If you’re a fintech founder or developer, where should you be focusing your energies?

And what can the rest of us expect, as the digital revolution in the financial services sector gathers pace? Anton Ruddenklau, Global Co-leader of Fintech at KPMG and an adviser to banks, corporates and startups on strategy and growth, shares his valuable insights with AWS’ Charlie Barrett, Fintech

We’ve seen massive changes in the financial services industry during the past couple of years. What are the key landmarks you see happening in the next few years?

If you look at the liquidity and investment going into financial services, the defensive playsof the large banks and the non-bank disrupters, there’s a lot happening. The large banks are spending billions and the other thing is the opening up of financial services and the move to Application Programme Interfaces (APIs),which means big change for us all. We’re seeing a move towards services for customers that follow their end-to-end needs, rather than just banking. There’s a huge opportunity there, including cloud and distributive ledger technology and quantum computing.

Where does the UK sit on a global scale and how might that change?

The UK is seen as the pioneer, when it comes to fintech. We’ve got great entrepreneurs in this country and a cool eco-system with our technologists and universities. The government-backed British Business Bank is putting £2.5bn ($3.2bn) into patient capital to back SMEs,so it’s looking positive. But the UK has only so many SMEs and retail customers, so we have to expand. Firms around the world are looking to us for leadership, so now’s our chance to export our skills to China, Australia or elsewhere.

Thinking about digital banks such as Starling, Monzo and Tandem, what do you see in their futures?

I love Monzo. It’s a cool card and a cool brand. They’ve done amazing things in terms of reinventing the public perception of banking and financial services. Monzo, Starling and Revolut are all aspirational brands people want in their wallet. If I was Tom Blomfield, Monzo’s Chief Executive, I’d be thinking about how to build more customer liquidity and get more customers on my platform and how to build a deeper revenue pool from those customers. That’s where the cloud providers, such as AWS, and machine learning technology comes in.

What does the future hold for large banks?

They’re so tied up with technical legacy debt and bureaucracy, they’re struggling. They’ve been brought up to measure credit risk and careful usage, but consumers and SMEs have a different view. One future scenario we call ‘Red Dwarf’, is where the large banks become much smaller but are still significant. They have funding and can get that out through distribution channels, but the front and back end, and digital, data and cloud rule the waves. All the large banks are is a piece of infrastructure sitting in the middle, with white labelling and market places all around them.

What main tipping points should we be looking out for?

The first is 2027, by which point 75% of large organizations will have gone cloud native and the other 25% will have gone bust. By 2020, Chief Information Officers will spend more money on cloud services and data than on legacy technology. Blockchain’s tipping point will be between 2022 and 2024, by when 10% of consumers and SMEs will have adopted distributive ledger and crypto currency. The other big thing is 6G coming in around 2020, which will fuel sensor technology,

location-based services and the connection of machine to machine. Finally, quantum computing’s tipping point in 2024-2025 will change everything, including distributor ledger.

Bringing it back to fintech founders, what three key things should they be thinking about now?

The first is talent. When you’re running your own business, you want people who understand and can execute your vision. Second, is go to market and distribution. Just because you’ve got a good idea, make cool technology and have a whizzy brand, it doesn’t mean customers will come. You’ve got to work on making distribution happen, which means using associations, trade bodies and other routes to build customer liquidity and get them on your platform. Finally, keep that discipline around financing and management of investor relations.

What advice do you have for potential founders about working in a regulated environment?

Don’t fear regulators, engage with them. They may have come from a different mental mindset and generation, so two-way communication is good and should be adult-to-adult, rather than parent-to-child. Recognize there are those who can help, whether Innovate Finance, City of London Corporation or others who deal with regulators regularly. Also, share stories. The best fintech scale up leaders speak to each other about regulation and how to change mindsets or inform, without saying ‘You’re wrong’.

What are your views on the insurance industry and where do you see that going?

There has been disruption already, with Phoenix emerging as an aggregator and comparethemarket.com. More people would rather trust an animated meerkat to buy their insurance policies, than insurance brokers. Insurance firms need more sticky day-to-day relationships with consumers and are trying, with things like sensor technology in cars, but they need to go further. What hasn’t really raised its head yet, is the underwriting equation which is data. We need to get that long-term risk discipline into the cloud quickly and make the provision of insurance more certain, specific and fact-based.

To wrap up, Anton also emphasized how fintech founders need to focus on the basics, if they want to be successful. Watch the full interview here or find out more about how AWS can support your fintech startup here.

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