How London’s FinTech upstarts are joining forces to take on the banks and big finance
A favourable regulatory environment and active venture capital community has made London a hotbed of FinTech innovation in the past five years or so.
Mingling the City’s centuries old ‘fin’ pedigree with the bounty of innovation and creativity provided by the capital’s ‘tech’ community has helped cement London’s position at the vanguard of the new wave of innovative upstarts and challenger banks.
Throw in the FCA’s commitment to actively promoting and fostering innovation as part of its statutory objectives back in 2013, and you can understand why so many FinTech shoots have grown out of such fertile ground.
Now there are signs that the last half decade of multiplication and expansion is giving way to a new period of consolidation, as some of London’s biggest FinTech names begin to partner up and cross-pollinate their services in what could be their biggest challenge to the hegemony of big banks and finance yet.
Today, London-headquartered money transfer service TransferWise announced a new partnership with soon-to-be-launched Starling Bank, which will give customers of the challenger bank direct, in-app access to its money transfer services from the UK.
In an open challenge to institutional finance firms and incumbent money transfer services, the announcement proclaimed that the new partnership was part of both firm’s dedication to ‘revolutionising outdated finance and providing a fair, transparent experience for consumers’.
It marks a growing trend towards the co-mingling of likeminded FinTech firms which, thanks to off-the-shelf APIs and their openness to collaboration, has ramped up a gear in recent months.
Just yesterday (March 14) foreign exchange app Revolut said it would begin offering almost instant loans of up to £5,000 through its app thanks to a new partnership with peer-to-peer lender, Lending Works. The FinTech company also revealed a partnership with London-based investment platform Bricklane last month to provide a property ISA to users.
Such openness to collaboration and an ecumenical approach to their competition is in stark contrast to the traditionally closed-off and voraciously competitive world of banking and big finance which, despite efforts to foster their own innovative energy, still remain opaque at best.
Perhaps most notable is the impending launch of Nick Ogden’s ClearBank, which will be the first new clearing bank in the UK for around 250 years, and could prove to be an even greater game-changer that opens up a new era of open services and collaboration.
Focused around the stated aims of improving choice and ‘radically’ shaking up the market dynamics, the bank will provide FinTech firms and challenger banks with direct access to payment services such as Bacs and Faster Payments, unfettered by the interference of the big banking beasts such as HSBC and Lloyds.
All told, the pulse of innovation and increasing openness wrought on the financial sector thanks to this new generation of tech firms may be bad news for the traditional institutions, but it is great news for consumers, who now have greater choice and control than ever before.
As Megan Caywood, Chief Platform Office at Starling Bank, explained today, both the bank and TransferWise are putting the ‘customer first’ and want to bring ‘real choice’ to the market.
“These are all values that are important to Starling and our partnership signifies a vital step for UK banking customers,” she added. “Using APIs to integrate best-in-class services from across the market, we can transform the way we we understand everyday money so that customers have easy access and real choice in a way that truly fits in with their lives.”