PwC’s Financial Services Technology 2020 and Beyond report states that of the ten competitive technology driven influencers it has identified for 2020, fintech will drive the new business model. Better stated, Fintech is the new business model.
Many people think that it is hard to keep up with the rapid changes of financial technology, but look how far we have come. Financial Technology appears to have started in Mesopotamia with the abacus, circa 2700–2300 BC. The abacus remains a great tool I am sure, and is still in use in many parts of the world, but it is not all that helpful when you are trying to order a new water filter online!
Today, Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century. Originally, the term applied to technology applied to the back-end of established consumer and trade financial institutions. Since the end of the first decade of the 21st century, the term has expanded to include any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and crypto-currencies like Bitcoin.
In more recent history, in broad brush or headlines, in the 1950s emerging financial technology was the credit card; in the 60s it was the automated teller machine/ATM, although they only began to replace tellers in the 70s; the 80s saw the rise of the mainframe computer in mainstream use; in the 90s it was the introduction of e-Commerce sites such as Amazon (1994!); and the noughties saw the online banking boom.
More recently, fintech probably conjures thoughts of the latest mobile payment app such as Apple Pay, or a contactless tap for your commute (if you use Transport for London, we helped make that possible!).
At Ballard Chalmers, we have been on the development side of Fintech software solutions since the 1990’s. Take Capital Tracker, the bespoke technology platform we have developed for leading Private Equity Fund Administrators Ipes starting back in 2010. As the first entirely web-based system in the field, Capital Tracker was arguably one of the very early fintech-proper applications in the modern day use of the term.
As a tool it disrupted traditional business models with an innovative idea and software solution. A cutting-edge application, used for daily tasks such as managing funding calls, distributions, cash movements, book keeping and reporting as well as complex tasks such as waterfall calculations, it gave/gives clients full access to live data (remember this is 2010!) including investor due diligence, capital accounting, cash management and investor reporting. Ipes was ahead of the game on this project, but then it had to be.
Nowadays, we see many start-ups impinging upon the space of traditional companies. Here it was the reverse and that Ipes did not wait for others to take the risk on new technology speaks volumes to how the intelligent application of custom software (or, if you want, fintech) can maximize the value of your business. Today Capital Tracker remains at the core of Ipes’ Fund Administration service.
It is difficult to argue against the idea that the future of finance lies in adopting more advanced technology. Firms grasping emerging technologies can reduce costs and enhance their reputations as first movers in an industry where perception is everything.
Another of our Fintech custom software engineering projects is a ground breaking enterprise financial operations solution. It transforms data into smart business process by fully automating an optimal balance between achieving best receivables performance against best operational efficiency. Traditionally, BI deals with historical data and typically subsets of it, often giving limited and incomplete results. The software we engineered and built for our client changes this by providing data mining and real-time reporting, which offers opportunities for sales growth to be identified and diminishing financial risks (contact us for more details on this project).
Financial institutions have done well to learn from other industry giants’ disruption mistakes, and as such we have the fintech evolution in full swing. The rise in customer expectation of better, faster service coinciding with an Internet of Things means financial institutions need to accelerate modernisation, otherwise smaller fintech start-ups will capture further chunks of the market.
There is no bigger industry disruptor than the cloud. Looking at cloud adoption as a benchmark for disposition to modernise then, seventy-five percent of the largest banks are now using Azure (as highlighted at the Build 2016 conference). Today, Societe Generale, one of the largest financial services groups in Europe and a systemically important financial institution (i.e. it is classed as “too big to fail”), is working with Microsoft to embrace the cloud. According to Bloomberg, by 2020 Societe Generale “intends to have 80 percent of its infrastructure on internal and external cloud networks.”
In an interview with The Record late last year, Sean Foley, Microsoft’s chief technology officer for the financial services industry said banks are looking to move much more quickly and compete, particularly with FinTechs/start-ups. “They’re looking to the cloud for things like significantly speeding up product development, and a lot of banks are taking advantage of areas like risk modelling to produce better products,” said Foley. He continued, “Our work with some banks shows that up to 80% of their applications are movable to public cloud, and a lot of banks are looking to move 40-60% of their internal data centre spend over to public cloud in a three- to five-year horizon.”
The finance industry is banking on software engineering and cloud integrator companies such as Ballard Chalmers to drive its innovation and to transform the way business is conducted. Ultimately, it is software development that makes fintech possible. With our bespoke software development expertise and cloud integration experience we are keen to continue to help solve real problems for finance firms and help them to progress. Importantly, we have the track record to show that we can.
By Andrew Chalmers, Managing Director
Andrew Chalmers is co-founder and Managing Director at Ballard Chalmers. With over 30 years’ experience in business management, Andrew brings the business-side experience to Ballard Chalmers to complement our CTO’s technical leadership.