Financial infrastructure: How Covid-19 is accelerating the pace of change

By Oliver Smith on Wednesday 26 August 2020

Digital BankingSavings and Investment

“We’ve seen three to five years of acceleration in three to five months.”

Financial infrastructure: How Covid-19 is accelerating the pace of change
Image source: Nick Ogden/Keith Grose.

Traditionally financial infrastructure, the nuts, bolts and pipes of finance, have been among the slowest-changing aspects of the industry.

But in a world of Covid-19, lockdowns, travel chaos and working from home, is that still the case?

Last week, AltFi partnered with Plaid and hosted a virtual debate to find out.

Taking part in the webinar was Nick Ogden, one of Europe's best-known entrepreneurs, having founded fintech heavyweights WorldPay and Clearbank, the UK's first clearing bank in more than 250 years, and who is currently working on a new piece of financial infrastructure in RTGS Global, a new real-time gross settlement network for banks.

Joining him was Keith Grose, Plaid’s head of UK who led the company’s launch here and has helped Plaid provide a whole host of open banking and payment services for the likes of budgeting app Cleo and digital banking giant Monzo.

Watch the full webinar on-demand Fintech in the age of uncertainty: Rewiring the financial system.

An acceleration of the trend

The first change clear to both participants is that the pace of disruption in financial infrastructure is accelerating, and in large part due to Covid-19.

“I think Coronavirus has created three to five years of acceleration in three to five months, in my opinion,” said Grose, nodding to the increasing demand for access to open banking data.

“We've seen a 300 per cent increase in investment application traffic over the past few months, which you can see represented in the news coming out of the US with folks like Robinhood and over here with Freetrade and Trading212, and I think that’s just the start.”

Recently PensionBee reported a whopping 400,000 visitors using its balance API through Open Banking partners like Starling Bank, Moneyhub and Yolt during Q2.

But it’s not just consumer behaviour that is changing, having spent his career building new pipes in the worlds of payments and clearing, Ogden is now turning his attention to real-time settlements between banks, and has found conversations in recent weeks and months only accelerating.

“I don't think conversations are ever easy when you're trying to get somebody to say yes, but I think that there is now a realisation that customer service is pretty absent in relation to financial services,” said Ogden.

“Now, stand back from financial services and look at other organisations, you’ll find service levels are the way that they differentiate ourselves and win customers. I think there is a real big realisation, that service levels are very, very important.”

“That means, you know, we don't have a situation where a high value settlement system doesn't work at the weekend for example.”

There has always been “tonnes of room for improvement” in the outdated infrastructure used by the financial services industry, according to Grose, but for the first time there is real demand to make things “faster, easier and more scalable for the next generation of banking applications.”

Speedboats and cruise ships

Often absent in the conversation around disruption of financial infrastructure are the incumbent banks and financial giants, but that also seems to be changing.

Just last week banking giants Lloyds and Nationwide joined Barclays in their investment in and partnerships withpayments technology provider Form3.

Rather than holding up change, are these players starting to encourage it?

“A lot of newcomers have been quick to dismiss incumbents slow and clumsy, you have to remind yourself just how big they are and how hard it is to actually make massive technological changes,” said Grose. 

“It’s steering a cruise ship versus turning the speedboat. But I think that you're starting to see those turns happen.”

Grose said Plaid’s experience had been that while incumbents previously saw open banking as “a compliance exercise”, they were starting to view the real opportunity.

Lastly, given the stark changes of the past six months, the question remains whether the progress made in the world of financial infrastructure will remain post-Covid.

“You have whole demographics that had never used API access before and probably didn't even know they were using it, who are now suddenly seeing FinTech for the first time,” said Grose. 

“You’re seeing this acceleration and I don't think it's going to change post-Covid. I think that level has become the new bar, and it's going to stay that way and only increase in the future.”

Ogden said from RTGS Global’s point of view, the ease of conducting global commerce remotely had been an efficiency boost for his team, and one that he expects will remain long into the future.

“I don't think we'll go back to the old normal,” he said. “I think what we're living in now is the new normal and the efficiencies and the ways that you transact business will [always] be different.”

Watch the full webinar on-demand Fintech in the age of uncertainty: Rewiring the financial system.

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