Naturally, Bartos found the typical answer was Covid-19, reflecting how Covid-19 has changed the way financial institutions are purchasing technology.

“A lot of the barriers to experimenting with new technologies and with innovation fell down all of a sudden, and super large enterprises, 200-year-old institutions, were forced to work and serve customers digitally remotely and at scale.”

Albion VC witnessed more big banks buying into things like moving into the cloud, going towards no code or low code software, more experimentation with AI and machine learning, and, buying more from startup providers rather than incumbent providers of technology.

While Bartos raised the milestone of Capital One going 100% public cloud, she qualified that we are likely to see constraints around this adoption of new technology come to the fore.

“As we come out the other side of Covid-19, and we all get back to our more normalised world, we are going to see some more of the constraints around using new technology come to the fore. This includes concerns around security, data privacy, meeting regulatory scrutiny, and the generally long IT procurement processes which are going to be here to stay.”

“While we've learned a lot from Covid-19. I think some of that normalisation is coming back.”
Alison Imbert, principal of investment platform Partech, furthered that there are certainly still areas for disruption in the space, notably, accounting.

“SMEs are looking to get better solutions to add real time cash, get effective financial support from the government and also accounting advice - as accountants hold a key role in helping SMEs get through the crisis in a better way.”

SMEs realised however, that in most cases, while accountants offer tools like Quickbooks , it is overall a very “old school” experience. As a result, the industry is seeing tools which plug-in to accounting software skyrocketing as they smooth the process of invoicing clients, paying suppliers, and offer better treasury dashboards.

In the B2C fintech world, Adam French, founder of Scalable Capital, argued that while there is a risk to commoditisation, this cannot be generalised to assume that every business will be at risk, and there are elements taking place which mitigate this risk.

Also, in the B2B space (as is also the case in B2C), French stated that the element of service is something which can be viewed as mitigating this risk of commoditisation. “Large enterprise financial service firms want to know that your product works, but it’s about more than just the product. It’s about your ability to be able to service them and this component is not commoditised.”

Second, the element of brand also plays a part. “At Scalable we’ve been able to get eight large enterprise implementations up and running, which, if we were a typical startup this may have taken us too long and we may have failed […] A big risk to the B2B sector is how long it takes to implement against large financial services firms.”

Continuing the topic of risk, Paul Taylor, CEO of Thought Machine argued that “when it comes to risk, you separate the sources. Our main goal is to solve infrastructural risk.”

He added that banks are on decades old technology, running on software which no-one knows how to operate, and for which there is no documentation or guidance. This software was not built for the internet or modern security protocols which therefore presents security, scalability, and platform risk.

“The interaction between physical and human risk also became apparent at the beginning of the pandemic […] this shifted a lot of the underlying assumptions around risk.”

Rounding out the conversation on the type of fintech opportunities his firm State Street Alpha is looking for, JR Lowry, COO, commented that they tend lean towards players that already have traction with State Street’s clients and are gaining revenue.

“If a fintech wants to move to the top of our radar, having a few of our clients coming to us and saying, ‘we’re working with company X, we want you to integrate with company X,’ that certainly has impact with us. Ultimately, we’re trying to help our clients, many of whom are already working with fintechs and we want to be supportive of that.”

Lowry added that when working with very early-stage companies - particularly when State Street Alpha has a stake or a board role - he has found invariably one gets immersed in trying to keep the company going when things get tough, which is often. “That, for us, is a distraction.”