ka-ching! on Tyne

Digital innovation has transformed finance more than most sectors. Peter Murphy, director of JHC Financial and member of Dynamo’s Fintech Workstream spotlights some of the exciting activity in the region

For many years the portmanteau word Fintech simply meant the application of technology to the financial services industry, mostly at the back end of established businesses, automating and streamlining existing operations.

While this aspect is still enormously important and has a long way to go in many firms, in the past ten years or so Fintech has come to mean something more, something innovative and exciting. It describes a world of disruptive technologies, agile start-ups and new slick services that empower us to take control of our personal and commercial finances through tools that are powerful, intuitive and simply a pleasure to use. The cosy world of bank branches on every corner, the city broker and the long lunch are already well behind us and starting with the ‘Big Bang’ in 1986 opportunities for innovation exploded out of The Square Mile and into the beginnings of cyberspace.

Now, 30 years later, here in the North East, we have a fantastic opportunity to lead the Fintech industry through the next steps of innovation and development. Bringing together our cutting edge academic institutions, established software houses and young, hungry start-ups, together with funding from both government and the very financial services industry we seek to improve, we can generate new truly disruptive products and services for the world market.

At the hub of the Fintech cluster JHC is collaborating with Northumbria University to explore the ways in which the huge wealth of data that we have gathered over the last 30 years can be put together with the latest in machine learning and pattern recognition technology. This work will lead to a much better understanding of how systems and services in the Finance industry are actually used and give us insights into the next phase of app development.

Also on the theme of big data, JHC and another firm central to the Fintech workstream, Opencast Software, are exploring putting ‘sentiment analysis’ together with the current JHC services to greatly enhance the industry’s ability to act in its customers best interests.

Firms such as Cityweb Consultants are active in the fast moving world of blockchain technology. Only 12 months ago this was a technology still hunting for an application but with the enormous and rapid (and possibly inexplicable) rise of Bitcoin (did you invest?) it has leapt into the mainstream. Real life, meaningful applications are still thin on the ground but the technology is now well proven and as the real and most effective use of blockchain will be in replacing most of the incumbents in a value chain, the next breakthrough is going to come from an insurgent.

The next step for our nascent Fintech group is to bring in firms such as Ubisoft, Sage and Scott Logic together with expertise from the psychology and design departments of our academic partners, to inject ideas from the world of games and consumer software into the staid and stuffy world of finance.

There are major financial services players in the region, some such as True Potential and Virgin Money who have been very successful in utilising technology to win in the current environment and others, such as Atom Bank, who are entirely reliant on new and innovative services in order to succeed. But whether true disruptor or streamlined traditional company, there is a huge amount of change still to come and the Dynamo Fintech Group is going to be right at the front leading the way.

Case study – True Potential

In the year to the end of 2017, Newcastle-based True Potential, one of the UK’s fastest growing financial technology firms recorded a 43% increase in usage of websites and apps to manage money among its clients. The growing popularity of its own impulseSave service was part of this trend.

The platform enables users to top up pensions, ISAs and general savings accounts by as little as £1 at the push of a button. Part of its original aim was to make it just as easy to save as it is to get into debt – and figures suggest it has done just that.

Since it was launched in 2014, over £100m has been impulseSaved by clients, while the app has been downloaded 43,000 times since its launch in 2015. The £100m invested is made up of 42,000 transactions, a third of which were for £10 or less. Half of all investments were worth £50 or less. Almost a third of clients use the app to top up their retirement funds, with other common goals including holidays, new cars and house deposits.