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Fintech for the future

Going on holiday soon? If so you may benefit from a rather clever foreign currency service from British start-up Revolut. You get an app, plus an optional credit card, which allows you to make payments in multiple currencies with zero fees and zero spread. Revolut means tourists can avoid getting gouged 20 per cent by money changers. The concept is so good Revolut has won £1.5m in funding from Balderton Capital. The old FX companies must be wondering how they’ll make a living.

Revolut is just one of the stars in the FinTech galaxy. As the name suggests, FinTech is the industry where finance meets technology. And it is, in the words of the British Banking Association, a “revolution”.

Mobile-first banks

There is a rash of new mobile-first banks. Atom Bank will have no call centre, and no branches. Merely an app. The back-office infrastructure will be bang up to date. Not like the creaky Fortran-based systems from the 1980s you’ll find at the current high street banks. Secco Bank will offer account balances though social media.

FinTech is changing every area of asset finance. Nutmeg is a user-friendly asset-management start-up. There’s no paperwork to sign up. An account can be opened online in minutes. Then users can select a portfolio based on their risk appetite. The old Independent Financial Advisor model, where customers sit in an office and get paper brochures shoved under their noses, looks obsolete.

Lending is being done peer-to-peer, via FinTech ventures like Zopa and Funding Circle. Both the investors and borrowers get better rates by cutting out the middle man.

The UK is the home of fintech – the powerbase of the City of London, fused with the entrepreneurial energy of the capital, is proving a potent combination

Accounting is now paperless, and automated. FreeAgent is a cloud-based accounting service for small firms. For invoice processing there is Receipt Bank. Got a bill? Just take a photo it, and Receipt Bank converts to text, and feeds the data into your system. All the Big Four accountancy services use it.

The UK is the home of FinTech. The power-base of the City of London, fused with the entrepreneurial energy of the capital, is proving a potent combination. Last year 42 per cent of FinTech investments in Europe were in the UK and Ireland, and 80 per cent of the VC cash and 70 per cent of all these deals were in London.

Figure 9

Naturally, FinTech companies are hungry for talent. Take a company like TransferWise, founded by former Skype employees Kristo Käärmann and Taavet Hinrikus. The business model allows companies swapping currencies to find a counterparty making the same deal the other way. So no fees. TransferWise handles 300 currencies, and is valued at $1bn plus. TransferWise employs 450 staff. There is a big cohort of coders. At the front end these includes Javascript and CSS developers. They work with full stack developers and database engineers. Sysadmins keep everything ticking over.

In FinTech there is a lot of compliance work. Anyone dealing with customer’s money needs to understand FCA banking regulation, as well as data protection legislation. Chartered Insurance Institute and the Chartered Institute for Securities & Investment qualifications are highly regarded. Since companies expand internationally, mastery of the national regulations of other major markets is in demand.

Fraud is a concern. FinTech companies love to recruit direct from major established institutions, such as banks, insurance companies and asset managers. In FinTech, data plays a central role, including fraud, so there is an overlap with that other red-hot sector, data analytics. Data scientists with a knowledge of Hadoop, Pig, Jive and other big data disciplines will find themselves coveted by FinTech companies. Presenting the findings is also crucial: hence the need for designers with familiar chart-tools such as Tableau, Qlikview, SAS Visual Analytics and Opinurate.

The future

It is important to note that the big high street banks are not standing still. They see the challenge posed by FinTech start-ups, and are moving fast to modernise. Santander has a $100m venture fund to invest in FinTech companies, with a view to integrating viable technologies. Citi has accelerator funds in Israel, Singapore, the US and Ireland. Barclays offers free workspace and mentoring for the best companies in London. FinTech will mean big change for these banks. They are competing for coders, compliance offers, and data scientists, and they’ll need project managers and change managers to handle the restructuring. The CBI and PwC reckon UK financial services firms will be spending 75 per cent more on IT to cope with the transition to FinTech.

Not everyone will be a winner. The rise of FinTech means bank tellers have a dim future. Accountants using paper-processes will seem archaic. Book-keepers are almost certainly going to struggle as everything moves online. But Martin Hook, Alma’s UK Managing Director states they expect demand for accountancy services to increase as a result of FinTech. Clients are crying out for help in making sense of the vast array of new services which are emerging. Accountants are well placed to advise.

The FinTech era is going to bring incredible products to consumers, and change the way we think about money and banking. The recruitment market will need to work hard to keep up.