Fintech: to disrupt or not to disrupt?

At a developer conference in the US last month, Facebook founder Mark Zuckerberg said: “Payments is one of the areas where we have an opportunity to make it a lot easier. I believe it should be as easy to send money to someone as it is to send a photo.” Facebook insiders say the team developing the new currency, a digital coin linked to the value of the dollar, has reached out to crytpocurrency exchanges - through which users could store their coins safely or convert the Facebook coins into other cryptocurrencies - and registered a new company in Switzerland to develop the required software and infrastructure. 

When I was discussing this story with Scottish entrepreneur, adviser and investor Richard Braidwood last week, Braidwood made some interesting points about the generally accepted terminology in the sector. “You could argue”, says Braidwood, “that there is a continual over use of the term ‘disruptive Fintech’. In the conversations we’ve had with investors and potential clients and partners, we repeatedly have to position ourselves as a non-disruptive enabler that is looking to work across the Financial Services industry.” 

Braidwood’s latest venture, Visible Capital, where he is a co-founder alongside Ross Laurie and Christian Burgin, uses PSD2/Open Banking data to automate the information required to onboard customers in the wealth sector, aiming to reduce friction for customers, providing accurate insight for investment managers and moving the whole market toward real-time customer insight.

We proceeded to talk about the whole definition of Fintech. Startups who use technology to offer existing financial services at lower costs with better customer experience? Technology companies who provide payment services (commentators are predicting that Facebook will release its cryptocurrency later this year)? Or incumbent financial firms investing billions into innovation? Braidwood references Lloyd’s at this point, with the banking group in the process of transforming its digital banking experience, as part of a £3 billion investment programme that will create 500 new jobs in Edinburgh. On this basis, Braidwood suggests that we should perhaps be thinking of Lloyds as Scotland’s largest Fintech based on the existing broad definition of the sector. 

Visible Capital’s co-founder also takes issue with the term disruption. “Disruption entered the startup ecosystem as a cultural ethos within small tech businesses who believed their innovation would gain them large market share from incumbent organisations. But, for me, disruption is causing upheaval with a lack of positive contribution, in fact it frequently destroys, while innovation is about improvement to an existing process, product, service or sector. Most Fintechs are not disruptive, instead they are enabling ways to improve the customer journey and experience, innovating to remove operational inefficiencies, and streamline and enhance regulatory compliance.” 

I was curious to hear who Braidwood is most excited about on the Scottish scene and was not too surprised by his answer, Blockstar Developments. Blockstar is in the final pre-launch phase of its Zumo app, having been one of the first companies invited onto Wayra’s Edinburgh Blockchain accelerator. Zumo will enable customers to easily acquire crypto currencies, store them securely and exchange them with traditional currency seamlessly within its digital wallet. A Convertible Debit Card will allow users to spend crypto just like ordinary money. Having raised £1.5 million in seed money last July, the team is set for a significant series A round later this year. 

On the international scene, Braidwood identifies Ripple, a California-based global Blockchain settlements network that provides liquidity for foreign exchange reserves and allows companies to make cross-border payments in XRP, the cryptocurrency developed by its founders. “It will drastically reduce cross border payments remittence from days to seconds while reducing the cost to the end consumer, says Braidwood. Ripple has over 200 clients worldwide, including some of the world’s largest banks and commentators point to the company as being well positioned to serve as a world reserve currency. 

An edited version of this article appeared in The Scotsman on Monday 3rd June