TechFin? Don’t you mean FinTech?
No. We mean techfin. The difference is one of emphasis; fintech's goal is to use consumer-facing tech to disrupt the delivery of financial services still based on core systems that are very old. Techfin is about using the core tech itself to develop a cutting edge financial services system from the ground up.
Bristol city-region is the perfect breeding ground for techfin. We have a solid fintech network embedded in the culture, well-established pillars of the finance industry, and a city full of techies. We are kings of engineering – building the future that will remove the friction from your finances. We have no less than four universities developing the next generation of quantum computing and raising a generation of tech-minded leaders and business owners. We have trend-setters in cloud, open banking, ethics and transparency, edge computing and distributed technology.
The public sector has our back too – with incubators, accelerators and clusters everywhere. Did we mention that Bristol is the UK’s #1 Smart City?
Bristol TechFin 2017
The inaugural Bristol TechFin 2017 was run on 7 November to showcase all the good stuff we have going on here and brought industry leaders across the UK and internationally to mix with Bristol's very own and to develop new partnerships.
The keynote began with RBS’s digital propositions lead, Wincie Wong, followed by four panels with free-flowing discussion (even the regtech one!) and plenty of food for thought.
Keynote
Traditionally thought of as dinosaurs, incumbent banks are evolving their services and trying to keep a clear focus on the customer. Wincie gave great insights into the mammoth process of working through onerous compliance obligations and legacy systems to provide a customer-facing AI chatbot; no one likes to be tricked into talking to a computer.
It was also refreshing to hear an incumbent bank be honest about how other companies might steal their relationship with the customer, and that their response to that challenge is partnership and inclusion.
Finance 2.0
It’s easy to get excited about all the amazing things that are happening at the minute (our fintech predictions 2017 are doing pretty well), but don't forget that we, the early adopters, are a tiny minority. Most people change their spouse more often than their banks (11 v 14 years).
How much friction has the iPhone removed in our lives since its launch 10 years ago? How much has banking?
Finance 2.0 will be about fluidity. Fluidity reduces friction and makes the customer's journey through their services or switching as painless as it can be, and fluidity means that the provider is constantly changing their product to make it better.
One of the more fascinating discussions that developed revolved around why someone would bother switching from an incumbent to a challenger bank. 83% of people can’t see any real difference, meaning there is not enough distinctiveness in the market yet. Is it ripe for consolidation?
Another question ‘why is the cheque still lingering?’ had us thinking about how we can account for drastically varying customer demographics and preferences. Starling Bank pointed out that demographics might not be a very helpful measure sometimes. For example, it is often assumed that ‘young white males in London’ are the early adopters with challenger banks, but the reality is far more multi-coloured.
Future innovation in regulation
Has regulation killed innovation? An interesting question to put directly to the FCA and PRA/Bank of England!
On the one hand, the UK’s regulators are probably the best in the world when it comes to trying to work with the industry – with regular hackathons and tech sprints etc. The FCA were the first in the world to launch ‘Project Innovate’ involving direct access for innovative firms, an advice unit, and the very successful (and widely replicated) regulatory sandbox.
On the other hand, they were challenged to provide effective regulation that doesn’t just add to layers of complexity, or continually increase compliance budgets.
The FCA’s and Bank of England’s response to this is to stay at the forefront of “innovative regulators” by using technology to disrupt and innovate itself. Their most recent collaborative project focuses on "model driven machine executable regulatory reporting". For those that are lost on that title, the intention is to use R3’s Corda distributed ledger platform to explore “a model driven and machine readable regulatory environment that could transform and fundamentally change how the financial services industry understands, interprets and then reports regulatory information”.
Ethical banking
Is end to end ethical finance truly possible? No.
This is a long journey that’s highly subjective. But that doesn’t mean we shouldn’t be working hard to enhance transparency where we have ownership of the process, and holding our connections accountable for their actions also. Transparency is the key to rebuilding lost trust.
The ethics of the tech are just as important as the ethics of the fin. We can already create AI that quickly progresses beyond our understanding, but should we?
We can learn from cultural changes elsewhere such as the abolition of footbinding in China; systemic change will require an effort from the industry leaders. Might it take another financial crash to push the ethical agenda further?
Blue skies finance
Want to hear Professor Dave Cliff’s it’s-funny-because-its-true joke? How many people does it take to trade futures?
One person, one dog and one computer; the computer does the trading, the dog guards the computer, and the person feeds the dog.
If that’s the state of affairs today, what does the future hold? The panellists were each asked to come up with one controversial statement about the future:
“Capitalism as we know it is dead” Duncan Pauly, Edge Intelligence
Distributed ledger technologies, such as blockchain, are not perfect but still have the potential to be transformational; plenty of industries and services are ripe for becoming so decentralised as to be unrecognisable in 10 years. The exploration of these technologies signifies the beginning of the end for capitalism as we know it.
“Crypto should replace fiat currencies by 2030” Krasina Mileva, Dovu.io
Why does everyone have their own currency? If a cryptocurrency becomes the new ubiquitous currency then exchange rates, currency fluctuations, transfer fees and swaps will be a headache (or income source) of the past.
The tech-savvy won’t be surprised to learn that ICOs were brought up in discussion. ICOs are frequently thought of as the 'wild west’ of the tech world, but they are on the Regulators’ radars, from complete bans and the potential death penalty in China to more cautious warnings to issuers and investors from the UK’s FCA and, more recently, ESMA. Issuers should take a closer look before deciding their ICO is unregulated, and investors need to get clued up on the risks.
“Software is awful” Peter Rogers, 1060 Research
Software as we know it (i.e. the uniform application of vast lines of code) is bloated and poses major security risks. Spending huge amounts of time and money designing software for a complex problem – only to realise that it doesn’t really solve it and having to start all over again is crazy.
The suggested solution wasn’t to scrap software, it was microservices. This is about efficiency – specific coding for specific functions. Once we break down services into the smallest components, and the Internet of Things allows devices to seamlessly communicate and cooperate with each other, microservices will spontaneously combine to generate huge value.
Next steps – UK-wide collaboration and Bristol TechFin 2018?
Throughout the conference, there were probing questions from delegates and animated discussions during the breaks. There is a real need to demystify the tech infrastructural challenges and opportunities. This will realise the potential of TechFin to bring about collaboration and innovation that will then support UK financial services for decades to come.
There was a clear desire from the likes of the FCA, Innovate Finance, Oracle, University of Bristol, UWE and others to continue to engage and leverage the TechFin expertise that Bristol city-region has. The plan is to build this out over more informal events over the course of the next year ahead of Bristol TechFin 2018.
As they say, watch this space.
This article was written by Nathan Dudgeon and Adrian Shedden.