The Altfinance and Fintech Explosion

Amazing! In the same day I read that card payment processor Stripe raises $80m of investment at a valuation of $1.75 Billion and that the Royal Bank of Scotland is cutting 20,000 jobs.

a man in a blue shirt

Stripe.com is a card payment processing company started by two Irish brothers in their early 20’s, now relocated to silicon valley. The company makes it really easy for businesses to accept card payment online and is challenging PayPal in this space.

When a large-scale technology shift like this take place there are big winners and big losers. Unfortunately for them, the employees of the UK incumbent banking sector are going to be the big losers. I envisage 75% of bank branches closing down as online financial services reaches the promised land and delivers far better value to the consumer.

I often relate this technological shift to the changes that took place in 18th century London as more bridges were built across the Thames. The Romans were the first to build what became known as London Bridge and this was to be the only bridge in central London for 1,700 years. In the 18th century London there were as many as 20,000 boatmen who carried people across the Thames. The boatmen had a strong lobbying group (including the Royal Navy) that did slow down the building of the bridges (now 17). But there was no longer a need for boatmen and the trend was irrepressible.

In the last 12 months there has been a noticeable shift in the appetite for investing in technology that is going to dramatically change the consumer financial services sector. We think this is excellent news.

I recently attended a Fintech talk at the Guildhall, where the panel included the CEO’s of Zopa and Funding circle as well as the head of innovation at Barclays. There must have been 500 people in attendance. I would say 80% of them were corporate financiers, consultants, lawyers and accountants, trying to find a way to get involved in this growing new sector.

Fintech is about automating transactions and generally making consumer finance more efficient, whereas Altfinance is about trying to build the new “Bridge on the river Thames”. P2P marketplaces that disintermediate traditional finance have the potential to completely change an industry for the overall benefit of society.

Welcome change in the financial sector is afoot. Now is the time to be scaling up and investing in businesses that are disrupting traditional finance.

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