The Boom of FinTech Vs Internal Innovation

14 September 2017




We are a matter of months away from experiencing significant regulatory change that will drastically impact the financial sector should institutions fail to comply. Regulations such as, MiFID II and GDPR will change the way in which firms, traditionally operate. MiFID II, will come into force on the 3rd of January 2018 and will require all firms that operate within the financial sector to record and retain mobile voice calls. GDPR follows in May and is a new set of rules governing the privacy and security of personal data laid down by the European Commission. The primary objective of these regulatory changes is to fundamentally make the finance industry more transparent, maintain capital and improve risk controls with the conclusive aim to improve customer relations. However, with these regulatory changes on the horizon, how are banks expected to meet strict compliance deadlines and still make banking in 2017, function like banking should in 2017. Could the answer be FinTech?


“It is inevitable that today’s major financial services players will become a significant acquirer of Fintech businesses over the next three-five years.” - Tim Levene of Augmentum Capital

In a recent report published by PWC, 82% of banks are expected to partner with FinTechs in the next three to five years in order to meet demanding deadlines and comply with regulation.


With an estimated worth of $867bn across 6500 companies from California, London and Singapore, startups offering payments, currency exchange, crowd funding, online lending and wealth management services are competing with traditional retail banking and financial services firms. This is largely due to the combination of finance professionals finding themselves unmotivated or out of work and rapid growth in technological advancements.


Based in the heart of East Londo

n’s Silicon Roundabout, Monzo, referred to as ‘the bank of the future’ is a Fintech start-up challenging traditional retail banking. In their own words Monzo says it is "Focused on building the best current account in the world and ultimately working with a range of other providers so that Monzo can be an intelligent hub for your entire financial life". Although not yet a fully-fledged bank, Monzo provides a service like no other, truly disrupting the market with a serge of innovation. Monzo is operated via a single app (available on IOS and Android operating systems) with an aesthetically pleasing and functional interface that provides useful information regarding the users spending habits, weekly budgeting and the ability to transfer money to your listed contacts.


However, despite all of these nifty features, Monzo and other FinTech start-ups alike, still face one huge problem. Unlike many of the high street banks that we have grown to  respect due to their trusted heritage, FinTech’s do not have years of experience, millions of customers or thousands of branches that many of today’s banks have gathered through generations of building. Unsurprisingly, high customer acquisition costs and a lack of consumer base

 hinders them from being truly profitable in comparison to there big bank siblings. That being said, how should these innovative start-ups better equip themselves to work alongside these financial giants that boast longevity and respected heritage? By not innovating efficiently and in turn negatively disrupting the development rate within the financial services industry, banks need to get wise and partner with FinTechs in order to survive in this rapidly evolving environment.


“Banks must begin to act less traditionally and follow the path forged by other customer-centric organisations that allow themselves to be shaped by customer demand, using more mobile, more two-way, more “right now” experiences to give customers what they want when they want it.”- KPMG


This new wave of FinTech startups fundamentally provides an innovative approach to the finance industry by utilising existing technologies and developing new ones, whilst streamlining the functionality and user experience. Their idiosyncrasies and ability to innovate quickly sets their technology years ahead from any solutions that an established financial institution would attempt to develop in house. A recently published PWC report states that 75% of innovation within the financial sector comes from start-ups. This could be down to

 the fact that FinTechs worldwide have raised $105bn through funding and can therefore create and innovate without any financial restraint and don't experience the same delays through departmental hierarchy.


FinTech founders are often individuals who have worked within the financial services industry and therefore bring a strong foundation of knowledge and deep understanding of the processes and problems required, relative to that of larger scale businesses. This gives them the opportunity to develop and implement their ideas without being restricted by legacy systems and long chains of command, thus assisting banks in areas where they would not be able to develop in house solutions in order to meet imminent regulatory deadlines.


"FinTech is different from many oth

er startup sectors because the financial world is heavily regulated and mostly consists of a relatively few number of large, well-established firms.” says Houman Shadab, a law professor at New York Law School


Like many FinTechs operating in the market, our very own CEO Oliver Blower, has brought in over a decade’s worth of first hand experience and knowledge from his time spent working with Barclays Capital and more recently Bank of America, Merill Lynch where he ran market structure. With these expertise in place, VoxSmart have been able to develop a multi award winning compliance solution, VSmart™, which provides a solution for tier 1 banks and financial institutions alike, to comply with forthcoming regulation. Our solution is able to record and retain all mobile voice calls, instant messages, SMS and voicemail.


Versatile Fintechs and institutionalised banks must get wise to the rapidly evolving financial eco system in which we all partake. We are witnessing banks parlay with Fintechs in order to meet consumer demand and deliver the contemporary user friendly technologies that we take for granted in our day to day. Those banks who are still adjusting to this climactic shift may be in imminent risk of falling short, resulting in the loss of custom and by default, millions of pounds. The time to act is now.






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