Nick Hungerford, CEO and co-founder of Nutmeg, gives his fintech outlook for 2016
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The year 2015 has been a boom year in UK financial technology. And 2016 will be better still. If I had to characterise the industry’s development in the last twelve months I would say it had succeeded in grabbing headlines, achieving real growth, and engaging customers. If there’s been a problem, perhaps it is that the back-end – the underlying technology – has been neglected in favour of the consumer-end.
So in the next 12 months, I predict more work on the nitty-gritty: the best FinTech innovations in 2016 will be in back-end technology, or B2B. I expect to see more software and tools that help existing firms do their core business better – to manage secure payments records (Tradle), compliance obligations (Behavox), corporate finance (Origin), and so on. The government, aware of this need, is developing an API standard for banking, so FinTechs can create bank comparison tools for customers.
At the same time, I also expect the sector as a whole to keep growing. I predict more investments by incumbents, like Schroders’ 2014 investment in Nutmeg. I expect to see fast growth in developing markets – witness the growth of WeChat in Asia, of Yandex in Russia. Here in the UK, I believe mobile-only banking will finally take off (Mondo, Atom Bank) – eight new banks were authorised in the UK during the last five years, compared to just one in the five preceding years. And I foresee rapid growth in some specific niches – for instance, PropertyPartner will track the upward fortunes of the heated property market.
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By GlobalDataI also expect to see exits, with companies sold or looking to raise cash through IPOs. This will result in the first deployment of proceeds as generation one entrepreneurs invest in and start new businesses.
It can’t all be rosy, however. There will be some failures. I expect Schwab to give up on its fee-free model of managing investments in the US. Bitcoin will remain on the margins, crippled by (among other problems) volatility and, ironically, a massive trust problem. At Nutmeg we do see a future for the distributed ledger, however, and I predict 2016 will bring a welcome pivot from over-excited speculation at FinTech conferences to the unglamorous business of actual implementation.
In spite of failures, I think we’ll see further flourishing in the network of organisations supporting FinTech’s growth. InnovateFinance will recruit its 200th member. I think we’ll see more innovation at the FCA (see the recent Sandbox, the Innovation Hub, and various welcome consultations). I hope to see more supportive policy work from the CMA, and a programme of proper reform of financial advice from the FCA and Treasury’s Financial Advice Market Review.
Finally, following Eileen Burbidge and Harriet Baldwin’s appointments during 2015 to FinTech-related roles in HM Treasury, I expect to see more women taking prominent roles in the industry. I hope to see firms engaging more actively with female customers, to correct today’s gender imbalance across the FinTech customer base. Women have to make international payments, women have to put their money somewhere – but, today, far fewer women than men are using FinTech products. We recognise, however, one welcome fact: the number of journalists writing about FinTech seems to be balanced in favour of women!
