The world’s hungriest entrepreneurial and tech talent are in the vanguard of a financial insurgency – and investors are backing them, writes Jon Card

The internet revolution disrupted and destroyed traditional industries throughout the 1990s and early 21st century. The record industry was crushed by MP3 downloads, telecoms by mobile, and the high street by online retail. But one major industry has, so far, proven resistant – the banking and financial sector. Most of the traditional big names of banking still have enormous power over our everyday lives.



However, a new breed of entrepreneurs is creating financial technology (fintech) which could change the whole game – and many of them are based in the UK.

They’re frustrated that cheques still take days to clear and that it costs so much to send money overseas. And they don’t want consumers to be beholden to a financial adviser or bank. So these online companies are using software to offer greater transparency, better rates, and democratise the way the financial sector is run.

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The financial crash of 2008 – and the resulting haemorrhage of talent – planted the seeds of the current revolution, says Eric Van der Kleij, head of Level39, Europe’s largest startup technology accelerator. “As a regulated industry, financial services was always going to take longer to transform than other sectors, but following the crash, there was suddenly a huge talent pool in financial services that thought there was a better way to do things,” he says.

Restrictions on lending led to a hungry market, which the banks couldn’t service. This sparked a boom in peer-to-peer lending (P2P) where individuals lend and borrow from one another via an online platform.

The P2P lending service pioneer Zopa – which was set up four years earlier – was well-placed to take advantage of the banks’ malaise. “We’re building a business that is set to become a household name and a mainstream activity,” says CEO Giles Andrews of his 70-strong company, which is set to lend £550m in 2015 alone.

Currently leading the pack on money transfer is Transferwise, created by former Skype engineers and backed by Sir Richard Branson, which is making a big name for itself by offering rates banks can’t match.

We do just about everything else from our phones, why not send money? Laurence Aderemi, CEO and co-founder, Moni

Others contenders include TransferGo, FreemarketFX and smartphone app Moni, led by CEO and co-founder Laurence Aderemi. His business helps customers make money transfers to fellow app users for 99p. “We do just about everything else from our phones, why not send money?” says Aderemi.

Businesses seeking investment have found the internet is the ideal platform for the micro-investor. Some companies have used this to great effect, raising money via crowdfunding platforms such as Crowdcube and Seedrs.



But shareholders in private companies can find it difficult to understand the value of their stake, or how to make a successful exit. Attempting to solve this problem is fintech startup Asset Match, an online marketplace for private company shares. It worked with Scottish “punk brewer” BrewDog, which has successfully raised money from the public on three occasions. “With so many companies now raising funds through the new wave of alternative finance, such as crowdfunding and angel investing, more companies are facing the problem of how to provide liquidity for early investors,” says company founder Stuart Lucas.

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Then there is digital currency. Bitcoin is growing, but what’s really exciting investors is the underlying Blockchain technology – a vast, decentralised ledger which records all Bitcoin transactions. There is also growing interest in cryptocurrencies.

James Haycock is managing director of Adaptive Lab, which helps businesses in the financial sector develop new online products. The banks are facing a major challenge from new companies and some customers may go elsewhere to access better services and products, he says. “When you talk to bankers themselves, there’s a lot of complacency, and the idea that they are different because of the regulation and capital requirements.”

Haycock says the banks are struggling to maintain the sort of dialogue with customers they need to remain central to their lives. “They could be relegated to places where people simply store money.”

The stakes are high and, with some of the best entrepreneurial and technology talent finding backing from the biggest venture capitalists, the fintech sector is getting exciting. “The financial sector is a very big industry,” says Haycock, “and this makes it an exciting opportunity for these entrants. Change is inevitable. It might not happen overnight but there’s a lot of investment going in from some major venture capital companies. I think probably a lot of banks won’t move fast enough.”

Five more to watch



The UK is home to a number of exciting fintech companies. Here are some to watch:

1) Nutmeg is on a mission to “democratise the traditional world of financial management” by offering anyone with £1,000 or more the chance to invest from a range of options via its online platform.

2) Droplet makes payments possible on mobiles and doesn’t charge retailers to use its service, cutting out credit card fees. The Birmingham-based business now has brewers and train companies on its books.

3) Elliptic provides custodian services for traders of virtual currencies. Accredited by KPMG and backed by Octopus Ventures, the business is gaining the trust of the city.

4) MiiCard uses bank security to verify online identity, making transactions and trust building faster and easier.

5) Bizdaq allows entrepreneurs to buy and sell SMEs online and provides tools and knowledge to enable these transactions, potentially opening up a vast marketplace.

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