As CEO of CYBG, FinTech Envoy for England, Ambassador for FinTech Alliance and with 30 years’ experience in the world of banking David Duffy is in a unique position to survey the current landscape of financial services and the disruptive forces that are reshaping it.
As part of our Leaders in FinTech series, we sat down with him to discuss the impact FinTech is having on the UK financial services sector, its prospects for future growth and the big issues both new entrants and entrenched incumbent companies will face as the sector adapts to meet fast-changing consumer demands.
Q: What are the major trends you see in UK FinTech?
A: Currently we’re seeing a huge focus on retail financial services, because it is mostly solving simple needs and improving the customer experience. That concentration will ultimately lead to consolidation in the space. We’re also seeing emerging SME capabilities – in general the business world is seeing more entrants and positivity. Meanwhile the data and AI space is becoming much more populated than before with capabilities to help you understand your customer better.
Q: What has your experience as FinTech Envoy for England taught you about the power of FinTech for the financial services industry?
A: The biggest learning so far is that FinTech should be viewed as something you can collaborate with. Too often FinTech is seen as a demon but I learned very quickly that actually most of these new companies have very smart ideas, technology and services. If they do a better job than we can in specific parts of our business why not collaborate with them?
Q: What are the challenges for established organisations trying to embrace FinTech?
A: I’ve seen a great deal of what I’d call cultural chloroform. Imagine you’ve got decades of experience working in a bank doing things a certain way, and then someone comes in and tells you all you know is irrelevant and that they can replicate it and improve on it in five minutes!
That might be accurate but it’s hard for traditional banking to take on board. The result is a cultural conflict as the big firm - with all its history and learned patterns of behaviour – resists these radical ideas. That’s why creating a part of your culture that is receptive to disruptive thinking is imperative.
Q: Given this power to disrupt business as usual does FinTech have a role to play in helping financial services deliver on issues such as financial Inclusion where the sector has an obvious responsibility but has struggled in the past to deliver?
A; It’s not an option. It has to be a requirement. FinTech for me is not necessarily going take over the world but it is going to make the world a better place by challenging the norms and the status quo. What FinTech has done incredibly well so far is point out the inefficient and price-insensitive models of yesteryear and provide alternative solutions which have encouraged existing players to provide a better answer for the customer. Here at CYBG we have been working on finance integration initiatives where loans are offered through a company at source, with payments deduced from the payroll. This gives access to finance to individuals who might not be too attractive otherwise.
Q, what about other key sector issues like data privacy and ownership?
The tech companies are the largest, most valuable in the world and they dominate the economy. Yet can we really say their current model can be sustained in the longterm? One where we say: “I will give you every piece of data that I own. I’ll tell you where I eat, what I do, where I go and you’re free to take that and sell it to whoever you like and make a lot of money for yourself.” Moving forward what we’re going to see is data control, data regulation, and a realisation on the consumer side that my data is private and valuable; If companies want it, they will have to pay for it.
Q: As a FinTech envoy you obviously support the adoption of new technology. But does the rapid rate of change ever give you cause for concern?
A: What’s fascinating is to look at the different technologies to try and anticipate the consequences. The most important ones are social. For example, automation and AI are going to eliminate many jobs across all industries. Who’s going to pay for our economic growth and well-being if people don’t have an income. Our disruptive model can crash if you take it to its extreme. So, while there is a lot of good in it you have to be careful about the social consequences.
Q: As you look forward what do you think the future looks like for UK FinTech?
D: Simply put, the sector will have to collaborate or it faces its own threat. No one is safe from elimination. There will be disruptions. Big tech companies can do a lot of damage to FinTech. These companies already have immense revenues, data capabilities, resources, knowledge and investing power – not to mention ready access to billions of customers – that no single FinTech can compete with.
Big Tech could eliminate the need for FinTechs as we currently know them. But the story doesn’t have to end that way. FinTechs can also be part of a solution but, to do so, collaboration and partnerships will be crucial.