can help you find the best talent on the market. Whether it’s within the

pensions

, banking or

fintech executive search

space, our deep industry knowledge and existing relationships can help you
to find the people you need. Contact us
to find out how we can work together.