Hot in fintech: 3 emerging themes across fintech and technology

Fintech for a post-Brexit world

Fintech, the use of technology to create, deliver and disrupt financial services, is a thriving industry covering everything from app-only challenger banks to tools that give disadvantaged groups better access financial products. It employs over 75,000 people in the UK and is worth an estimated £7bn to our economy. The UK accounts for 11% of the global fintech industry, and last year £1 in every £6 invested globally was invested here. It is little wonder, then, that in the face of Brexit the UK Government is pushing to maintain the UK’s place as a global leader in fintech.

To this end, on Tuesday Chancellor Philip Hammond announced the launch of a new organisation, the Fintech Alliance, which will run an online community-led platform for UK fintechs to benefit from education, insights and global opportunities. This built upon Monday’s announcement by the DTI of two "Fintech Bridge" pilot schemes between the UK and Hong Kong and Australia to encourage knowledge sharing and international expansion. Back in March Start-Up and Innovator visas were introduced and it was announced that PhD level jobs will be exempt from immigration caps later this year. With the Government striving to "make London a truly global hub for fintech", we can expect further initiatives to encourage exports and increase investment into the UK.

Bharti Moore, senior associate in our Corporate and Finacial Services teams, comments:

"It’s an exciting time for UK fintechs. Venture capital investment in fintech is up 2.2% in Q1 of this year. These new initiatives will further help UK fintechs boost their international profile and mitigate any negative Brexit-driven impact on inward investment."

Technology for social good

One of the fintechs selected for the UK-Australia fintech bridge pilot scheme is Disberse, a company that has developed a peer-to-peer platform using distributed ledger technology to enable donors and aid organisations to send and receive funds around the world more efficiently and transparently. Edward Chapman, associate in our Corporate team and Blockchain Lead, notes that such technology can play a key role where traceability is important:

"In payments we often focus on settlement and lowering transaction costs by cutting out middlemen, but there are also opportunities to use blockchain registries to centralise and remove duplication across KYC and AML processes - making it cheaper, faster and more reliable."

Disberse is just one of the many 'Tech for Good' businesses that address social, economic and environmental challenges. Whilst fintech and open banking is creating new opportunities for hard to reach and disadvantaged customers in financial services, innovative technologies are delivering social benefits in other sectors too. Examples include:

• our client PurePlanet, an app-based energy provider who uses an AI-driven 'chatbot' to deliver customer service and provide low-cost renewable energy, and
• Service Robotics, creators of "Genie Connect", a robotic AI companion designed to alleviate loneliness amongst older and vulnerable adults living alone (look out for this month's of our "Ahead of the Curve" magazine in which we showcase Genie Connect).

Last week, Tech Nation published a report suggesting that this sector was worth £2.3bn in 2018, with a turnover of £732m - this puts it ahead of the UK's consumer electronics manufacturing sector. Further growth is to be expected, with nearly half of the community having only raised seed funding to date. Bharti Moore comments:

"We work with a number of early-stage businesses to secure additional investment and loan facilities. As a full-service firm and with our knowledge of the tech sector, we are able to support our clients in realising their growth plans through our employment, real estate, IP and commercial teams."

5G and the importance of ethical AI

As the roll out of 5G approaches, the promise of data rates 20 times faster than 4G means that UK businesses should be bracing themselves for the opportunities that 5G can bring. Yet a report released last month by Barclays Corporate suggests that as many as 91% of businesses aren't allocating sufficient resources to exploit it - despite estimates that 5G could boost aggregate UK business revenues by between £8.3bn and £15.7bn by 2025.

The extreme speeds that 5G will bring will enable business to make some fundamental step changes in how they implement new technology. It will enable extensive machine-to-machine communication and the collection and sharing of huge amounts of unstructured data. This in turn will facilitate (and necessitate) innovations in, and mass adoption of, AI by businesses in order to make sense of it all.

This will be a boon for some sectors. In manufacturing for instance, subcontractors facing into multiple primes could better manage order pipelines and production capacity through greater data sharing across the supply chains, and the ability to work with and provide unstructured data rather than being tied to legacy management systems could reduce cost and inefficiency.

But for other sectors, particularly those that are highly regulated like healthcare and financial services, with great opportunities come great burdens - ensuring ethical usage. Businesses will need to make sure that any AI it uses is lawful (particularly in terms of privacy and data protection), ethical, and robust. On this theme, just last month the EU released the latest iteration of its guidelines on 'Trustworthy AI'.

Dan Meadon-Bower, partner in our Corporate team and lead for commercial, technology and innovation comments:

"As businesses become more reliant on AI for decision making, accountability will be the watchword. Do you understand how your (or your supplier’s) AI tool has come to its decision? Do you know how accurate it is? How do you get comfortable that a decision is free from gender or racial bias? Or explain it to a patient? Or prove to your regulator that you are treating customers fairly? Businesses cannot afford to treat AI as a black box that they don’t need to understand - it is time to open the lid. The EU is already developing voluntary standards for implementing trustworthy AI and, as we have seen with GDPR, it is not afraid to extend its reach where it identifies a need to protect individual rights."