It’s been fascinating having the equivalent of a ringside seat for the London and New York rounds of the Barclays Techstars Accelerator.  The two cities have some of the most innovative FinTech start-ups and some of the more supportive government and digitisation environments.  

[Disclosure: I’ve been one of the start-up mentors partnering with Barclays on the New York round]

I’ve found it hugely educational trying to understand what technology is industry disrupting, what is incremental evolution but potentially very immediately applicable, and what is (if I’m honest) at the frothier end of the scale. The most interesting areas to me have been where we are moving to truly digitised process (as opposed to just IT enabled processes). The move to digitisation is very real but some areas of digitisation will arrive much faster than others.

1. It’s not automatically London vs New York – There is a perception (often driven by the media) that London and New York are in a zero sum game of competition. I’m not sure that’s true. Last year, when London’s City AM did a comparison, both cities were virtually equal for FinTech jobs and more importantly, far in front of their nearest rivals.

My impression is that both will be very strong in Fintech, with some overlap and some significant differences. New York draws on the massive scale of the US domestic market. It also has the advantage of a local (as opposed to national) regulator who is showing real innovation with developments like June’s announcement from the NY DFS of the New York Bitlicence for digital currency. London has huge expertise in areas such as remittances and emerging markets (for example, I’ve been impressed by the team at BitPesa) and London has great strength in industries like insurance (I’ve posted previously on Everledger and how Leanne is developing the blockchain for asset identification and provenance in that industry).

The telling point is that Barclays and some of the other banks are working in both cities to get the best of both ecosystems.

2. Banks are not incompatible with disruption – There is a culture within start-ups that focuses how they will disrupt an industry. I wouldn’t dispute that in FinTech some start-ups will cause massive change and that some incumbents will fail to adapt and be destroyed.

However, the idea that the banks can’t adapt strikes me as a misreading of the situation. They may find it hard, and some may not manage to adapt, but the idea of total disruption depends on the banks not understanding the threat and not engaging with it. Chris Skinner has written very eloquently and persuasively about this (see for example: “Watch out Fintech, the banks are coming”) and I rather share his views. For me a good parallel is the other industry I’ve worked in, Telco’s and Service Providers. The rise of ISPs, mobile, satellite and so on has massively disrupted the industry from its days of fixed line cable, yet it’s still AT&T, BT, Deutsche Telecom, etc… who are some of the largest players. Incumbancy, infrastructure and regulation give you advantages. If the banks were ignoring FinTech, I’d understand the idea more but as Barclays is showing, the banks are paying close attention and have well-resourced teams of very capable people working on exactly this issue.

3. Difficult niche problems are good – Re-envisaging the banking industry is great, but understanding what’s problematic and painful today and then fixing it, is to me a better plan. As mentioned above, in a heavily regulated industry working with partners and incumbents can be a huge asset compared to challenging from the outside. The start-up at the NY Accelerator I’ve been working with is, Wayerz, who are focused on exactly that type of real need banks have today. Wayerz have a deep understanding of correspondent banking (how money is actually moved between banks) and the many current challenges. Today correspondent banking can be a painful process and one I’m familiar with from my time working on the build of the CLS Bank for global FX back-end settlement. Yet correspondent banking is a huge industry, handling $21Tr daily yet on an infrastructure that in places dates back to the 1970s where Excell spreadsheets are too often used.

Rather than take on key parts of the global system like SWIFT and challenge the existing investments banks have made in payments infrastructure, Wayerz have an elegant approach of digitising what is currently a disjointed process with gaps between multiple IT systems. Wayerz visualises the correspondent banking transfer route options, prioritising them (by risk, speed, cost, etc…) and then providing reports and analytics.

Although the video of Wayerz presenting at the New York Accelerator Day is not yet public, the head of Global Payments for Barclays’s Corporate Bank introduced them (you can see his introduction HERE (0:45)) and there’s a good overview of their solution HERE (1:48). 

The benefits for both bank and FinTech provider are clear and both benefit from tackling the problems in correspondent banking together.

4. Blockchain seems to be getting more interest than BitCoin – The striking thing about both the Barclays New York and London days is how much there was about blockchain, and how comparatively little there was about BitCoin. I’ve mentioned Everledger from the London day already and also in London Barclays also agreed a POC with the BitCoin specialists Safello . In New York, as reported by New York Business Journal (“Barclays signs two blockchain deals among slew of other contracts at Techstars accelerator”) the focus was on blockchain, espeically on Chainanalysis and Wave. Both have really interesting ideas, but neither is dependent on the BitCoin implementation of the blockchain.

5. Where is customer experience FinTech? – Perhaps the biggest perceived threat to established banks is from the disrupters who are planning on competing on retail customer experience, be they Moven in the US, number 26 in German or Metro Bank and Atom Bank  in the UK. Yet there I’ve only seen a small number of FinTech startups that focus on this and look really capable. Looking through the list of Barclays London Accelerator companies  there were no true retail customer experience technology specialists.

In New York, I was really interested to see LiveOak technology. They offer a nice combination of secure on-line collaboration and document sharing with authentication/ signature capabilities and no requirement for end-user downloads. It is a nice way of removing some major pain points in regulated product sales and customer management.

What’s fascinating about FinTech is that it will change some of the longest established business and IT systems, and do so at levels from the granular to the strategic. I suspect that it also will change its own nature, as the use cases become clearer and the banks become better at identifying, developing and buying the FinTech start-ups. It’s likely to be very interesting!