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What we learned at London Fintech Week 2018

London Fintech Week 2018 brought together leading experts from around the world to discuss the opportunities, challenges and future for fintech.

We are proud to once again be a lead sponsor of the event.

Fintech is widely regarded as one of the fastest-moving investment markets in the world, growing by one third in the past year.

London Fintech Week highlighted the focus on London, among other hubs, as both a financial centre and start-up hub helping to drive the fintech revolution. The capital is home to 13 private start-ups valued at $1bn+ (‘unicorns’) – the largest concentration in Europe.

Post-crisis, financial institutions have collaborated with fintech start-ups to develop in-house innovation hubs. High start-up costs and competition, attracting talent and aligning objectives are just some of the challenges industry participants face.

Find out more about our solutions-driven Fintech advice or explore below the top things we heard, view our illustrations of the event content, watch our Future of Fintech video, or read our news and updates about Fintech around the world 

“Fintech Week highlighted the pace and scale of Fintech across the world – from the appetite for investors and established players to work with start-ups and disruptors, to the emerging ecosystem for blockchain and digital assets and structures. Here are the key themes we found interesting, and our thoughts on what the future of fintech looks like in the next 12 months.”

Image of Fionnghuala Griggs

 

     Finn Griggs, Global Co-Head, Fintech

Top things we heard about fintech

Blockchain and digital assets: market dynamics

  • Participants continue to see a key benefit of blockchain being disintermediation – sharing a database without a central administrator.
  • However, it is necessary to have a centralised organisation sitting above the decentralised technology to develop the technology and bring it to market
  • Others benefits of blockchain include: fast and free ownership transfers, complete record of activity, and lower transaction costs
  • VCs/investors appreciate the liquidity of cryptocurrencies, but still look for long-term investments
  • Certain jurisdictions – Bermuda, Gibraltar, Malta – are positioning themselves to take advantage of ICOs/blockchain. Gibraltar could have one of the world’s first regulated cryptocurrency exchanges in 2019
  • A recent assessment by the Bank of England found crypto-assets do not present a risk to financial stability
  • Industry challenges for cryptocurrency: data transfer, privacy and storage; and trust and transparency between consumers and providers

Blockchain and digital assets: regulation

  • Regulators and industry players are showing increasing willingness to collaborate and provide services with appropriate protections
  • Bank of England’s CryptoAssets Taskforce is working with HM Treasury and the FCA to determine if regulation is required
  • Regulators need tap into expertise from engineers, scientists and policymakers to develop a more holistic approach to creating rules around technologies
  • Greater regulation should lead to more stable markets as investments are dominated by funds and institutional investors rather than retail investors
  • Regulatory challenges include: keeping pace with exponential development of technology; working effectively with other regulatory jurisdictions; managing new markets; and determining which blockchain-related services/products need regulating

Blockchain and digital assets: the future

  • Rapid growth in blockchain is expected over the next few years, with fintech, supply chain and identity verification industries likely to lead the way
  • We also expect to see blockchain in combination with AI and the increased use of security tokens
  • Requirements for development include: regulatory certainty across jurisdictions; resolving scaling issues to make blockchain quicker and cheaper; using blockchain only where there is a real advantage; improving infrastructure between chains; and better engagement with users

Digital payments and platforms

  • Mobile payments are an important part of banking infrastructure. Start-ups are keen to access innovation in this area
  • Generational differences in using apps means it takes longer for new ideas and concepts to reach certain audiences 
  • Liberalisation of payments in China may present a key opportunity
  • Regulators, such as the FCA, are making headway in opening up global opportunities for payments
  • Institutions face strict regulatory requirements when working with start-ups: for example, providing start-ups access to data to meet KYC and AML requirements 
  • Cross-border collaboration agreements are helping to expedite certain applications, making it easier to provide services
  • Some believe regulators are not keeping pace with technological advancement and should be more forward-looking

Regtech

  • TISA (a financial services membership association) believes spiraling regulatory costs and a backlog of regulation are key challenges for the finance industry in the UK
  • “Approximately £1.6 trillion of criminal proceeds are laundered globally each year,” says Nick Cook, Head of RegTech and Advanced Analytics, FCA
  • The FCA see themselves as a catalyst for regtech. Two significant projects include:
    • I. Regulatory Sandbox, launched in May 2016 to help innovative fintech businesses in the UK and develop compliant prototype products;
    • II. TechSprint consultation in November 2017 proving that industry compliance with FCA rules can be automated through machine-readable technology

 

5 key stats from London Fintech Week 2018

fintech week key facts

fintech week 2018 day 1 illustration
fintech week 2018 day 2 illustration
fintech week 2018 day 3 blockchain illustration

Distributed ledger technology

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Many institutions are looking to distributed ledger technology for potential solutions to improving efficiency and reducing costs. The European Parliament has declared that it wants the EU to be a leader in DLT and has proposed several policies for boosting DLT and related technologies in Europe. Richard Hay, UK Head of UK Fintech, on the potential impact of DLT.

What does the future of Fintech look like over the next 12 months?

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What does the next 12 months look like for Fintech? In this video you will hear from nine of our lawyers on what's ahead across Tech M&A, Payments, Artificial Intelligence, Platforms, Regtech, Blockchain and Infrastructure, Cryptocurrencies and Data.

 

Key Contacts

Financial institutions and disruptive companies alike trust Linklaters' lawyers with their most complex fintech projects.

We have consistently held the position of market-leaders in advising on the application of new technologies to finance, including: blockchain and crypto-assets, regtech, digital payments and platforms, artificial intelligence, smart contracts, fintech M&A, and fintech JVs and consortia.

Our strong relationships with regulators, banks, insurers, funds and infrastructure and service providers mean that we understand the issues that affect every area of the financial technology ecosystem. This enables us to deliver incisive, informed and innovative advice across the fintech spectrum.

Do get in touch if you have any questions or ideas you would like to discuss.