Gregor Dobbie, CEO of Vocalink, a Mastercard company, tells us what challenges he thinks the UK FinTech landscape will face over the coming years.
I think that the regulatory regime needs to keep up with the pace of technology advancement. That’s not a slam of the regulators, that’s tough to do because technology is progressing. Who would have thought three years ago, when cloud technology was first on the scene, that high profile UK government departments would be storing records, including classified information, on the public cloud?
So that pace continues to quicken, and I think it’s tough for the regulators to keep up and the problem with that is that you then open the industry up to risk because regulators are there basically to try to manage risk. Ideally, we can get to a point where the regulators are driving innovation by being one step ahead; Open Banking and PSD2 are good examples of this where agile, new and creative FinTechs have risen to the challenge of developing consumer and business focused solutions through the innovative use of Open Baking data.
Also, I think there will be consolidation in the market. I think that’s inevitable. Look at some of the acquisitions Mastercard’s doing, such as Transfast or Transactis.
Additionally, investment in FinTech is currently at record levels. However, this will need to continue to ensure that there’s a strong pipeline of relevant FinTech solutions. Global FinTech investment doubled to $111.8bn in 2018. In order to maintain this level of investment, new ideas and new technologies must be able to prevail.
That requires a combination of complex factors such as education, availability of skills, national infrastructures, government focus and so on. There’s no doubt that countries and regions already embracing FinTech such as London and the UK will be one step ahead. But competition is biting at our heels on a continual basis from the likes of India and China – interestingly, India is experiencing thriving growth of digital payments with a compound annual growth rate (CAGR) of 12.7% in the number of non-cash transactions.
The banking ecosystem is changing fast due to new competition such as the rise of challenger banks, which suggests we’re in for a quite an interesting next few years.