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FCA unveils first steps to a ‘global fintech sandbox’

The UK Financial Conduct Authority (FCA) announced the launch of the Global Financial Innovation Network (GFIN), a new alliance to encourage the growth of fintech globally.

The GFIN is part of the FCA’s plans to formally create a “global sandbox”, an idea it first discussed in February. A sandbox allows companies to test new, innovative products that are not protected by current regulation or supervised by regulators, reducing the time and cost of getting products to market.

The new ‘global fintech sandbox’ will involve a collaborative effort with watchdogs from around the world including the US Consumer Financial Protection Bureau, the Monetary Authority of Singapore and the Hong Kong Monetary Authority. It aims to help regulators stay ahead of the new wave of emerging technologies.

Over the past few years, watchdogs have seen the rapid rise of data analytics, the advancement of technologies such as AI and the creation of new securities such as ICOs. Under GFIN, a fintech will be able to carry out tests in different countries at the same time to solve common cross-border problems such as data protection, KYC and anti-money laundering.

The UK has established a reputation for being at the forefront of the fintech revolution and received more investment in its fintech sector than any other country in the world during the first half of 2018.

Regulators have demonstrated their commitment and willingness to work side-by-side with fintechs; the FCA was the first regulator to create a domestic sandbox in 2016, while the Bank of England has completed proof of concepts with start-ups such as enterprise software firm R3. It also launched its own Fintech Hub in March 2018.

This subsequently led to calls for a global sandbox, which received near-unanimous approval from regulatory bodies all over the world.

It is important to note, however, that not everyone believes in the importance of regulatory sandboxes. The chief of New York’s financial regulatory body said on Tuesday that the agency is “fiercely opposed” to the U.S. Treasury Department’s recent endorsement of regulatory “sandboxes” for fintech firms. Superintendent Maria T. Vullo said, “the idea that innovation will flourish only by allowing companies to evade laws that protect consumers, and which also safeguard markets and mitigate risk for the financial services industry, is preposterous.”

It will be interesting to see whether the initiative will achieve its aims and whether financial services regulators will effectively collaborate to balance the potential benefits of innovation with their traditional policy objectives.

Chatsworth welcomes this positive collaboration between regulators and aspiring fintechs, both domestically and internationally, as this gives companies a safe environment to test new ideas and learn how to effectively scale their business concepts. We would encourage fintechs, investors, governments, and other interested parties to participate in the consultation process to ensure it is transparent and fair to potential firms wishing to apply for cross-border testing.

UK Holds the Crown for Worldwide Fintech Investment

The UK has received more investment in its fintech sector than any other country in the world, according to KPMG’s latest Venture Pulse Report.

With over US$16.1bn of inbound investment during the first half of the year, the UK is firmly ahead of China (US$15.1bn) and the United States (US$14.2bn).

Europe currently stands as the leading continent for fintech investment ($26bn), with the UK accounting for over half of this. Moreover, four of the ten largest European fintech deals were conducted in the UK. This includes the US$250m raised by Revolut in April and US$100m by eToro in March of this year.

KPMG also predicts that the UK will retain its crown in the second half of 2018.

The report cites artificial intelligence (AI) as one of the main sectors responsible for attracting fintech investment in the UK. Hot startups such as Previse and Mosaic Smart Data are utilising the technology to revolutionise areas as diverse as late payments and data analytics in wholesale financial markets.

Brexit

With the shadow of Brexit looming large, it is a timely reminder of the importance of the UK to the global fintech community. In a keynote speech at London Fintech Week earlier this month, our CEO Nick Murray-Leslie noted how finance and technology are almost indivisible; nowhere comes close to London in terms of dominance as a financial centre and, by extension, a fintech hub.

The strong data also dismisses the notion that Brexit is affecting the way investors think about the City and the rest of the UK. Our view is that Brexit is not the biggest risk to London; rather, it is the risk that the UK, and London in particular, becomes a victim of its own success and unaffordable or unattractive for people.

This city has been undergoing its own version of what scholars of US cities have termed “the Great Inversion”. This is the return of people, high-end housing and highly-paid jobs to city centres. If it becomes too expensive these people will go elsewhere and there may soon be only two types of people left: the wealthy and those who are in social housing. This will be a problem.

Looking Forward

Beyond the UK, fintech as an industry has sky-rocketed this year. Worldwide global fintech investment this year has already exceeded the whole sum value of 2017, proving why it’s crucial for the UK to remain at the forefront of this vital sector.

Chatsworth has been working with a number of award-winning start-ups and established fintechs such as Previse (late payments), Mosaic Smart Data (data analytics), R3 (blockchain), and can personally avow for how London can support a fintech business of any size, better than any other city in the world.

Looking forward to the third-quarter of the year, tax reforms in the US, a significant amount of dry powder and the continued flow of funding into the VC world are expected to keep the fintech investment market strong over the next quarter.

AI and data analytics are expected to remain high on the radar of VC investors. It is also expected that companies in maturing sectors, such as e-commerce, will continue to broaden their offerings and investments in order to access new or adjacent verticals.

But as KPMG notes, an area that may be one to watch over the next quarter will be valuations – particularly for companies with no tangible assets, where investors are focused on what the company might do in the future. The level of assumption and risk involved in these types of valuations is quite high and it is still to be seen if these valuations will be substantiated.

Mosaic Smart Data & Previse named in Europe’s 50 Hottest Fintechs

Last week, Fintech City unveiled the sixth annual list of Europe’s top fintech50 companies. The list is selected by a panel of internationally renowned figures across finance and technology from a long-list of 1,800 companies. We were very proud to see Mosaic Smart Data and Previse added to the list this year for the first time.

Drawn from both B2C fintechs and those aimed at the institutional market, the list includes a wide range of business models and technologies.

Mosaic Smart Data and Previse lead a strong contingent of data analytics and machine learning companies. Both companies have had huge success targeting these technologies at specific, previously unsolvable, business problems.

In the case of Mosaic, it is enabling institutions to, for the first time, see their fixed income, currencies and commodities business in real-time. It uses advanced analytics to enable sales teams to generate useable insights to boost their performance and improve client servicing. In the last twelve months, Mosaic announced its first client, secured funding and expanded its team.

Previse is using machine learning to enable large businesses to have their suppliers paid instantly. It has made it onto the list in just its second year of business after securing funding from the Scottish Government and welcoming senior business figures such as John Gildersleeve and David Tyler to its advisory board.

As well as analytics companies like Mosaic Smart Data and Previse, a big trend in the 2018 list are blockchain companies. The list includes businesses applying the technology to a range of fields, from wholesale payments settlement to digital identity and cybersecurity.

Data analytics and blockchain are moving beyond theory and are now actively transforming global finance. It is, therefore, no surprise that these technologies feature strongly in this list of the most exciting financial technology companies.

We are proud to be working with some of the companies in the vanguard of these changes, both in Europe and the United States.

Carillion collapse shines spotlight on late payments issue

The collapse of construction giant Carillion has focused media and government attention on the global issue of payment terms after it was discovered the group paid subcontractors with a 120-day delay. These delayed payments meant many suppliers had to resort to expensive bank finance to stay in business while others are now facing bankruptcy.

Recognising the importance of ending the culture of late payment, two FTSE 100 chairmen have joined the advisory board of Previse, a UK based company which uses artificial intelligence to solve slow payments for the entire supply chain.

Chairman of supermarket chain J Sainsbury, David Tyler and chairman of property group British Land, John Gildersleeve have joined the company as investors and advisers.

Previse’s AI technology is designed to enable large firms to pay suppliers on the day they receive an invoice. The London-based firm’s technology calculates a buyer’s likelihood of paying an invoice, before deciding which invoices will be paid, so small suppliers can be paid instantly.

David Tyler said: “The length of time it can take for suppliers to be paid hurts not only them, but the large companies buying their products and services as well.” He believes that Previse will bring benefits to the entire supply chain and that the company has a bright future ahead of it.

Mr Gildersleeve, who is also deputy chairman of telecoms company TalkTalk, told the Financial Times that Previse could tackle an issue that has, “infected British business forever.”

Lengthy payment terms and the prevalence of slow payments by large buyers, which affects three in five SME suppliers, cause 50,000 UK SMEs to close each year. Previse’s artificial intelligence technology allows even very small suppliers to receive payment the day they issue their invoice by instantly identifying if an invoice is correct and allowing a funder to pay the supplier immediately based on this information.

“I am proud to be able to welcome our new board members who represent incredible senior experience across such a wide range of industries with significant supply chains.” Said Paul Christensen, CEO of Previse. “I think this shows the deep understanding across industry that slow payments are a real problem, and confidence in our approach to tackling the problem.”

 

J.P. Morgan deploys Mosaic Smart Data for fixed income data analytics

As a recent piece in the FT pointed out, traders are searching for ever more inventive data streams to try to make better predictions about their market or get an edge over the competition. Whether that be advanced social media analytics, algorithms to read the news or even using drones and satellite images to look at factories, banks, and hedge funds are investing significant amounts in collecting and analysing data.

But, banks know that there is a vast wealth of data created and stored within the institution created simply through the normal course of the trading day. This is free, and it is completely proprietary.

The problem is, data within the bank is distributed across desks, systems and messaging languages. Bringing that all into one, aggregated and standardised form so that the algorithms can work their magic and deliver valuable insights is a herculean task.

But that is exactly what Mosaic Smart Data has announced it is doing J.P. Morgan.

By using sophisticated historical, real-time and predictive analytics algorithms, the Mosaic’s platform will provide, in the first instance, J.P. Morgan’s rates, sales and trading business with advanced tools to accurately provide tailored client service. This innovative technology enables users to better visualise and anticipate market and client activity and thereby offer better service. It can also reduce the cost and complexity of compliance.

“Having a more holistic view of trading data will improve our service delivery for clients.” Said Troy Rohrbaugh, Global Head of Macro at J.P. Morgan. “The Mosaic platform integrates securely with our existing technology infrastructure, and enables our teams to quickly make better-informed decisions.”

Once these fundamentals of a data analytics platform are in place. Mosaic can roll out advanced machine learning and predictive analytics which will help sales teams to predict their clients’ behaviour, allowing them to better facilitate client needs and improve their performance.

“Data analytics and artificial intelligence are changing the face of investment banking.” Says Matthew Hodgson, CEO, and founder of Mosaic Smart Data. “Banks understand that the insights locked away in their transaction and market data are potentially some of their biggest competitive advantages. They already have the raw materials, but MSX® gives them the tools to aggregate and standardise that data and put it to work intelligently.”

We Explore or We Expire: SxSW Tech Briefing

“We explore, or we expire,” said astronaut Buzz Aldrin, of the Apollo 11 mission and one of the first two humans to land on the moon.

This simple sentence won over SXSW this year, the event in Austin, Texas which brings together some of the brightest minds in technology and innovation to collaborate.

In his keynote speech, Aldrin was talking about the push to Mars, but his speech and sentiment went wider – exploring how people and organisations are thinking and learning new ways to communicate, adapt, survive and flourish.

Virtual reality (VR) was everywhere, but there is still real debate about its real world application. In our view, VR is still looking like fun toys to promote films and event experiences. Smells a little like 3D TVs to us, and we know how that fad ended.

Does anyone really want to wear those headsets?

AI, however, is another matter. This was hot for the second year running and is being positioned as the next big disruptor.

Harley Davidson, for example, is using an AI tool to match audiences to its current database – finding customers who might be interested in purchasing a motorbike through machine learning. It attributes 40% of its sales in New York to this tool.

Disney’s R&D studio is using AI as a tool for storytelling across multiple digital platforms.

One speaker estimated that a 30-year grace period before AI completely takes over the workplace, calling for a push to design AI to augment rather than replace people.

This requires a clear distinction between AI (artificial intelligence) and IA, or intelligent augmentation.

AI is about reproducing human cognition and functioning autonomously, while IA is about supplementing and supporting it, leaving the intentionality of human operators at the heart of the process.

For brands, this is going to continue to be about making sense of complex data through machine learning, enhance and augment, rather than merely removing human roles.

Back to Mr Aldrin’s alma mater, NASA, which is working with Google to explore the application of quantum computing to artificial intelligence.

The space agency’s Quantum Artificial Intelligence Laboratory (QuAIL) is using quantum computers to perform calculations that are difficult or impossible using conventional supercomputers, effectively becoming a quasi-AI.

The team aims to demonstrate that quantum computing and quantum algorithms may someday dramatically improve the agency’s ability to solve difficult problems for space missions but also back on earth.