To counter the insurgence of alternative banks, banks - 9 major ones, came together to bring data into the hands of the consumers through Open Banking – a PSD2 (The Payment Services Directive established by the EU to regulate payment services), implementation in the UK. The standard implemented through Open Banking Limited– a non-profit established to seamlessly integrate data access across banks will provide consumers with direct payment from banks instead of re-routing or authentication through a third-party.
The alternative banking services and cryptocurrency have challenged HSBC, Barclays, RBS, Santander, Bank of Ireland, Allied Irish Bank, Danske, Lloyds, and Nationwide. By reducing the cost of the transaction through FinTech, banks hope to retain the customer through the next decade.
Although most major banks look at Cryptocurrency - the decentralized payment system as a threat to their existence, The Bank of England has successfully tested a real-time payment settlement service - the 'inter-ledger program' developed by Ripple - the biggest disruptor in Blockchain. The proof of concept run in July 2017 is set to replace the 21-year RTGS system that currently handles daily volumes of $690 billion - mostly as payment settlements for companies and real-estate deals.
What do the latest trends in FinTech mean for MBA applicants targeting UK-based MBA programs?
The improvements in computing technology enabled a drove of start-ups to enter the space. Millennial MBAs, who value meaningful work over stable income, embraced FinTech over traditional investment banks.
Up to 28% of Businesses in the Banking and Payments, and 22% in the Insurance, Asset Management, and Wealth Management sector are likely to face a loss of Business with the evolution of FinTech companies.
Citibank has predicted that in 10 years, more than 35% of direct jobs will disappear in Financial services company and proportional indirect jobs in Law and Accounting firms will be impacted as FinTech technology becomes mainstream.
The only major roadblock to FinTech’s mass adoption is the regulators. Luckily, UK’s Financial Conduct Authority established in 2013 didn’t look at innovation with suspicion but embraced the emerging FinTech as an industry that can improve consumer protection and foster competition. The Entrepreneurial culture led to the creation of the first regulatory ‘sandbox’ in 2015 where new FinTech products were monitored and tested.
London’s role as the FinTech capital should be credited to the pro-activeness of the VCs and also the openness of the regulators – a culture that encouraged MBAs to be part of an innovative FinTech eco-system.
