The fintech entrepreneurs reshaping finance
London is strutting its stuff as a world centre for fintech innovation to rival Silicon Valley and New York. The first-stage disruptors, challengers and innovators are now established and growing. Government and regulators want to build a better financial system and see technology as the key.
Sitting down for lunch with Claire Cockerton, founding chief executive of Innovate Finance, a membership organization established last summer for London-based fintech firms, feels slightly surreal.
It’s not the gorgeous view on this sunny winter’s day across London Docklands from the top of One Canada Square. It’s more the immediate surroundings of ClubLounge39: all chunky water glasses, art deco furnishings with a modern touch and discreet waiters ferrying crab cakes and salad.
Innovate Finance is a convening force for the fintech industry, driving the benefits of clustering, and being a single point of access to the necessary influencers and resources of change
It’s deafeningly quiet. The only other diners appear to be Eric van der Kleij, head of the Level39 fintech accelerator and member of the advisory council of Innovate Finance, discussing with his guest what Euromoney can only imagine is some ground-breaking, big-money deal.
This feels more like the executive dining room of one of the global investment banks towering nearby, albeit one that’s had the designers in for a makeover to try and feel more hip. It’s a world away from the pizza cartons and ice bins of diet cola cans that make up internet start-up folklore.
Cockerton recounts the founding of Innovate Finance after UK chancellor George Osborne asked her and van der Kleij, as heads of Level39 and of Pivotal Innovations, a firm specializing in corporate innovation and accelerator programmes, to report on the challenges and opportunities of the fintech sector in London.
“Fintech entrepreneurs are delivering new technology and new business models which are transforming the financial services sector for the better – bringing new efficiency and security to existing players, and new choice to consumers through being challenger digital banks. Fintech firms who offer lending and funding alternatives to SMEs are driving economic growth and employment across sectors in the UK,” claims Cockerton.
“Innovate Finance is a convening force for the fintech industry, driving the benefits of clustering, and being a single point of access to the necessary influencers and resources of change – policymakers, regulators, investors, tech innovators, government initiatives and accelerators, to name a few key forces. Also, the community felt we needed a new and common voice, available to companies big and small, to drive a new and more positive narrative for financial services in the UK.”
Euromoney is still struggling, though. The surroundings just feel so very smart. Cockerton allows: “We are an independent membership-driven organization for the industry and took no government funding. As founding sponsors, Canary Wharf Group and City of London offered office space and the necessary start-up capital for our organizational set-up in year one. Pricing is based on the size of your enterprise – revenues and capital-raised – and ranges from £1,000 to £50,000, so as to create an inclusive and financially sustainable structure. We feel that it’s important that all members pay for the benefits of membership and that we as an organization remain enterprise-oriented – we value and engage with what we pay for and we are committed to bringing the greatest value for money to our members.”
The inclusion of members of every size has brought into Innovate Finance, alongside the likes of IBM and Swift, some of the biggest banks in the world: HSBC, RBS, Santander, Barclays, Citi. Aren’t these the same incumbents – their reputations tarnished by near-collapse and serial scandals – that the fintech newcomers are supposed to disrupt?
Cockerton says: “We knew the size of the transformation that Innovate Finance is trying to bring to financial services, we knew we needed both big established players and small firms to participate. We all want to accelerate fintech adoption in the industry, and indeed part of our work is about fostering partnerships, investment and collaboration between the members.”
But tensions seethe beneath the service. "I’m a bit ‘Meh’ about Innovate Finance,” says one source, expressing indifference. “It all seems to be about them, and I think they really have missed a trick with their ties to the big banks. Sure the banks want to see what ideas get thrown up in the incubators they run. But these are the banks that won’t even open basic business accounts to some of the established fintech newcomers. The big banks think we’re trying to take their market share – and they’re right – so why should they help us? And I suppose, to be fair to the banks, we do spend a lot of our time slagging them off.”
Anger at the lack of provision of basic business banking accounts and services is a perennial of every gathering of fintech entrepreneurs.
However there is much that enthuses entrepreneurs in the fintech sector in London about the way it has found a voice to deal with regulators, about how supportive the government has been and the sector’s capacity to attract investors.
Rhydian Lewis, co-founder and chief executive of RateSetter, the UK’s biggest peer-to-peer lender, sees regulators being required to promote competition and innovation as a big support to the UK fintech scene. “It’s very vibrant. The arrival of many US venture capitalists with lots of money to invest from previous wins in the tech sector has completely changed the dynamic in the UK, where previously UK investors have been more conservative around technology.”
And entrepreneurs are being attracted from outside the UK. Justin Fitzpatrick, an American, and compatriot Damian Kimmelman co-founded DueDil – specializing in the extraction and analysis of data on private companies with global ambitions – in the UK partly because of ease of access to such information, partly also because of the relative difficulty in the US of dealing with city, state and federal regulators.
Fitzpatrick says: “One of the reasons I was so excited to help launch Innovate Finance is that the UK, and London in particular, has a special opportunity to capitalize on its position as the leading fintech hub in the world. Silicon Valley has tons of tech, but it doesn’t have the fin. New York is the financial capital of the largest single domestic market, but London has fantastic links to other financial capitals and is a major centre in its own right. London has other critical elements, especially in regards to its talent. Here you have people with deep domain expertise in financial services, access to strong engineers and world-class creatives.”
If you dropped Stanford University into London, it would be the fintech centre of the world
Nick Hungerford, Nutmeg
Talk among company founders often ranges around what last extra pieces London needs to cement a lead position in the unfolding transformation of the financial services industry.
Nick Hungerford, chief executive of online wealth-management business Nutmeg, says: “Having a lot of people in a dense space all concentrating on the fintech sector does foster a spirit of collaboration. London might benefit from closer involvement from the academic sphere. If you dropped Stanford University into London, this city would be the fintech centre of the world.”
Back at One Canada Square, it’s time for a tour of Level39, which classes itself as Europe's largest technology accelerator for financial, retail and future cities technology businesses and where Cockerton wears another of her several hats as head of innovation programmes.
Cockerton explains that members of Level39 pay for different levels of space. Larger firms can take an office. She breezes past several of them, all closed and with the lights off. Or member firms can hot-desk, or have a permanent station at an open table. As she strides past, a handful of men briefly look up from their screens before turning back to the marvels of their technology. At the basic entry-price level, budding entrepreneurs can bring their laptops to the coffee lounge.
Finally, the tour reaches a room that is full and buzzing. Euromoney declines the offer of coffee, however, confused for some reason when Cockerton explains that we have to order it using an iPad.
Then, in the space by the lifts, the realization finally hits. Here stands the model for the next phase of Canary Wharf’s development. Canary Wharf manages 97 acres in London Docklands, and its plans for the next stage appear to envision a cluster of new skyscrapers that looks roughly equivalent to the ones already housing the likes of Citi, HSBC, Morgan Stanley, JPMorgan, Barclays, Credit Suisse and the rest.
This is the point. Canary Wharf is helping to incubate its next generation of tenants, betting that from the hundreds and hundreds of fintech start-ups that come through accelerators like Level39 and all the other accelerators and incubators around London, winners will emerge that become the financial giants of the next 25 years.
That’s the hope. To put it to the test, Euromoney met a few of the candidates.
Over the course of the week ahead Euromoney will profile many of these firms, as well as some of the others that may become the big winners that lead the financial industry in the decades to come.
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