May 17, 2019
Our Weekly NewsletterContact
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.
Seeing ‘green’: the next mis-selling scandal
“Greenwashing” – the practice of asset managers giving an eco-friendly label to a conventional fund and overstating its environmental credentials – could be the investment industry’s next mis-selling scandal. As ESG has grown in popularity, the ambition to comply with its principles has grown – but investors may need to approach so-called ethical funds with a healthy degree of cynicism. (From Financial Times, 13 May 2019)
A Hong Kong businessman who lost $20m from making investments via a supercomputer is taking legal action in a landmark case that could test the bounds of liability. While robots are getting more intelligent every day, they still can’t be sued. Instead, the salesperson who persuaded the investor to take advantage of the AI’s services is being targeted with claims that the AI wasn’t up to the task of making suitable financial decisions. This legal battle could be a sign of what’s in store as AI is incorporated into all facets of life. (From Bloomberg, 6 May)
Fake news, real consequences
Metro Bank has been forced to quash “false rumours” about the bank’s financial health after the accusations – initiated on WhatsApp and spread quickly across social media – resulted in a run on West London bank branches from borrowers fearing for their cash and valuables. Not long afterwards, the challenger bank’s share price dropped 5%. Social media can be an effective brand building tool, but also a dangerous platform for ‘fake news’ that can turn into very real consequences. (From ITV, 13 May 2019)
Government branches out
Growing concern around the decline in high street bank branches across the country has prompted MPs to suggest that the government or regulator may need to step in to halt the closure of local branches. This intervention follows a report from the Treasury Select Committee (TSC) that said the loss of a banking presence on local high streets was more likely to affect older and more vulnerable customers, and that banks must do more to keep them open. (From City AM, 13 May)
The night is dark and full of spoilers
The final season of Game of Thrones is the TV event of the year – but unfortunately for fans, its early screening time of 2am every Monday leaves ample room for spoilers and plot reveals from friends, colleagues and social media. Luckily, just as the show’s final episode is about to air, Endsleigh Insurance has introduced a remedy with its new “Spoiler Cover”. Though not quite a policy, the tongue-in-cheek offer allows fans to claim financial compensation of up to £100 for plotlines ruined by major spoilers. (From Daily Star, 13 May 2019)
Should we ditch the term ‘fintech’?
We live in the midst of a ‘fintech’ boom, with global investment in financial technology companies doubling to $112 billion last year and the term now firmly embedded in the financial services lexicon. But given the pace of change in the sector, which requires all companies to adopt technology in some way in order to survive, does the term still have meaning and relevance today?
Though it may feel like a recent phenomenon, the term ‘fintech’ is said to have been first coined back in 1971. The actual concept of fintech, however, goes back much further than this. Credit cards, for example, were introduced in the 1950s, while ATMs removed the need to go in-branch for cash in the 1960s. These inventions marked the journey from analogue to digital, with the transition led by traditional financial institutions.
The fintech that we know today is arguably a different beast, and generally relates to the emergence of new players in the financial services market which sprung up in the aftermath of the 2008 financial crisis. As general mistrust in banking institutions spread, so did customer desire for the reimagination of financial products, paving the way for new players to enter the market. Crucially, these organisations took advantage of the intense technological innovation happening during this period. The first iPhone, for example, was launched in 2007, a year before the global financial crisis began.
Fast forward to today, and fintech companies are active in virtually every financial service segments, from financing and asset management to consumer payments and insurance. But it’s no longer just new young players adopting financial technology: nearly two-thirds of established companies are leveraging ‘fintech’ capabilities for growth, according to a recent Mastercard-sponsored study.
The adoption of fintech is evident even across the British high street. NatWest is currently trialling a virtual personal assistant that will allow users to switch insurance, subscription and energy deals through their bank for the first time, while HSBC has spent $2.3 billion on Artificial Intelligence (AI) and digital innovation.
It is partly for this reason that, in a recent City AM debate, it was suggested the term ‘fintech’ may have had its day. All financial organisations have had to harness the power of technology and it’s becoming increasingly difficult to define where general technology ends and fintech begins. Incumbents have cottoned on to the popularity of new innovative services for customers and are quickly ramping up efforts to introduce their own versions.
The counter argument to this debate suggests fintech should not be thought of in terms of technology alone, but also as the ethos and spirit of the organisations that typically fall into the fintech bracket. Arun Srivastava, partner at law firm Paul Hastings, argues that by shaking up the status quo and offering customers a better, more innovative and user-friendly service fintechs have been setting themselves apart from day one. It would therefore be a disservice to put them in the same category as other financial institutions.
Some established players have chosen to embrace fintech through acquisitions, such as by making large investments in fledgling start-ups and bringing these technological capabilities under their own brand. But given their large customer base and established brand recognition, will the typical consumer mind – or even notice?
Regardless of your stance on how fintech should be defined, it’s clear that all financial services companies need to take note of the technological boom that has reshaped the sector. The key will be to communicate the evolution of their products and services in a way that indicates a genuine dedication to meeting the needs of modern consumers in an increasingly tech-enabled world innovative – rather than simply jumping on a bandwagon and paying lip-service to a popular trend.