Nick Freer comment: Is ‘disruptive’ language misrepresenting fintechs?

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 its new currency, a digital coin linked to the value of the dollar, has reached out to cryptocurrency 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.

Under such a broad definition, we could perhaps think of Lloyds as Scotlands largest fintech, Richard Braidwood tells Freer. Picture: Stewart Attwood

When discussing this with Scottish entrepreneur and investor Richard Braidwood last week, he made some interesting points about the generally accepted terminology in the sector. “You could argue 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, co-founded 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, provide accurate insight for investment managers and move the whole market toward real-time customer insight.

We proceeded to talk about the definition of fintech. Start-ups using technology to offer existing financial services at lower costs with better customer experience? Technology companies who provide payment services? Or incumbent financial firms investing billions into innovation? Braidwood references Lloyd’s, now transforming its digital banking experience as part of a £3 billion investment programme that will create 500 jobs in Edinburgh. Braidwood suggests we should perhaps think of Lloyds as Scotland’s largest fintech, based on its broad definition.

He shares his concerns over the term disruption. “Disruption entered the start-up 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 cryptocurrencies, 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 this year.

On the international scene, Braidwood identifies Ripple, a California-based 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 more than 200 clients, including some of the world’s largest banks, and commentators feel the firm is well positioned to serve as a world reserve currency.

- Nick Freer, founding director of the Freer Consultancy and Full Circle Partners.