RegulationMar 23 2017

Top tips to improve your tech offering

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Top tips to improve your tech offering

According to Martin Bamford, chartered financial planner for Informed Choice, this is why the industry perhaps has not seen mass announcements about fintech innovations coming out of the Project Innovate process so far.

He says: "Developing new technology and using this to launch new businesses takes a long time. 

"Even in the fast-moving world of fintech, I would not expect to see immediate results from an initiative such as Project Innovate. It could take several more years before we start to see positive outcomes."

However, some results of financial technology have already been witnessed in the industry.

For example, research by EY revealed that, at the end of 2016, there were up to 70 players offering, or planning to offer an automated advice system.

It's right the regulator is encouraging innovation like this, as the regulatory system can be unwieldy. Martin Bamford

As the technology advances, EY believes robo or automated advice will make significant strides across the financial advice arena. 

EY has predicted the robo or automated advice arena will grow to a US$2.2trn industry by 2020 - just three years away as consumers become comfortable with digital channels and advice and investment firms offer access to more affordable wealth management.

Indeed, EY predicts auto-advice fees could end up at 0.25 per cent to 0.5 per cent of assets, compared to 1 per cent to 2 per cent for a human adviser. 

Yet with all these changes and developments in the world of fintech, advisers will also need to get to grips with what is already available to them before they can take the next step on their technological journey.

Chris Hannant, director general of the Association of Professional Financial Advisers, comments: "One of the biggest challenges is how to effectively integrate the various technologies that are already available."

Social media

Before developing new technologies or committing capital to funding fintech, make sure you are making the most of the internet-based tools already available (for free) to your firm.

This is one of the points made by Abbie Knight, founder of A Business Innovation, who says as the majority of clients are now going online to do their research before buying a product or service, advisers will need to up their social media game if they are to succeed. 

She explains: "A third of those searching for a local service use a smart phone as the primary tool to seek advice. Eight out of 10 people searching online will take action based on what they find online."

In addition, make the most of the data your firm already has available to you to improve what you offer and how you offer it.

This is the view of Deloitte Consulting, which in its 16th Deloitte Review Issue, Cognitive Technologies: The Real Opportunities for Business, claims making the most of the data you have can add immense value to your firm.

 The report said: "A famous early example of the use of cognitive technology to improve a product offering is the recommendation feature of the Netflix online movie rental service, which uses machine learning to predict which moves a customer will like.

"This feature has had a significant impact on customers' use of the service; it accounts for as much as 75 per cent of Netflix usage.

"Another category of cognitive technology application is automation. By automation we mean using computer systems to do work that people used to do.

"The result is that the work gets done faster, cheaper, better or some combination of the three. The organisation that implements it, rather than customers, tends to be the primary beneficiary, generally through cost savings or more efficient use of resources."

Current examples

David Geale, director of policy at the FCA, says the regulator helps firms to navigate the regulatory landscape "where they meet our criteria" and, if they qualify for the regulatory sandbox, then the FCA will provide several tools each company can use to test their services and products.

According to the FCA, the first cohort of the regulatory sandbox which closed to applications on 8 July 2016, drew a total of 69 applications from a diverse range of sectors, geographies and sizes.

The work gets done faster, cheaper, better or some combination of the three. The organisation that implements it, rather than customers, tends to be the primary beneficiary. Deloitte Review

Twenty-four applications were deemed to meet the sandbox eligibility criteria and were accepted to develop towards testing, including early stage start-ups, challengers and incumbent firms.

On its website, the FCA has published a list of the firms which are in the testing process, on a short-term and small-scale basis, and the regulator is working with these firms to agree testing parameters and building in consumer safeguards.

Names in the frame for cohort one:

Firm

Description

Billon

An e-money platform based on distributed ledger technology that facilitates the secure transfer and holding of funds using a phone based app.

BitX

A cross-border money transfer service powered by digital currencies / blockchain technology.

Blink Innovation Limited

An insurance product with an automated claims process, which allows travellers to instantly book a new ticket on their mobile device in the event of a flight cancellation.

Bud

An online platform and app which allows users to manage their financial products, with personalised insights, on a single dashboard. Bud's marketplace introduces relevant services which users can interact with through API integrations.

Citizens Advice

A semi-automated advice tool which allows debt advisers and clients to compare the key features of available debt solutions.

DISC Holdings LimitedA technology provider that has partnered with the Department for Work and Pensions (DWP) to determine the feasibility of making emergency payments using means other than cash or the Faster Payments Scheme. The payments platform will use blockchain to allow the DWP to credit value to a mobile device to transfer the value directly to a third party.

Epiphyte

A payments service provider that aims to provide cross-border payments using blockchain technology.

HSBC

An app developed in partnership with Pariti Technologies, a FinTech start-up, to help customers better manage their finances.

Issufy

A web-based software platform that streamlines the overall Initial Public Offering (IPO) distribution process for investors, issuing companies and their advisers.

Lloyds Banking Group

 An approach that aims to improve the experience for branch customers which is aligned with the online and over the phone experience.

Nextday Property Limited

An internet-based property company that will provide an interest free loan for a guaranteed amount to customers if they are unable to sell their property within 90 days.

Nivaura

 A platform that uses automation and blockchain for issuance and lifecycle management of private placement securities.

Otonomos

A platform that represents private companies’ shares electronically on the blockchain, enabling them to manage shareholdings, conduct bookbuilding online and facilitate transfers.

Oval

An app which helps users to build up savings by putting aside small amounts of money. These savings can then be used to pay off existing loans early. Oval will be working with Oakam, a consumer credit firm, and a number of their customers during the test period.

SETL

A smart-card enabled retail payment system based on their OpenCSD distributed ledger.

Tradle

An app and web-based service that creates personal or commercial identity and verifiable documents on a distributed ledger. In partnership with Aviva they will provide a system for automated customer authentication.

Tramonex

An e-money platform based on distributed ledger technology that facilitates the use of “smart contracts” to transfer donations to a charity.

Swave

A micro savings app that provides an across-account view; enables a round-up service every time a user spends money and calculates an affordable savings amount based on the user’s spending behaviour.

There will be a second cohort which will start testing further down the line. Mr Geale adds: "For any firm unsure where to start, it's worth checking out the Project Innovate section of our website.

"It provides details about the type of support we can provide and sets out our eligibility criteria, which firms must meet before we can provide assistance."

Systemise advice processes as a starting-point

Last year, Steve Thomas, professor at Cass Business School, said the disrupting advance of technology would have still forced a change in the financial services sector, even if the RDR had not taken place, commenting: "Financial services firms would have always had to think harder and smarter about adapting with the technology."

His comments were echoed by those of Ola Abdul, chief executive of Fundment, who told advisers it was important for them to go digital in this post-RDR world. 

He highlighted how the advisory marketplace had shrunk from approximately 200,000 advisers in the UK in 1990 to approximately 25,000 qualified regulated financial advisers today. 

So to meet this gap he believes the systemisation of financial advice is important to get right.

He suggests much of the hard graft of advice, such as Know your Customer, investment objectives, risk profile, identity checks, gathering of financial information, client communication, formulation of an investment plan, all the legals and creating suitability reports, for example, can all be automated. 

This would see the financial adviser free to do more holistic financial planning and portfolio construction, while creating a compliant, efficient, time and cost-effective technology-based service that would take the time and the pain out of advising.

Get involved

Mr Bamford believes it is a good idea to get involved with regulatory projects such as Project Innovate, and has welcomed the fact Project Innovate has helped to bring entrepreneurial tech firms into the financial services sphere.

He explains: "It's right the regulator is encouraging innovation like this, as the regulatory system can be unwieldy, especially for start-ups and businesses unfamiliar with financial services regulation in the UK.

"Without Project Innovate, there was a risk that only established financial services firms would take responsibility for technological innovation; this is not a sector renowned for its innovative qualities."

simoney.kyriakou@ft.com