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Innovation in finance doesn’t always come from the bottom up

The UK’s fintech sector is experiencing a period of unprecedented growth. According to figures from Accenture, investment in fintech in the UK and Ireland rose from $264 million in 2013 to $623 million in 2014. These figures are impressive, but the impact this investment is having on innovation and entrepreneurship in the sector is even more interesting. New entrants are starting to change the rules of play, shaking up the old world order and pushing established players to innovate and adapt faster than before.

This certainly rings true for banking. Just this year a number of challenger banks made their debut on the UK banking scene. Among them – Atom bank – a digital only proposition, aiming to do for banking what Uber did for transportation. Atom, however, is just one example of the shape of things to come. Digital only banks are increasingly gaining traction in the UK, forcing more established players to rethink their strategies in order to stay relevant to their customers. Many banks, such as Barclays and HSBC are already making significant changes to the way they operate, offering greater numbers of services online in order to cater for an increasingly tech-savvy base of consumers. In the payments market, competition is even fiercer. A growing number of alternative payment providers such as Square, Zapp and Intuit are starting to steal a large portion of the market, forcing more traditional players to more rapidly innovate. Organisations that don’t traditionally operate in financial services are equally hungry for success, with technology companies like Twitter, Facebook and Apple now offering their customers the ability to pay through a Tweet, Facebook Messenger or via Apple Pay. It seems that all over the world of finance big, established players are increasingly having to play catch-up.

Yet, for areas such as accounting, the situation looks slightly different. Traditionally slow to adopt to technological change, accounting sometimes seems many years away from other financial services. And it’s not for the lack of transformational technology – a number of truly innovative technologies have been developed for the sector over the past few years. Despite that, many smaller accounting organisations remain conservative in their approach to technology and operate largely in the world of spreadsheets and the manual collection of audit data. Accounting software and automation – on the face of it, technologies that have the potential to limit the mundane part of any accountant’s job, are not as widely implemented as one would think. Larger organisations, however, including some of the Big Four waste no time when it comes to monetising the potential that technology brings into their practices. Most already use financial data transmission software that significantly cuts the time it takes to securely access the data needed to perform an audit. The time freed-up thanks to this automation is then put into other high-value activities such as consulting and winning new clients, to the benefit of both the organisation itself and its clients.

It goes to show that in this sharing economy, innovation doesn’t come from a single source and does not play by any particular rules. Organisations that spot the potential that software and technology have for their ability to retain and win new clients and act upon it, will be the ones to make the most of this technological revolution in financial services. And while someone will always play catch-up, it’s never a given that innovation comes from the bottom up – after all, it works in ways that no one can fully predict and that’s why its impact is so significant on the whole industry.


Comments: (1)

A Finextra member
A Finextra member 04 August, 2015, 13:321 like 1 like

There are many parallels here between the innovative use of data transmission technology and with the KYC (know your customer) platforms. Both provide comprehensive, timely, standardised platforms to collect and manage client data and establish uniform data standards – providing cost efficiencies and improved client experience.

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