By Marion Dakers, The Telegraph. See online here.
Old Billingsgate Market, once the world’s biggest trading venue for seafood and in an earlier guise a survivor of the Great Fire of London, now earns its keep as a corporate events venue. Last week, its Victorian arches played host to a thousand reasonably sized fish in one of London’s newest industries, bringing together well-heeled City backers with six-dozen start-ups with a shared aim to reel in banking customers.
The third annual Finovate Europe, a portmanteau of “finance”, “innovate” and the Continent, showed off the newest developments in fintech, a combination of “finance” and “technology”.
Despite the clunky monikers, banking giants including Santander, Investec and Close Brothers sent representatives to the event and many more are spending increasing sums on banking gadgets and developments to stay relevant online.
One of the apps to win best in show was Jumio. Instead of filling in reams of paperwork to apply for a bank account, the American firm’s invention allows a customer to upload a photo of their driving licence or passport from any one of 120 countries, along with a photo message to verify the person’s identity. Simply put, you can apply for an account by sending the bank a selfie.
It sounds far-fetched. It looked a bit far-fetched, as a Jumio developer contorted his face to match the eye and mouth spots on his iPhone screen, while the app checked the resulting photo against his ID card. However, last Wednesday, Lloyds Banking Group said it would launch this very service using Jumio’s technology across Lloyds, Halifax and Bank of Scotland by the summer. There is a lot riding on initiatives like this for the banks, which since the advent of seven-day switching in September 2013 have watched as 1.5m customers moved their money.
After decades of staid and unchanging customers accounts, when it took 20 years between the first British ATM being installed in 1967 and the first debit card, banks have undergone several years of swift progression via online banking to contactless cards, mobile payments and bank branches as IT hubs. Some are concerned that online players could cut out the banks completely, going direct to customers and rendering much of high street finance obsolete.
“The sector has had exponential momentum. If customers are going to demand interaction with their financial future, they are going to need the tools to do that,” said Amy Nauiokas, the president of the fintech investment firm Anthemis.
Ms Nauiokas said firms such as hers “act as interpreters between the start-ups and the banks”, which are increasingly open to allowing small technology firms into their business.
“Banks have not been particularly active in the acquisitions market, but they are looking at ways to participate in these firms’ development,” she said.
London has become a focal point in Europe for this rapid proliferation of start-ups and the large companies that hope to use their inventions. Silicon Roundabout, the name given to a clutch of technology firms around Old Street Tube station, attracted an estimated 16,000 new businesses in the year to March 2014, backed up by tech-focused offshoots of global firms including KPMG, Amazon and Vodafone. Nearby, round the corner from London Wall, is three-year-old mobile agency Apptivation, founded by Mark Kanji to give new mobile ideas a channel to reach banking institutions.
“It’s not just the realisation that there are so many fantastic people in this field, but also that there are digital banks who are going to take customers away from them,” he said of the growing interest from financial companies. “Start-up used to be a dirty word three years ago – certainly when I was trying to hire people – but I think that’s changed dramatically due to the new support structures that are there now, from non-profits giving advice to government schemes.”
Apptivation brought Lloyds staff into the offices to work alongside developers on the bank’s mobile services, with the aim of combining digital expertise with a view of what customers actually use. More than 6m people a week now use Lloyds apps.
Mobile banking is now so successful at some banks that a third of customers no longer log into “traditional” online banking and manage finances solely through their phone. The British Bankers’ Association found last year that 77pc of us bank online at least once a month, using banking apps that have been downloaded 14.7m times, and that transactions worth £1bn a day pass through mobile and internet banking portals.
For banks looking to shave costs from their expensive bricks and mortar branch network, this should be music to their ears. However, for almost every early adopter, there is a customer not using online banking, with security concerns cited as one of the biggest barriers to signing up. And so the industry is also investing in ways to bridge the gap for customers wary of the rush to the internet.
Mastercard, the payment firm, is among a number of finance firms working with an eight-year-old card company named Dynamics to create bank cards that have buttons and embedded screens. The cards, which look almost identical to an ordinary debit card, let customers change the payment currency or produce unique security codes for each transaction. This two-step check is intended to make online transactions safer by ensuring the card is in the hands of its owner.
Mastercard is also working on a bank card with a fingerprint reader, named Zwipe, which is intended to safeguard the growing number of contactless cards against theft and fraud. But bank cards, which are responsible for about three-quarters of retail spending, are now seen by some more far-sighted corners of the industry as a mere stop-gap until mobile phones take over as payment methods. ApplePay has been used since October by more adventurous American shoppers to pay by phone at a shop till, and Finovate hosted an array of mobile apps with names like Yoyo, Mobino and LifePay that can be used in retail transactions. Lockbymobile also appeared at Finovate to pitch a feature that several banks have already adopted: an app to block particular cards, notify when the card will be used out of the country, and set spending limits. TransferTo, another Californian firm, showcased a product that allows customers in developing countries, where bank accounts are not ubiquitous, to use a text message to top up an electricity meter or pay a medical bill.
With British Gas and others encouraging the use of smart meters in the UK, this kind of mobile payment could eventually end the need to set up a direct debit. It’s this kind of simple service, which neatly circumvents the banks, that has the same financial institutions reaching for the old-fashioned chequebooks in an attempt to keep up.