2015 fintech has been focused on providing simplicity to customers with the creation and subsequent implementation of new technology; but with new technology, comes increased security risk. Biometrics could be the answer and resolution to this problem as it could result in a more secure payments process, although experimentation still needs to take place as traditional players still view this form of tech as disruptive. Challenger banks took to the stage this year as many were granted licenses to bank and now financial professionals wait and envisage how this industry will develop in the coming New Year.
Read Part One here!
Convenience vs. Security
This correlates with the adoption of Apple Pay in the US as it was taken up in the country before anywhere else, but it is debatable whether or not it was embraced. The application was approached in a different way in the UK and since the announcement, many large banks and major credit card issuers have implemented it and 2015 has seen a boom in contactless payments being made. Some believed that this launch was a milestone in the payments landscape and it would result in the depletion of cards. “The launch of Apple Pay UK is potentially the most significant event in consumer payments for over 50 years, since the advent of cards and ATMs. As consumers become familiar with using phone devices to make purchases, we will probably see a plateau in the issuance of plastic cards in the next few years, followed by a long but inevitable decline of cards into obscurity,” Lu Zurawski, solutions practice lead consumer payments EMEA, ACI Worldwide said.
Although the introduction of applications such as Apple Pay provides convenience, security of personal data was also considered. Mike Weston, chief executive of data science consultancy Profusion, believes that retaining personal information on devices was frightening. “When this information is combined with our browsing habits, social media profiles and location (via GPS on our phones), it paints a very vivid picture.” However, Grady Summers, chief technology officer of network security company FireEye, commented on how there have not been any hacks of point of sale terminals due to the fingerprint authentication. “Apple’s use of fingerprint authentication adds another layer – a thief can’t use a stolen PIN with your card; they’d need to somehow steal your fingerprint, which is difficult to do though not impossible,” Summers said.
Biometric technology was widely reported on during the year and it expected to make more of an impact in 2016 with fingerprint, voice, iris and heartbeat scanning emerging. Michael Cooper, chief technology officer of Radianz, BT Global Banking and Financial Markets at BT, believes that biometrics will play a big part in the development of fintech in the years to come. “The digitisation of the financial sector will continue apace in 2015. This will be both in terms of sector specifics, but also including more ubiquitous elements including things like the intersection of biometrics in a digitally enhanced identity capability.” This year, Barclaycard unveiled three new wearable devices: a wristband, key fob and stickers which bank customers can use to make payments. Alongside this, Wells Fargo bank tapped into facial and voice recognition to create a more security-friendly banking system which used technology that analyses a person’s facial symmetry and voice to authenticate the payment.
Old Banks vs. New Banks
Disruption was on everyone’s mind during 2015 and the banking industry went through an upheaval this year with over 20 challenger banks applying for a banking license from the Bank of England, with a couple being granted after five were listed on the London Stock Exchange in 2014. Since Atom Bank, one of the most well-known challenger banks, obtained its license in June are currently developing to provide a 3D interactive experience. “Biometric security and end-to-end in-app account opening are just some of the features being developed to deliver a branch-free, paper-free and stress-free bank,” Atom Bank revealed in a statement. However, it was announced that late this year, Spanish lender BBVA invested 345 million into the UK’s first mobile-only bank and in preparation for the launch in 2016, members from the bank will join the board to develop strategy.
Another challenger bank that has been in the news this year is Tandem, which was granted a banking license recently. Although it flew low on the radar during most of 2015, after many prominent financial executives were recruited, it gained popularity. The founder, Ricky Knox, had a vision to create a good bank and make the most of the ever-growing digitalisation of the banking industry. “For too long, traditional bank have made money at their customers’ expense. We want to build a bank that challenges this model by putting our customers’ interests first,” Knox explained.
East vs. West
In 2015, fintech boosted growth all over the world and according to a report by Accenture and Partnership Fund for New York, investment for fintech grew by 191% in 2014, which led to global investment figures to triple. Payments accounted for 29% of all US deals and the next most popular area of investment in New York was lending, which accounted for 16% of investment. Managing director of Accenture Strategy Capital Markets, Robert Gach, explored how New York is a city that can give the fintech industry resources that no other city can. “For fintech entrepreneurs, New York provides key advantages that no other city can match. With each passing year, New York City’s fintech industry becomes more established and a larger force in the city’s entrepreneurial and financial services ecosystem,” Gach said.
New York, San Francisco and London all respectively occupy the space of leading financial technology hub. UK Prime Minister, David Cameron, backed Innovate Finance’s 2020 FinTech Manifesto and according to London & Partners, 40% of the $75 million invested in London businesses was invested directly into fintech. The large amounts of investment into fintech organisations in New York and Silicon Valley are why these two cities stand out as fintech hubs, but it can be questioned how they will survive in the current climate.
In addition to this, we can expect more fintech hubs to open up in the coming year, for example earlier this year, John Tsang, the Financial Secretary of Hong Kong, said that Hong Kong would be an ideal place to develop into a hub as venture capitalists are increasingly seeing potential in the city. Sydney already has a $60 billion financial services sector and this year, the fintech innovation hub Stone & Chalk, was opened which gained $2 million in funding from Australian banks and technology companies. As well as this, Dublin has positioned itself as a leading hub and in a report released by Deloitte highlighted how by 2020 Ireland could support a further 5000 jobs in the fintech sector.