Paul Taylor: Reinventing finance - a digital ecosystem with a modern core
I recently took part in a panel discussion as part of Innovate Finance’s UK Fintech Week – I always think it's important to look ahead for key future trends that will shape our sector. In particular the panel focused on the real opportunity which exists now, as we emerge from the pandemic, to build a whole new digital infrastructure that works across the financial services landscape. If done in the right way this has the potential to revolutionise day-to-day transactions and deliver huge benefits to consumers.
I’ve spent much of my career exposed to the cloud, having formerly worked at Google developing software. We have all seen just how important cloud-based technology platforms have been in enabling our lives to continue over the past year: between Zoom and Netflix, cloud technology has made lockdown not just bearable but enabled millions of people to continue working and allowed businesses to stay afloat. As we look to enter the post-pandemic stage of our recovery, there is a huge opportunity for fintechs to capitalise on the more agile digital infrastructure which Covid has forced us to put in place.
For founders of fintech companies, cloud technology is optimal because it drives ongoing operational efficiencies, reduces barriers to innovate, and allows fintechs to focus on what matters – developing products that customers love. The sheer scalability of the cloud offers huge potential opportunities to financial services companies as well. After all, when the application can scale horizontally to meet the demands of either 100 users or a million while ensuring data quality and zero downtime deployments, the traditional barriers to growth are more easily overcome.
Here at Thought Machine, the financial technology company which I founded in 2014, we are reinventing the foundations of the financial services industry with next generation, cloud native technology. Core banking modernisation is one of the most significant and often overlooked challenges facing the sector today. Many of today’s banks are operating on decades-old technology, with legacy software. In a fast-changing market banks and fintechs must deliver modern customer experiences while keeping costs under control — or risk losing market share. Moving to the cloud is a chance to start afresh and have it all: agility, speed, security, compliance, resilience, and more.
A key part of building greater resilience and agility post-pandemic is enabling the banking industry to partner with financial technology disruptors. This has the potential not just to accelerate developments in digital infrastructure, but also deliver greater competitiveness and benefits for consumers. Customers in today’s internet-driven world expect faster, cheaper and more transparent multi-currency banking than was previously possible on legacy core banking technology and traditional correspondent banking networks. As an example of this, Thought Machine recently teamed up with international payments technology company Wise, formerly known as TransferWise. Wise have integrated their API into our core banking engine, Vault. This will allow any bank, fintech or financial institution using Vault to provide Wise’s fast and low-cost international transfers service to their customers more quickly and efficiently.
Modern technology, data visibility and B2B partnerships are all key to building customer-first products for a 21st century, digitally native market. In the 2020s, we are sure to see B2B fintechs drive the development of a new ecosystem model in financial services. These fintechs will serve many of the traditional functions (like payments and banking-as-a-service, following on from the original B2Bs like PayPal) and continue to redefine the boundaries of financial services with relevant new services. Core fintech will expand to include winners in identity, fraud and risk (several of which are already in the making.)
Other founders across the UK fintech space are also working hard at developing new products, harnessing new tech and, in the process, bringing greater choice and benefits to consumers. Organisations like Fintech Founders – and I am delighted to sit on their Steering Committee – are a great opportunity for Founders to pool insights and expertise from across the sector, and ensure that we can speak with one, powerful voice when it comes to highlighting our common challenges to Government and regulators. Fintech Founders recently secured an opportunity to do just this in a discussion with John Glen MP, Economic Secretary to the Treasury, where we raised directly with him both the challenges and opportunities that lie ahead.
We are on the cusp of a new era of tech-driven financial innovation – the Kalifa Review and the Government’s response are promising signs that the Treasury understands the value of fintech to the economy as a whole, but we need to go further, as well as faster.