Two days before Halloween in 2017, Chris Herd was at his gran’s house when the phone rang.
He answered and during the conversation that followed, discovered that his gran was paying four times more than he was for a poorer TV subscription package.
“I didn’t think that was right,” Herd recalls. “Her eyesight isn’t great, so I’d help her with her statements and letters when they came.” He identified the problem as “asymetric information” – when one party to an economic transaction possesses greater material knowledge than the other.
Herd says: “I thought ‘If you could solve that, you could help every single person in the world pay the lowest price for all their bills and expenses.’ Nexves crystalised at that moment and exists to improve people’s lives.”
Around the same time, towards the end of 2017, Adrian James and his wife were doing their Christmas shopping online. Like many people, they were buying and returning goods across multiple platforms and several different credit and debit cards. “When we had to return or check things, finding e-mail receipts for the goods was almost impossible with spam, phishing and promotional e-mails – and bank statements gave no details about what was purchased,” James explains.
With a background in data science, he decided to use machine learning to extract data in email receipts on people’s phones and add it to transactions in banking apps – and he set up Monily. “It lets you understand what was purchased and illustrates fraud on the account if there is a missing receipt. Banks have very little good data in their systems and we hope to change that through Monily by making it useful.”
These two real-life stories say something quite profound about fintech and how it aims to improve the customer experience. At its roots, it is about identifying consumer problems with financial services and solving them to make our experience better.
As Georgina Bulkeley, Director of Strategy and Innovation for Personal Banking at RBS, puts it: “We have to understand a customer need that is not being met – or a customer pain point we can stop.”
In Scotland, there are increasingly large numbers of extremely bright and determined young entrepreneurs wanting to fix these “pain points” – with a strong sense of social purpose running through the community. As Kent Mackenzie of Deloitte says elsewhere in this supplement: “Scotland is fantastic at tuning into the social agenda. It’s in our blood, looking after one another.”
Companies such as Castlight – aiming to “build a safer financial world” – have put that at the heart of their mission, with a focus on ensuring lending decisions are based on current, real-life financial information, not an outdated and often irrelevant credit history.
Nexves is similarly trying to put balance and fairness back into financial services – at a time when a recent report revealed vulnerable groups pay up to £1,500 a year more for services than they need to.
Sustainably wants to help consumers “change the world every time you shop” by rounding up transactions and donating direct to chosen charities.
Yet there is deep cynicism around fintech – when I have talked to ‘ordinary’ people about writing this supplement, several said: “I don’t believe in this fintech stuff – it’s just hype.” This might be driven partly by a lack of understanding of what fintech is, and does, and perhaps a failure to grasp that open banking is designed to help the customer – and isn’t yet another threat to our personal data.
We are in an age where data is ‘the new oil’ and has immense value. As consumers generate ever more information, Edinburgh is carving out a niche in data science and how we analyse and draw conclusions from big – and ever-bigger– data.
We might mump and groan that our data is being used for multiple reasons unknown by social media giants and others, but how many of us are happy to click on the button to access a website, rather than stopping to think what that click means? As Burness Paull’s Stuart Murdoch says: “If there is an easy solution that means you can carry out a financial transaction in ten seconds but also have to sign your data away, many people will do it.” In a nutshell, convenience wins.
This is another area young fintechs like The ID Co. are grappling with – how to deliver that convenience (at speed, on a mobile device) without any sense that our data is being compromised or misused; to make our data work better for us.
Some of us are very much in the fintech world and embrace new technology with open arms; many are still uncertain. Yet as our assets become increasingly digital and our lives focus more and more on that mobile device in our pocket, the march of technology is inexorable. As tech entrepreneur Chris van der Kuyl often likes to quote: “The pace of change has never been this fast, yet it will never be this slow again.”
It’s a scary thought for many, and it will change our lives. Fintech is already moving into areas that are not simply financial – how do we join up the messy links of buying a house, for example?
Kent Mackenzie of Deloitte says: “We are not far away from connecting up that entire journey. From the point you appear to be interested in moving house, you leave a data footprint. You might search information about neighbourhoods and schools, look for a mortgage provider, secure a financial product.
“Then there’s the removal company, changing all your address history, etc. It’s technically possible to take you all through that journey. It just needs someone to sit above the process and bring a joined-up service to market. The financial services elements could almost become invisible – it would be a lifestyle journey rather than a mainly financial one.”
How much easier would it be if that end-to-end product came to market? And how can we use technology and data to make other everyday experiences simpler – and cheaper?
“There is a real drive towards connected devices supplying data – linking home insurance to connected devices in the home and car insurance to devices in the car,” says Mackenzie. “Car insurance could be linked to the distances you drive, connecting into data sets about the state of the roads, the type and condition of cars and the individual’s insurance risk. Then, using market comparison data, you can make a real-time insurance offer.
“It’s not easy as there are very real issues around data security, integrity and ownership. When you expand the reach of technology, you have to be very careful about integrity and security. You have to consider the risks; it’s not just about the art of the possible.”
So what has fintech ever done for us? For most of us, it has made our financial lives simpler, quicker and more efficient – and will continue to do so, at an ever-increasing pace.
For the cynics, who think fintech is all about geeks and gimmicks, it is worth reflecting back on those two opening stories. We all want our online Christmas shopping to be simpler. We all want our bills and expenses to be cheaper.
And, if we embrace it, fintech could make a positive difference to our lives. Looking to the future, Chris Herd says: “Imagine food receipts, married to Fitbit health and activity data, tied to your age and demographic information. Could that be used to give preventative diagnoses on how you are living your life?”