THE DIGITAL REVOLUTION: CHALLENGER BANKS AND THE EVOLVING FINTECH LANDSCAPE

THE DIGITAL REVOLUTION: CHALLENGER BANKS AND THE EVOLVING FINTECH LANDSCAPE 

Many have suggested that the pandemic has prompted UK fintech’s, ‘moment’ – a time when consumers and businesses will truly embrace the future of finance. As one of the UK’s most prominent homes for fintech firms, Level39 has been exploring what’s next for the sector.

On February 24th, Level39 hosted a virtual panel looking at: The digital revolution: challenger banks and the evolving fintech landscape. 

Our panellists:

Joining us were two leading figures from the fintech ecosystem; Sean Hunter, Chief Information Officer at OakNorth– a fintech firm focused on redefining lending to SMEs globally. Prior to joining OakNorth, Sean was one of the first commercial engineers at Palantir Technologies where he led trader oversight partnerships with large financial institutions.

Alongside him, was David Hall, chair of the Venture Capital Trust Associationwhich represents ten of the largest Venture Capital Trust managers in the United Kingdom. He is also the Managing Director of VCTA member YFM Equity Partners, where he is involved in all aspects of the business, including fundraising and the management of investments.

The discussion:

The discussion centred around digital acceleration and its impact on challenger banks, whether banking incumbents will be able to accelerate their digital programmes fast enough to compete, and the ultimate end game for our financial services.

More people used digital banks last year than ever before with over 71% of digitally active UK adults now using the services of at least one fintech firm. The panel discussed how the pandemic has changed the banking experience and whether these shifts are set to be permanent. Both speakers noted that the need for digital banking services creates an opportunity for challenger banks as they were designed to be digital from birth and can provide consumers and businesses with a holistic banking experience.

Yet, Sean highlighted that if it is only the app of Challengers that makes them stand out from the crowd, banking incumbents will be able to quickly catch up, so it’s important this year that they focus on diversifying their offerings.

The pandemic also shone a light on how fintech can be used to distribute Government accredited loans. David and Sean discussed how the Government utilised challenger banks for the first time, enabling them to distribute CBILs and BBLs quickly to the small businesses that needed capital the most – prompting a conversation on how Government can further tap into fintech to help businesses and consumers over the next few years.

The UK fintech sector attracted $4.1bn in investment last year, and Sean was quick to point out that the UK has a unique structural advantage with its tech and financial centres in the same place, allowing for collaboration and idea exchange. David added to this, highlighting how the customer experience must remain the core ambition of fintech to drive investment and success, to ensure the UK keeps its position as a leading fintech nation.

The session also provided an opportunity to pause and predict the investment trends we are likely to see in 2021. David noted how covid-19 and the aftermath of Brexit will inevitably have a dampening effect on the economy. Yet it’s not all doom and gloom as businesses have been provided with the opportunity to refocus their goals and improve their digital capabilities, which in turn provides fintechs with plenty of opportunities to flourish and integrate their offerings into a wider array of products.

Brexit was also a brief topic on the agenda, specifically on what UK fintechs need to do to continue to secure record levels of funding, despite the hurdles leaving the EU has provided. Sean noted that whilst some of the larger banks may pull back from the UK market – this will create exciting opportunities for challenger banks to thrive. There are still hurdles to overcome, especially when it comes to futureproofing the talent pipeline. We must ensure we get a visa system in place where we can bring in workers from abroad with the skills that are needed for the fintech sector to continue to innovate.

The panel finished positively with David highlighting how tech will be increasingly important in a post-pandemic world explaining how it won’t just be the fintech sector innovating over the next few years, but all sectors will be looking to see how they can increasingly apply tech to the work they do. In turn, this will provide the fintech sector with endless opportunities over the coming years.

You can re-watch the discussion here.

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