• Fasanara Capital

Trust Lack to Fintech, AI Picks Up Your Job and UK Booming



Happy Monday!



Today's Topics Are:


  • Lending from challenger banks hits record £115bn in 2019

  • UK fintech investment is booming as the UK prepares for Brexit

  • Lack of trust and customer inertia are barriers to fintech growth, PwC says

  • Alternative finance-focused investment trusts facing ‘existential crisis’ 

  • Is AI coming after your job?




Lending from challenger banks hits record £115bn in 2019


Challenger banks have more than doubled the amount of money they are lending to customers in the last five years after a record £115bn was lent in 2019. Despite the record figure, lending by challenger banks rose by just three per cent last year, the slowest annual growth rate since 2012/13. Digital banking giant Monzo failed to make a profit from lending in 2019, according to their annual report they were set to lose £3.1m, largely from overdrafts and other small loans. Metro Bank was ejected from the FTSE 250 after its value nosedived because of an accounting error that saw them misclassify low-risk loans it was holding..

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UK fintech investment is booming as the UK prepares for Brexit



Venture capital and private equity investment into UK fintech firms soared 38 per cent in 2019, up from $3.6bn in 2018, hitting a new record of $4.9bn, according to new research from trade body Innovate Finance. Of the 10 largest fintech deals in Europe in 2019, the vast majority were from UK firms, including Greensill Capital ($800m, UK), N26 ($470m, Germany), Klarna ($460m, Sweden), WeFox ($235m, Germany) and Checkout. com ($230m, UK) European fintech continues to accelerate too, rising 49 per cent to $8.5bn of investment. Europe’s major fintech ecosystems in the UK, Germany, France and Sweden all attracted record investment in 2019. Global investment into fintech fell overall as investment in China slumped a whopping 93 per cent, from $26.0bn in 2018 to $1.8 bn in 2019.

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Lack of trust and customer inertia are barriers to fintech growth, PwC says


A study from accountancy giant PwC cited a recent survey that found that 48 per cent of British consumers would not consider purchasing any financial product from a fintech. PwC said that consumers take a relatively low interest in financial services products compared to other industries and rarely scan the market for new offerings. As a result, new entrants must have a significantly higher level of proposition differentiation to attract customers. Due to this customer inertia, acquisition costs are high, the report added. The report also said that regulatory requirements can be a challenge for new entrants due to complexity and costs and concludes that the key to success for all market players will be working together in partnerships. It cited the example of Goldman Sachs partnering with Nutmeg to develop a stocks and shares ISA and BBVA acquiring Simple to develop a digital banking offering and partnering with Uber to launch lending and payments products in Mexico.


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Alternative finance-focused investment trusts facing ‘existential crisis’


A review of the direct lending investment trust sector, by brokerage Numis, warned the sector has been hit by poor credit underwriting that has led to losses or significant uncertainty over portfolio valuations. The report warned portfolios have been too concentrated by position or asset class and have not been able to name specific positions due to confidentially agreements in place. The analysts suggested that funds should improve their transparency to boost demand, by allowing investors to assess the underlying risks more easily as well as the portfolio’s individual exposure to certain platforms.

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Is AI coming after your job?


It is no secret that artificial intelligence (AI) systems have made enormous strides in recent years, partly due to the adoption of probability-based)machine learning techniques rather than the rule-based techniques used until about 20 years ago. Numerous applications of AI have been fielded in the medical and financial services arena and other occupations likely to be impacted include package delivery drivers, construction workers, legal workers, accountants, report writers and salespeople. Many have responded to these developments by observing that in our era, as in earlier eras, technology advances have led to productivity increases, which have advanced standards of living worldwide, and have opened the doors to new and, in most cases, more creative and fulfilling work than before. Yet some still worry that today’s situation is somehow fundamentally different. Are computers and AI becoming too smart, too fast? Will the requisite dislocations in the economy be too painful? Can governmental, educational and cultural institutions change fast enough? Will there any meaningful work for humans to do in the future?

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