Fintech vs banks: the battle heats up
Fintech – the term coined for financial services technology – is an extremely fast-growing industry worldwide. In fact, the total global investment in Fintech between the years of 2010 and 2016 reached as high as $80bn.
Its evolution can in large part be attributed to ‘disruptors’ – startups shaping the financial services landscape for good. Some argue that the secret to maintaining the industry is nurturing the startups through which new technology is birthed, but with Fintech gradually seeping into the growth strategies of traditional banks, which of the two will win?
Born out of the financial crisis, Fintech in the UK has since flourished. As a result of the events in 2008, startups identified a loss of trust in banks and took advantage of the opening. Since then, London has been named the global Fintech hub – one which supports startups and encourages them to create choice and value for customers. This makes for a perfect environment to innovate, and with regulations such as the FCA’s regulatory sandbox – introduced in 2015 – Fintech startups have been flocking to the UK as a result.
The regulatory sandbox introduced last year by the FCA paved the way for financial services startups to test their technology in a safe environment, without certain limitations and obstacles which they would have faced otherwise. It reduced the time of testing procedures and the costs, which made it far simpler for challengers to compete with the traditional banks’ vast stockpiles of money and resources. This has been a large factor in achieving London’s current status as the global Fintech hub.
For some time after the financial crisis, traditional banks’ emphasis was on regaining customers’ trust – so it was no surprise that Fintech was not top of their list. However, banks have since realised the potential of Fintech if applied to their processes more vigorously, and are slowly joining the startups in the race. Banks across the UK have taken to increasing their total IT spends, investing in R&D and innovation labs to compete with challengers. Meanwhile, other traditional institutions have chosen to work with the startups – whether via a program to nurture them, partnering up or acquiring one, they have recognised that the innovation they need is already out there.
Nevertheless, disruption of traditional banks continues, and the CMA report published this month was welcomed as an enabler for the startup cause. Making data more open to improve customer choice, it allowed smaller Fintech businesses to access the same information as the traditional banks. This would provide the startups with the ablity to compare their prices with that of the major banks, as the banks already do now, forming a fairer, more competitive market for all. Banks’ response to the report, as expected, was highly negative, with some criticising the report as not doing enough to create more choice for customers.
With the playing field for traditional banks and Fintech startups now levelling out, there is a bright future for customers in the UK. More choice – something which the startups have been aiming for since 2008 – is becoming readily available, with regulations being introduced to ensure it happens. The major banks which have dominated the scene for some time now may have to relinquish some of their power, as customers are given a fairer comparison between their offerings and that of the startups’.
It is now their choice whether they want to work with startups or against them, but I would strongly advise against the latter. As time passes, more and more investment is pouring into innovative Fintech, and banks would be careless to ignore this.
Paresh Davdra is CEO & Co-Founder of Xendpay & RationalFX
UK office space slashed as hybrid working looks set to stay
With hybrid predicted to be the working model of the future, and businesses both large and small announcing that WFH will continue for employees into the future, the traditional office space is being re-thought.
Businesses are both questioning how much space they need for a hybrid working future, especially if it means they can potentially save money, and what form that space should take.
UK firms slashing office space
Back as early as February, HSBC – whose real estate footprint currently stretches to around 112 football pitches worldwide – said it would be cutting its post-COVID office space by half globally and by 40% in London over the next few years, as it looks to implementation of a hybrid working model in light of the pandemic.
Lloyds Bank followed suit. Following an internal survey where 77% of employees said they wanted to continue to work for 3+ days a week post-pandemic, the bank announced it was also moving to a hybrid model, and so looking to cut its office space by 20% over the next two years.
In fact, the latest research from consulting firm PwC reveals that a third of organisations surveyed (258 of the UK’s largest companies) believe they will reduce their office footprint by more than 30%.
The findings of PwC’s Occupier Survey indicate there is likely to be a sizeable fall in occupied office space with half of executives surveyed saying that despite taking into account mass vaccinations, employees will continue to work virtually 2-3 days a week.
And companies continue to announce the hybrid working model for their employees. Accountancy firm EY has just announced that its 17,000 employees are moving to a hybrid way of working, WFH for at least two days a week. This follows PwC which in March said workers could stay at home for half the time and KPMG which this month said it would expect employees to only work two days in the office every week.
More collaborative work spaces
However, what’s also clear from PwC’s research is that the role of the office is not going to disappear completely, but instead adapt to a new way of working, with half of all organisations with more than 100 employees saying they have a real estate and workplace strategy that considers the long-term impact of COVID-19.
“We may see an increased demand for flexible space as many businesses operating models may well need that option if holding dead space is to be avoided,” says Angus Johnson, UK Real Estate Leader at PwC UK.
According to the survey, more than three quarters of respondents said they are likely to reconfigure existing office with 43% of financial services firms stating that they are extremely likely to do so as a result of the pandemic.
“It’s also clear that the nature and purpose of office space is going to change. As occupiers seek new, different space to meet their accommodation needs, environmental aspects will be increasingly important. If the real estate sector is to truly succeed as a more dynamic, greener industry it’s imperative that creative thinking comes to the fore.”
And companies are already thinking creatively how they can utilise office space in a hybrid future. So while HSBC is cutting a significant amount of office space, it is not downsizing its prestigious Canary Wharf headquarters, and instead reimagining the space. In April, CEO Noel Quinn announced the firm was embracing an open plan floor, with no designated desks or private offices, and instead using hot-desks in line with the future hybrid working style. “My leadership team and I have moved to a fully open-plan floor of the building in east London with no designated desks,” he said on LinkedIn.
Lloyds also reported it was adapting its office space, so that rather than individual offices, it will have a more collaborative workspace. And just last month, KPMG announced it too was ditching desks and individual offices, and replacing them with meeting rooms and conference halls for a more collaborative workspace.