Capital Markets Corporate

December 14, 2018

Our Weekly Newsletter

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

Esoteric Returns

To bump up returns, fund managers everywhere are turning to increasingly esoteric options as traditional revenues dry up in global low rate environments. This includes bets being taken on aircraft leasing, catastrophe insurance and mortgage-backed securities. While this may sound like a risky strategy, these alternative investments can bring a number of benefits. Their returns are largely unrelated to growth in the wider economy and can offset the volatility that we have all grown used to lately. (From The Times, 9 December)

Big Pensions To Support Small Biz

Is peer-to-peer lending about to reach new heights? BAE Systems Pensions has partnered with a peer-to-peer lender in a £200m programme that targets fast-growing SME investment to find better returns. UK SMEs have traditionally relied heavily on bank lending, which has significantly dried up in the decade since the financial crisis. Now, with access to mega-pensions, SMEs may have found a way to avoid financial wobbles following the Brexit deadline next March. (From the Financial Times, 10 December)

A Christmas In The Red

Britain’s slide towards a personal debt crisis is only set to intensify this Christmas. According to a survey by online lender MYJAR, the average Briton accumulates £287 worth of debt over Christmas. More worrying still is the fact it will take half of 2019 for many to pay their bills in full. (Seen on Daily Mirror, 7 December )

Alarm Bells For Fund Security

A recent review into the cyber security credentials of asset managers and banking companies by the FCA found the gap of preparedness is wide-ranging. While some managers had carried out “extensive” cyber security programmes, others had done “almost no testing” of their measures at all. With over £8 trillion of assets under management in the UK, this inconsistency could lead to serious issues in the future – and the FCA is now ringing the alarm bells. (From Citywire Wealth Manager, 11 December)

Silicon Valley Opts Out Of IPOs

Spotify recently upset market traditionalists when it chose to list directly – but has it set a trend in Silicon Valley? Both Airbnb and Slack are rumoured to be planning to go public in 2019, but without an IPO. Instead, they’re looking to list directly on the stock market, discovering the share price ‘naturally’ on the first day it opens. But is the US public offering market truly broken, as Spotify’s CFO claimed earlier this year – or just its relationship with start-ups? (From Recode, 10 December)

Are The Big Banks Fintechs Too?

Just last week at Fintech Connect in London, Ruchir Rodrigues, senior managing director of Barclays, made a bold claim that the 328-year-old bank was actually the UK’s largest fintech.

He argued that while Barclays might be one of the UK’s biggest and oldest banks, that doesn’t mean it has not been moving with the times. He highlighted that seven million of its customers interact with the bank digitally – an online following most fintechs would kill for.

Barclays underlined its fintech credentials this week by becoming the first high street bank to allow its customers to “switch off” certain types of spending on their debit cards via their mobile app as a tool to help curb spending. While this move has been aimed at helping vulnerable customers such as gamblers or those in serious debt, it also means all account holders can choose to block their spending in various other categories, such as in supermarkets, restaurants, pubs and petrol stations.

And Barclays isn’t the only big bank offering hi-tech solutions to customers. Santander has been experimenting with a global blockchain system, while RBS is set to launch an online only bank called Bo. HSBC has spent much of 2018 promoting its Open Banking-friendly multi-platform banking app. Just last week, Lloyds launched a geolocation function that allows users to see where on a map transactions have taken place in an attempt to curb fraud.

The big question for emerging fintechs is whether they will be able to compete with high street giants in the same way, especially if the biggest banks catch up and start to embed these emerging technologies themselves. The biggest banks have already begun to enact a number of business strategies to partner, acquire or edge out upcoming challengers.

If customers can get similar intuitive money-saving services on mobile apps with the established banks, then fintechs will have a different kind of communications challenge to address. To survive and prosper to achieve any kind of scale, they will need to effectively sell their own USP and tell a compelling story about why they’re different, nimble and provide tangible value to their customers.

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