By Luuk Jacobs
In the last week, after initial waving potential issues with the Boeing 737 Max, the have now worldwide be grounded until more is known about the cause of the crash of 2 of those planes in 5 months. Investigations have shown that the path before crash of the 2 planes were very similar and that there are potential underlying issues with the technology of the plane. Some have quoted that the technology has become too complex and is even not understood by pilot. In the specific case of the Boeing 737 Max the technology/system prevents the aircraft from pointing upwards at too high an angle, where it could lose its lift. However, according to filings with the US Aviation Safety Reporting System, which pilots use to disclose information anonymously, it appeared to force the nose down. Not being a pilot I assume this can only be corrected by human intervention.
So bringing this situation back to the use of Fintech in Investment Management (and yes we can only loose money and not lives), do we understand well enough Robo Advice, AI, Blockchain to fully rely upon. Are they becoming our automatic pilots and who in the case of a nose dive can intervene ?
Think of a scenario of some kind of financial crisis and the impact on index funds. Would the technology used to manage these funds just spiral them to the bottom when prices are going down and investors start pulling money out ? Is the temporary closure of such funds the human intervention of the automatic pilot ?
I would be interested to know from specialists in the field @Christopher New, @Paul Smillie, @Simon Cornwell, @Christian Thomas, @Mark Holmes, @Angela Lloyd-Jones, @Andy Milner
By Rob Carter
The UK is a hotbed of fintech activity, and it has not escaped the attention of investors worldwide. so what can we expect in 2018?
Last year, almost £3bn of venture capital found its way in to the UK’s tech sector, a record high and nearly double the figure for 2016. British fintech firms attracted almost four times more funding in 2017 than Germany, and more than France, Ireland and Sweden put together. This year promises to be even bigger, but what are the exciting developments driving those investment flows?
Here’s what to expect in 2018 across five key areas we’ve identified:
One of the most exciting developments to land in the UK financial sector is Open Banking. Under these new rules, which came in to force in January this year, banks must share their customers’ financial data with other FCA-authorised institutions, if customers request them to. This includes bank and credit card transactions and information about spending habits, for example. The aim is to improve competition in the marketplace and ultimately help consumers get a better deal. It should also foster much greater innovation, as new alliances are forged between traditional financial services firms and fintech startups. This is already starting to happen – First Direct has partnered with fintech firm Bud, Barclays is working with Flux, and NatWest has teamed up with FreeAgent. Banks are working hard in-house too: HSBC, for example, has launched a beta app which will allow customers to see all their accounts on one screen, even those from rival providers. Expect more innovation and unlikely partnerships in the banking sector this year.
Wealthtech refers to the specific type of fintech which is used to solve problems and improve user experience in the wealth management and investing world. The definition includes robo-advisers like Nutmeg and Wealthify, as well as micro-investment services and digital brokers. They focus on the under-served mass market of people who would like to invest but only have small savings pots to play with, or who perhaps can’t afford financial advice or wouldn’t be economically viable clients for traditional financial advisers to take on. Robo-advice and micro-investing tools help to democratise investing and make it accessible to a much wider consumer base. Although some of these companies may take time to become profitable, the assets they manage are set to grow rapidly. Deloitte estimates the $2 billion in assets under automated management globally today may grow to as much as $7 trillion by the year 2025.
So strong has been the hype around cryptocurrencies that some listed companies in totally unrelated sectors have linked themselves to the space by changing their names or the focus of their businesses. Just adding the word ‘blockchain’ in somewhere has proven enough to send their share prices soaring (see Long Island Iced Tea Corp, now called Long Blockchain). But there may already be signs that the bubble could burst – highly volatile Bitcoin has fallen a long way from its lofty highs, and there is a regulatory threat from financial watchdogs globally following a crackdown by South Korea. There could be interesting developments to come in cryptocurrencies this year as companies navigate the new landscape.
Regtech refers to the use of technology to help financial services firms better comply with regulation. It’s been dubbed ‘the new fintech’ and it is a fast-growing area. Regtech businesses help other firms to meeting their reporting and compliance obligations, monitor transactions, and manage risk. Firms like Funds-Axis, DueDil, and Silverfinch are part of this growing movement. Deloitte says: “RegTech has a very bright future, with a huge amount of opportunity for those developing this type of technology to automate and enable the world of regulatory assessment and control management, bringing clarity and control to an area of the business that is so incredibly important, but so often cumbersome and time-consuming.” With the Financial Services industry under more regulatory pressure than ever and drowning in legislation, Regtech should be a fascinating area to watch.
When you think of AI, you might think of chatbots being used to replace customer service people, or voice command technology like Amazon Alexa. But the applications of AI in fintech go much further. It can be used to spot suspicious transactions and cybersecurity threats, or predict consumer behaviour and make more accurate predictions based on these insights – for example, whether someone will be a future credit risk. Machine learning can be used to create a customised investment portfolio based on someone’s personal interests and preferences, updating it as their preferences change over time. The possibilities are endless, and who knows how the FS industry could change when AI reaches its full potential?
As always, only time will tell when it comes to forecasting the future but one thing is sure, the UK fintech market is thriving now and will continue do so for a long time.
By Andy Milner
An interesting "dummies guide" to blockchain, with a legal angle.
Blockchain 101: A General Counsel's Guide
WWW.FORBES.COM Most financial institutions rely on complex infrastructures and lengthy processes to settle trades, send money abroad, reconcile records and secure transactions. But that could all change as blockchain...
By Luuk Jacobs
2018 is nearing its end. It has in many ways again been an exhausting year for the Investment Management industry. It started with the delivery of MiFID II, followed by other regulatory requirements like Gender Pay Gap Reporting and GDPR as well as preparing for the next round of regulation that will hit in 2019.
I however think that 2019 is going to be the year of the B word.
Likely this will be most associated with BREXIT – and the lack of plan B. I don’t want this blog to become another discussion of it as it is all in the hands of UK parliament as to where this all will go. If as a company you have not done your risk assessment in respect of this, and mitigated the risk already with changes to your business set up (how small or large this might be), time is, or has, run out by now and you can only hope for a low impact outcome.
There are however other B words that I believe will put their mark on 2019.
BLOCKCHAIN (or should we start calling it Distributed Ledger Technology). Much has been spoken about it but relatively little has been used in the investment management industry so far. The term at least has now become a collective understanding of the technology with targeted solutions becoming available although the blockchain technology offerings remain nascent and immature. Equally research from Forrester anticipates 90% of blockchain pilots won’t become complete products or services. Despite all these challenges blockchain will remain on the agenda of many Boards and Executives, as you can’t afford not to understand what it will change to and in your industry in general and the benefits it could bring to your own company.
This brings us on to BITCOIN, one of the best-known uses of blockchain. 2018 was literally a year of highs and lows for Crypto Currencies in general. If you believe specialists in the field, 2019 will see the entry of Institutional money entering crypto currency. The Nasdaq will launch cryptocurrencies in 2019 and various other trading platforms are preparing their launch (Cyprus, Gibraltar).
It is said that Bitcoin, as indicator for the crypto market, “is and remains in its long-term bull market. Bitcoin trades in its “transition band” whereas going forward, as Bitcoin is maturing as an investment, it will not exceed its bullish band” (investingHaven, October 2018).
Bringing us to BOX and more specific sandbox; the technology and software testing environment that enables the isolated execution of software or programs for independent evaluation, monitoring or testing. This is becoming standard practice in business, and even the FCA, to test ideas to resolve the challenges that are being faced without directly making choices. It is bringing us all back to the days when we were at kindergarten playing in the sandbox, being creative, free spirited and thinking, leading to creating better together. 2019 will see sandbox being applied more broadly beyond technology.
The last B word will be the BANK OF ENGLAND and its regulatory arm the PRA and FCA. Various regulation will need to be implemented in 2019, most notably and far reaching the Senior Manager Certification Regime (“SMCR”) and the Asset Management Market Study (“AMMS”). Both will not just be a challenge for the investment management industry to comply with but equally will change culture and governance on an unprecedented scale.