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In the UK, GDPR

In the UK, GDPR-compliant file sharing is the key to success for creative agencies, fintech, and enterprises in 2025.

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AI: The Big Disruptor Transforming the Fintech Industry

The financial technology (fintech) industry is a rapidly evolving sector that employs innovative technology to enhance and innovate financial services. Encompassing everything from mobile banking and online payment systems to cryptocurrency and peer-to-peer lending platforms, fintech is redefining the way we manage, invest, and interact with money. This dynamic industry has been marked by its ability to quickly adapt to changing consumer needs and technological advancements, creating a more inclusive, efficient, and user-friendly financial ecosystem.

At the core of this transformation is artificial intelligence (AI), a powerful disruptor that's driving unforeseen change across the financial landscape. AI's integration into fintech is not just an incremental improvement but a revolutionary force that's reshaping everything from customer interactions and fraud detection to personalised financial planning and operational workflows. As fintech companies increasingly harness the capabilities of AI, they're setting new benchmarks for innovation, security, and customer satisfaction.

In this blog, we’ll explore how AI is revolutionising the fintech industry, delving into its impact on various aspects of financial services. We'll examine the transformative potential of AI, its current applications, and the exciting future it heralds for the industry. Join us as we uncover the ways AI is forging a new era in financial technology, making it more efficient, secure, and tailored to individual needs

The Rise of AI in Fintech

AI has become a crucial tool in fintech due to its ability to analyze vast amounts of data quickly and accurately. Financial institutions are using AI to improve decision-making processes, enhance customer experiences, and reduce operational costs. As AI technologies continue to evolve, their impact on fintech grows exponentially, driving innovation and offering new opportunities for growth.

Enhanced Customer Service with Chatbots and Virtual Assistants

One of the most visible impacts of AI in fintech is the widespread use of chatbots and virtual assistants. These AI-powered tools are revolutionizing customer service by providing instant, 24/7 support. They handle a range of tasks, from answering frequently asked questions to assisting with complex transactions. The benefits are twofold: customers receive immediate assistance, and financial institutions save on customer service costs.

AI chatbots are becoming increasingly sophisticated, utilizing natural language processing (NLP) to understand and respond to customer inquiries more effectively. This not only enhances the customer experience but also allows human agents to focus on more complex issues, improving overall service quality.

Revolutionizing Risk Management and Fraud Detection

AI is a game-changer in risk management and fraud detection. Traditional methods of detecting fraudulent activities often involve manual reviews and rule-based systems, which can be time-consuming and prone to errors. AI, on the other hand, excels at identifying patterns and anomalies in large datasets, making it highly effective in detecting fraudulent behavior.

Machine learning algorithms can analyze transaction patterns and flag suspicious activities in real-time. This proactive approach significantly reduces the risk of fraud and minimizes potential losses. Moreover, AI-driven risk assessment models help financial institutions evaluate creditworthiness more accurately, enabling better lending decisions.

Personalized Financial Services

Personalization is another area where AI is making a significant impact. By analyzing customer data, AI can provide tailored financial advice and product recommendations. This level of personalization was previously unattainable and is now helping fintech companies offer more value to their customers.

AI-powered robo-advisors, for example, are democratizing investment advice by providing low-cost, personalized investment strategies. These platforms analyze a user's financial situation, risk tolerance, and goals to create customized investment plans. As a result, more people have access to sophisticated financial advice that was once reserved for high-net-worth individuals.

Streamlining Operations with Automation

Automation driven by AI is streamlining various operational processes within the fintech industry. Routine tasks such as data entry, compliance checks, and transaction processing are now being handled by AI systems, reducing the need for manual intervention. This not only increases efficiency but also lowers the chances of human error.

AI can also enhance regulatory compliance by continuously monitoring transactions and ensuring they meet regulatory requirements. This is particularly important in the highly regulated financial sector, where non-compliance can result in hefty fines and reputational damage.

The Future of AI in Fintech

The future of AI in fintech looks promising as the technology continues to advance. Emerging trends such as blockchain integration, quantum computing, and more sophisticated AI models are set to further disrupt the industry. Financial institutions that embrace AI will be better positioned to innovate, compete, and meet the evolving demands of their customers.

However, the widespread adoption of AI also raises challenges, particularly regarding data privacy and security. Fintech companies must navigate these challenges carefully to maintain customer trust and comply with regulatory standards.

AI-Powered Predictive Analytics

AI's ability to predict future trends and behaviors through predictive analytics is proving invaluable in the fintech industry. By analyzing historical data and identifying patterns, AI can forecast market trends, customer behaviors, and potential risks. Financial institutions use these insights to make informed decisions, optimize their portfolios, and offer better services to their clients. Predictive analytics also help in anticipating customer needs, allowing companies to proactively offer relevant products and services.

Improved Customer Insights and Marketing

AI is transforming how fintech companies understand and engage with their customers. By analyzing data from various sources, AI can create detailed customer profiles and segmentations, enabling highly targeted marketing campaigns. This leads to more effective customer acquisition and retention strategies. Personalized marketing, driven by AI, ensures that customers receive relevant offers and communications, enhancing their overall experience and loyalty.

Enhanced Cybersecurity Measures

As cyber threats become increasingly sophisticated, AI is playing a critical role in enhancing cybersecurity within the fintech industry. AI systems can detect and respond to security breaches in real-time, analyzing patterns to identify potential threats before they cause significant damage. Machine learning algorithms can adapt to new threats, ensuring robust protection against evolving cyber attacks. This proactive approach to cybersecurity is crucial for maintaining customer trust and safeguarding sensitive financial information.

Facilitating Regulatory Compliance

Navigating the complex landscape of financial regulations is a significant challenge for fintech companies. AI helps simplify this process by automating compliance checks and monitoring transactions for regulatory adherence. Regtech (regulatory technology) solutions powered by AI can analyze large volumes of data to ensure compliance with local and international regulations. This reduces the risk of non-compliance, which can lead to hefty fines and legal issues, and allows companies to focus on their core operations.

Democratizing Access to Financial Services

AI is playing a pivotal role in making financial services more accessible to underserved populations. Through mobile banking apps, AI-driven platforms can offer financial products and services to individuals who previously had limited or no access to traditional banking. This includes microloans, mobile payments, and savings plans tailored to the needs of low-income individuals. By democratizing access to financial services, AI is helping to promote financial inclusion and reduce economic disparities.

AI in Wealth Management

AI is revolutionizing wealth management by providing sophisticated tools that were once available only to high-net-worth individuals. Robo-advisors and AI-driven portfolio management systems offer personalized investment advice based on an individual's financial goals, risk tolerance, and market conditions. These platforms make it easier for everyday investors to build and manage their wealth, providing access to high-quality financial advice at a fraction of the cost of traditional advisory services.

Blockchain and AI Integration

The integration of AI with blockchain technology is opening up new possibilities for the fintech industry. AI can enhance the security and efficiency of blockchain transactions, while blockchain can provide a transparent and tamper-proof ledger for AI processes. This synergy is particularly beneficial for areas such as identity verification, smart contracts, and secure data sharing. Combining these technologies can lead to more robust and trustworthy financial systems.

Conclusion

AI is undeniably the big disruptor transforming the fintech industry. Its ability to enhance customer service, improve risk management, personalize financial services, and streamline operations is driving unprecedented changes. As AI technology continues to evolve, its influence on fintech will only grow, making it an essential tool for financial institutions aiming to stay competitive in a rapidly changing landscape.

Embracing AI is no longer a choice but a necessity for fintech companies that wish to thrive in the digital age. The journey has just begun, and the possibilities are limitless.

[transfergurublog-blog]

Interview with TransferGuru Founder Omid Pakseresht – Part Three – The Team, The Project, The Future: TransferGuru

The final part of our three-part interview series with TransferGuru Founder Omid Pakseresht – stickiness, strategy and the story behind the start-up saving everyone from expensive money transfers.

“It upsets me that 45,000 people search online, but only 1,000 search for a newer company, even though they’re offering a much better deal.”

To TransferGuru. So why a comparison service, specifically? Why didn’t you set up another TransferWise?

Because there are TransferWises. There are 10, 20, 50 Transferwises, and there are more and more of them happening every day. But the key is that people don’t know about them. Even if they did know about them, they wouldn’t necessarily trust them, or go to them as their first choice.

So the opportunity is in assisting people and helping them use this industry, which is growing so fast. So that’s how you could explain it. Or you could say, ‘Hey, it upsets me that 45,000 people search for, say, Western Union online on a monthly basis, but only 1,000 search for a newer company, even though they’re offering a much better deal.’ That stickiness needs to change. It seems like it’s purely because people don’t actually know what options are available to them. It’s what they’ve been used to for 30, 40, 50 years. Sure, the old guard supported people. It was fantastic. They’ve got a great history, whatever they did.

Now, it’s a different story.

For the last 5 years, people haven’t had to do that any more, but they do.

So to pick up on the word ‘stickiness’, by stickiness you mean loyalty to the more expensive option, the option they’ve always used?

Yeah. Loyalty could be a very strong word, actually, but just ‘habit’.

So you want to ‘break a habit’?

You’re only going to be able to break it if you bring something better to someone’s attention, offer them new information, and offer them a safe alternative. If you do that, the stickiness will become irrelevant.

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“I think the greatest asset that we have is that we rely on the community a lot”

TransferGuru essentially provides a quick and easy answer to the best price for remittance, and we’ve seen just how big the remittance market is. So there’s a need there, and there’s considerable activity there. All the elements are there for a really useful service. Are you happy with the traffic to the site – is there anything slowing it down?

I think it’s a trust issue, and I think it’s an awareness issue. And I think both of them are things that are moving in the right direction. And I think we are helping that process. There are other secondary parameters. The other parameters, like customer service and so on, which will come into play. But yeah, it’s really just an issue of trust and awareness.

So what are you doing to overcome that?

We’ll get there. We’re giving people what they need to know. And they’ll come. They’re coming already, and they’ll come more. I think the greatest asset that we have is that we rely on the community a lot. Whether it’s our followers on social media, whether it’s reviews that we generate on the website, there is a strong reliance on community building.

Everybody who makes a transfer has got to check first. That’s the target. If someone knows that they’re getting the best deal, fair enough, go and get it. But the target would be to raise awareness to the point where people know that there are other choices available to them.

How do you differentiate yourself from other people trying to do the same thing, or a similar thing?

I know that the service that we provide is more comprehensive and more efficient, compared to every other comparison service out there already. In terms of differentiating yourself from other people, it’s the user base that you build, that you build a relationship with, that you build trust with, and it’s a question of being able to service that user base so you retain those customers. And those are things that we’re doing very well.

Other sites – They look at brokers, and they look at people who need to send thousands of pounds abroad in one single transaction. They look at making a big cut out of that. We’re not doing any of those things. We’re not making a cut out of it, we’re just making referrals. We’re focussed on people who need this the most, who send money regularly and who get charged the highest rates already.

Also, we are getting live rates. We almost have live rates already. No one’s got that tech. We’ve got very, very talented people working on tech. But that’s something that will show in the coming months as well.

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“I think we’re working towards increasing the financial capability of people, and that’s always been the ultimate goal”

When I read the taglines of each of the companies you link to, it’s often a competition between them to say they’re the best or they’re the cheapest. And they can’t always be the best or the cheapest, obviously. So this can be very frustrating, as a potential user. So it seems likeTransferGuru has an interesting solution, which is to say we’ll find and we’ll tell you the objectively cheapest, or the best, which it can do with data in a way that sports analysts or film critics or anything more contestable can’t.

Will that always be the case? Will you always be able to provide the guaranteed best rate?

Yeah, absolutely. There are two questions there. I think that needs to go hand in hand with that trust issue, again. Because you have a company like Xendpay, you have companies like Transferwise, Azimo, you have these companies out there who are honestly all cheap enough, as far as I’m concerned. They’re all below 1%. They’re not really competing on fees any more, right? If I cut the fee from 0.5%, and say it’s 0.4% compared to what that company charges, that doesn’t make the decision for people. The question will come to trust, customer service and customer satisfaction. That’s what the big focus is going to be on, over the coming months. I remember 5/6 years ago, I would go on trustpilot if I didn’t know a website, and be like ‘okay, has someone written something about this? Because it looks dead to me’. And that was much more the case back in the day. This is happening to finance now, to fintech now, to personal finance now, and these are companies that are opening literally day by day, and someone needs to be reviewing them in a way that’s specific to that industry, and this is exactly what we’re doing with international money transfer. We’re looking at companies, we’re looking at which corridors they operate in, we’re looking at people’s satisfaction with the way that they are operating, and I think that will be much more of a deciding factor in the way that people choose these companies in about six months to a year, than the actual price, because the competition on price between these companies is almost not there any more. They’re all very competitive.

So just to go back to the last question, so there’s this model of this e-assistant, if you like, who finds you the objectively cheaper rate, who reviews companies for you and finds the best one.

Yeah.

Is there a problem with that vision?

Not at all. I don’t think there is. I think the concern for us is being able to tackle subsections of personal finance that we understand, and being able to do that one by one, with enough research, with enough resources to be able to do that. I think we’re doing a very good job at international money transfer now, and I’m sure the expansion will be much more rapid than it will be over the next two or three months. But that requires us to build the expertise and the team that can tackle those issues. And I also believe that it’s not just a question of price and rates, so we need the community engagement that we’re looking for, that we’ve got to some extent already, for them to tell us what the next thing is.

Hey, I could choose seven things now if you asked me to, but I shouldn’t make that choice any more. It’s for the consumers to decide, and they will have decided within the next month or two. And that’s what I mean, that’s what we’re getting at.

That’s the goal?

I want TransferGuru to be a little agent that makes products simpler for people to understand, but at the same time equips them with the tools that they need to understand those products. And this is a question of education, and this is a question of awareness, and it’s a question of making the products understandable and simple. And if we do that, I think we’re working towards increasing the financial capability of people, and that’s always been the ultimate goal, regardless of how we do it. So that’s what we’re moving towards.

Interesting. So how would a successful and widely used transferguru change the state of things? If Transferguru took off, everyone was using it, what does the world look like?

Simple and fair.

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The Team

“People can be considerably more influential in the world and on the people around them if they are doing what they are good at”

So let’s talk about the Transferguru team more specifically. I’d like to go back to the beginning. Was there a phase when it was just you working on it in the evenings and weekends?

The early days, absolutely.

And do you miss that? I mean, do you miss when it was just you working on Transferguru and it was your personal project?

No. I feel like I needed to go through that, and I did. When you’re on your own, you constantly question everything, right? That is the reason you come out of it stronger, because – so someone asks you a question, you will have asked yourself that question in the six months that you were working by yourself. That was really tough, but it meant that I had to answer every question. I’m not saying I figured out everything I needed to figure out, but it gave me a very very critical way of looking at things that I am able to tap into if we need to.

If you have the courage to do that, do that. Do it, and you will come out of it a considerably better person, and more well rounded. But it’s just every bit as you might imagine, working by yourself on a project that you don’t necessarily know all the answers to for six months. That’s tough.

So you were always itching to get other people on board. You always wanted to have a team?

Oh yeah, absolutely. I don’t see myself as a person who works independently. I don’t see myself as a person who even manages independently, which might sound quite strange, but I quite like having people that are pretty much the same level as me and I can work towards the same goal with them, rather than anything else. And those people are incredibly talented, passionate, caring people, and that’s the type of people that I want to work with. So that’s the biggest success to me, and that secured our future as well.

So – the classic question – what advice do you have for people trying to set up their own startup?

Okay. If I have advice for people, it wouldn’t be go set up a start-up. It would be go find a job that you enjoy doing. If you can’t find that, if you don’t fit the characteristics of a consultant, of a doctor, of this, of that, and you haven’t wanted to do that all your life, then think about what your perfect job is and go and create it. And that’s what I did. People can be considerably more influential in the world and on the people around them if they are doing what they are good at, if they are doing something they enjoy, if they are doing something they’re committed to and believe in.

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“I don’t look at people as if they’re above me, and I don’t look at people as if they’re below me either. We’re a team”

There’s a lot of concern, quite rightly, about the struggles that women face to reach parity with men in a number of industries. Fintech appears to be no different. Your co-founder is a woman and has been there from the start. So let’s talk about Shreya, where you met Shreya, and what Shreya brings to the team.

Everything. When we worked together before on different projects, it got to the stage where the skills that we had and the way that we looked at things complemented each other enough that everything was made considerably easier.

I think there is a problem in finance, and there is a problem in tech. So fintech is not separated from that, particularly when you look at tech, and programming, and that type of role. But if there is one person who can tackle that problem here, it’s Shreya. And I will give her all the support that I have to be able to tackle that problem. But that’s something – yeah, big on the radar.

And now you have two of your brothers working for you. And you are the youngest of the three. How do they feel about that? How does Amir feel about working for his younger brother?

Haha -okay. I think I should say that this all goes back to how I see things within our team, but I don’t look at people as if they’re above me, and I don’t look at people as if they’re below me either. We’re a team. I co-ordinate, sure, but we work together. And no one’s had the sense that they have a boss – I hope that’s the case. This is a team working together, and I will take every opportunity to point that out to everyone as I can.

Is there any better proof, that your older brothers work with you?

Well, they fell for it! Absolutely. I understand that they may have had a certain amount of trust and respect for me to come and join the team in the first place, but it was never a question of whether I’m a good manager or not. I hope that it was a case of, ‘Hey, he’s building a team and he wants to work with me’, not ‘he wants me to work for him’. So that’s been the key motto for me, for bringing people on board. And I hope that we can make sure that people feel that way as well.

I think they do.

[transfergurublog-blog]

Part Two of our Interview with TransferGuru Founder Omid Pakseresht is up today - why time is running out on the banks, and what start-ups can do to replace them!

http://transfergurublog.tumblr.com/post/137216762331/an-interview-with-transferguru-founder-omid

[transfergurublog-blog]

An Interview with TransferGuru Founder Omid Pakseresht - Part Two - The State of Fintech

Part Two

After covering a hectic move to the UK, learning English by watching Friends and learn his trade selling biker clothing, Omid turned to his thoughts on UK fintech and the power of financial networking. An always fascinating vision of the future: Part Two of our sit-down with TransferGuru Founder Omid Pakseresht.

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“We’ve just got rid of that massive middleman, which was the bank. You don’t need that any more.”

So before TransferGuru you had this finance experience, you had this business experience, you had this higher education experience (Part One). Why did you choose fintech specifically as the thing to put your energy into?

I think for a country to actually develop, and this is particularly the case for developing countries at the moment, you need the financial infrastructure to be able to build other industries. Besides, you know, primary needs, like, health and water and whatever it may be, I think the next most important thing would be financial networks, because that would be the infrastructure that needs to get set up for everything else to follow. So in a way, if you don’t have the financial infrastructure to do something, it’s blocking the way for a lot of other industries to grow.

So finance is a skeleton you hang everything else on top of?

This is the beauty of fintech at the moment, because there is a very social-good driven side to it – look at peer to peer, look at the not for profit initiatives. Microfinance in parts of Africa has fundamentally changed things. You have farmers who are actually able to now get small loans. You have people who have access to banking before they get internet access, because they can do it on their phone. It's fantastic.

You couldn’t open a bank branch in every village on the continent. It'd take decades. By the time you build the same financial infrastructure that you’ve built in the UK over the decades, you would have lost a lot of potential in other ways. Agriculture, food, tech. Any sort of industry that requires some capital, or any other financial product, is much slower. A farmer couldn’t borrow £500 to go and buy a crop for their farm without the financial ability to be able to do that. Now, they’re connected to people in the UK who say, ‘Okay, yeah. I will give you that £500. You can go set up a farm.’ That’s absolutely beautiful.

And I’m not saying this is happening enough. But I’m saying the possibility of this is now there, and it wasn’t, and it came very very quickly. And it can go much, much further very quickly.

There's a phrase that's you see quite a lot at the moment, banking the 'unbanked'. Can you discuss that a little bit - the idea is to get people plugged into this giant financial network?

Absolutely. I mean, think about the population of Africa, and what it’s going to be in 20 years’ time. Think about how rapidly it’s growing in every industry, the amount of big investments in education in a lot of countries, big investment in production. This all relies on an infrastructure that supports it, and that’s a financial infrastructure.

It's going to become more and more crucial. And I think fintech offers exactly the kind of type of tool that you could use in these places, and very easily. It relies on trust, and it relies on the community working together to build something. It relies on a little agent in the middle, like peer to peer loans and so on, that just facilitates that happening between people, rather than taking a load of money and putting it at the bank and investing in whatever they want to invest in. Which is what the banks did. Whereas if you’re just an agent that connects two people together, you haven’t sat on people’s cash, and you haven't simultaneously leant it to other people who are paying you large interests.

So we’ve just got rid of that massive middleman, which was the bank. You don’t need that any more. And you manage to make banking available without needing the bank. I mean, international money transfer is a perfect example of it. It’s no wonder the older providers charge such fees, because for users: if you don’t have a choice, that’s what you gotta do. Pay up. But once you’ve set up mobile pay, things like that, they become irrelevant.

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"It’s so far from being done, so so far."

Okay. So Transferwise are now a unicorn, which is...

It’s got to £1 billion valuation within 5 years.

And their ads are absolutely everywhere in London. WorldRemit, Worldfirst you see. Remittance companies are everywhere. Why do you think that is? Why has remittance all of a sudden become such a big deal? It’s always been happening, right?

This is the thing. It’s fintech! I mean, I’m not saying Transferwise is doing something absolutely revolutionary by doing peer to peer, it's not a new concept. It’s just balancing the books. So it's not a revolution in thought - It just wasn’t possible to do that before. It wasn’t possible to build a payment infrastructure, build the digital money transfer infrastructure.

So technology has caught up with our ideas?

Yeah, absolutely. Money transfer ultimately is essentially almost costless. If my pound is in digital pounds, and I want to move it to digital Euros, nothing should happen to my money. If someone’s doing that service for me, it’s absolutely minimal cost to them. And that’s why they can offer it so cheap to the consumer. Because for them, the biggest costs are marketing. The biggest costs are customer service. That’s why a few of them are saying, ‘Hey, pay us what you want. We’ll still do it for you’. It’s fine. They still make money. They’re still happy. Everyone’s happy, as long as there is enough trust in them to do their job.

So is there a future where everyone just does this automatically, and they don’t need to spend the money on marketing, and it will be costless, or cost of staff?

Well, I mean, we are decades away from that. And I think I’m quite optimistic with this kind of thing. Because if you think about it, only a maximum 6% of global flow happens digitally.

Only 6%?

Yeah. And that’s growing, and growing for everyone. They'll probably invest everything that they have in customer experience and marketing, or that’s what I imagine they would do. Because it’s so far from being done, so so far. Look at the G8 targets. Look at the UN targets. They want to drop these costs. Transferwise is not the first one, and it’s not the last one. We’re still seeing new people popping up every month or two.

And one day are they all going to be on Transferguru? Is that the plan?

Within the next month we will have at least 25 options, UK companies, listed on our website. And that’s just the first step. We’ve started comparing rates from the UK to the US. When you do US to UK, we’re already comparing 5 of those companies, because some of them do the other way round as well. And that’s fantastic. And all of these companies want to work globally. Very few of them are specific to corridors from country to country. And I imagine, if I was those people, I would be using that as a test case for building something much, much bigger. So this is by no means the end of it.

What do you think Bitcoin, for example, would do to this?

I’m quite a big fan of bitcoin, but let’s just say that even if bitcoin doesn’t exist in 5 years’ time, there will be a digital currency that is as prominent as bitcoin is now. If that assumption is true, then I think money transfer will essentially become costless. There are people who are using bitcoin to set up money transfer corridors. I think there is one from Mexico to Argentina. There are a couple in Africa. It has solved problems in corridors that were almost impossible to tackle - The costs were too high, the logistics, and so on.

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“Everywhere we are in Central London now, we are 500 metres away from tech startup's, and 500 metres away from some of the most influential banks in the world.”

There is a narrative at the moment that the banks’ days are numbered, and that fintech companies, bitcoin etc. are going to replace the banks. It was something that I think you could always sense in the Transferwise message, until they started teaming up with them. Is that a narrative you buy into, and is that something you think you’re a part of? Or are the banks going to stick around?

I think in some ways it’s just too late for banks already. They've been ignoring customer experience for a long time - whether that’s slow phone lines they set up, their internet banking experience, even the high street branches. There's the statistic that people would rather go to a dentist than go to their high street bank.

So it’s not going to take long for customers to switch banks. There are already I think 5 challenger banks who have got their licenses and are starting to operate, and that is going to fundamentally change banking for us, because they are going to open APIs and say, ‘Go build whatever app you want, and I’ll just be the backbone of it.’ And some of them are doing that. They haven’t managed to create the experience for people, so they only route that they have is to become the backbone and let other people create the experience. And that will happen, and that will make fintech grow rapidly. So it’s not necessarily banks being dropped, it’s just banks taking a passive backbone role and allowing other people to do that stuff for them. And that will be fintech.

Do you think you benefit from a backlash towards major financial institutions after the financial crash?

This is actually something that bothers me a lot, because – as a guy who worked in finance – I think we’ve massively failed in finance in terms of regulation, and I think we’re really, really behind. We allowed a lot of stuff to happen that we should never have. And I don’t think that’s an opinion that I hold by myself. But it’s too late with regulations and it’s too slow to change things with regulation. So yeah, absolutely, fintech benefited from that, in the sense that it saw the opportunity and it did what it needed to do.

But I wouldn’t say that was being opportunist. I think that it's exactly the other way around. The banks failed, the governments failed.

So there’s this unmet problem that someone needs to meet?

Yeah. This happens with any industry, right? This is what you get told at lesson 0.1 if you do anything entrepreneurship-related – that, ‘Hey, what is the need that you’re solving, or what is the problem that you’re solving?’ This is the problem. This was the problem that everyone’s trying to solve. And that stranglehold that banks had over the consumers is not there any more. They are losing grip, and they’re okay with that. Perhaps not just as much with b2b products in fintech, but from a b2c perspective, they have lost their grip and rightly so.

Interesting. So you mentioned earlier that the UK is the hub of fintech, and London specifically. Why do you think that is?

London is the perfect combination of tech knowledge and finance hubs. Everywhere we are in Central London now, we are 500 metres away from tech startup's, and 500 metres away from some of the most influential banks in the world. So that obviously creates the hub for it. That doesn’t happen in every country, and obviously there is government support for this. They are trying to do what they can with regulation, but they are also trying to do what they can by allowing new people to come in and fix some of the problems as well.

Will that last? Will London always be the hub, or is there already a new London ready to take over?

There are new ones popping up. I’ve heard things about Barcelona. I’ve heard things about Amsterdam, and heard things about Portugal. We’ll see what happens. They’re all trying, and they won’t be far from London. But I think one thing that there is in London is these little fintech movements and the circles have been formed, and people working together. And a lot of these companies, a lot of these startups, want to work together, because they realise they can solve a lot of bigger problems if they did stuff together. It’s reached a critical mass of companies being able to look around and say, ‘There are 10 UK companies that I could go and see to work with’. So if you wanted a payment solution, the best new company is actually two doors down. So that kind of thing creates more of an opportunity, sort of like a little bit of a critical mass, so that the more there is, the easier it gets for it to survive as a scene. There is an ecosystem in London, and they benefit from each other’s existence. And that’s fantastic. We want to work with Transferwise, Azimo, Xendpay. They’re all in London.

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“Look up what a mortgage looks like 30 years ago, and you can compare it to now...It is orders of magnitude more complicated.”

A broader fintech question. As a financial layman and outsider to this stuff, there’s a feeling, I think, that finance is unnecessarily complicated, or it’s this big complicated behemoth by design. And we're told that only a certain well trained group of people can interpret it for us, and we need to leave it to them. At the same time computers are now running more and more of the stock exchange – so I want to talk about financial literacy – Is tech making it easier or harder to really understand finance? Is it bringing it to the people or putting out of everyone's reach?

I buy into the idea that a lot of stuff could be semi automated, and it's not. So essentially we need banking agents, rather than banks who do a lot of stuff now. I think that’s – you know, when you talk about financial markets, and how computers do a better job than us, there’s fund managers who’ve been studying economics for 30, 40 years, there’s a team of 20 of them who do research into the stock, and try to invest, and the computer still beats them, based on an automated algorithm.

So how about: Do you think people are under-trained in financial management? Do you think, say, that more financial training would be useful at a younger age?

Well you have, on one side, a lot of people paying less attention to financial decisions. Maybe they're more impulsive. Less worried about what happens in the future. Often it's because it’s just got so complicated that people got fed up. I did - I never looked at my rates for my credit card. It was a stress worrying about why I’m getting charged for what I’m getting charged for, and why my money has gone into whatever place. It's a big problem, and people get fed up.

There is also a big education gap, I think, that can go further back into the early years. And I think there is a certain level of financial education and financial capability that we don’t have because of that education.

But you can look up what a mortgage looks like 30 years ago, and you can compare it to the options there are now. Tell me it’s the same level of complication. It's not. It is orders of magnitude more complicated. So there is a huge gap that has just been opening up more and more. There is a need to simplify this stuff, and help people answer these questions. And if that happens, and if that meets somewhere in the middle, then you’ve solved a lot of problems. And that’s ultimately what we try to do at heart, exactly that.

Present complex financial data simply and clearly?

Exactly. I worked in currency, and I did money transfer, and I saw that there is a margin, and a fee, and I thought, “Hey, wait a second. I mean, they’re trades. We have to think about this properly”, and so on. People who actually do fx trades think about these things. You can’t expect a consumer to know enough about currency, or where these costings come from, to be able to break this down. Particularly if you actually hide the fact that you're charging a margin from them!

Why has it become more complicated?

I mean, you’ve got 5 banks who have massively sticky consumers, so very low switching rates. They’re not competing on customer service. They’re not competing on retention, because their customers don't really go anywhere. There is no other real alternative. And you come to the stage where they have to compete on something, and that’s making more money out of each consumer. And that means they just produce hundreds and hundreds of nonsensical products that make sense to no one. But they think that’s creating products that means something to the consumer. If they created a nice app so I could check my balance, I would appreciate that. But they‘ve just been producing more products. They’ve been making it more complicated. Consciously or unconsciously, that’s what happens if you have an oligopoly. They will try to make more money out of each consumer. But that’s not the case any more. There is no 5 banks anymore. There are a lot of new banks.

Who are the challengers? Who are these new banks?

This is really exciting, actually. I keep checking every month or two to see how many of them have been awarded a banking licence. Fidor is quite a nice one. Mondo is the API first one that I told you about. They want to start as a backbone service and let people build the ecosystem around it. That’s quite exciting. I mean, to me, that’s as exciting as it can get, because it’s a big shift in something that’s been going very, very sluggishly for a good 30 or 40 years.

But is that not going to be more confusing? Whereas before you chose between, as you say, three or four banks, now there’s 10, 20?

No - they’re not competing on the products any more. This is not just a question of products. It’s not a question of how much money you can get out of a consumer for these businesses any more, because they have a risk of losing the consumer. If you have a risk of losing the consumer, then you care about retention. You care about customer service. You care about marketing. You care about making that experience as nice as possible for your consumer, because you don’t want to lose them. You make things complicated, they will go somewhere else.

Thankyou

Part Three tomorrow – Life as a start-up founder, challenges for the future and what TransferGuru are doing to help.