Views of leading authorities on FinTech’s development and growth

Jamieson Lee Hill, September 18^th, 2023

The FinTech industry is thriving. With the expansion of services and utilisation of co-location data centres and cloud computing, the financial services industry is witnessing an immense period of growth. IP House Data Centre in London is a key part of this digital revolution supplying services to FinTech organisations across the UK and worldwide. In this article we explore the views on FinTech’s future from some well-known organisations and leading experts.

FinTech in 2023

In 2023 over half C-level executives in FinTech agree that,

‘Digital transformation is the most important strategic initiative for their company and now spend 27% of their overall IT budget on digital transformation initiatives, compared to only 11% in 2022.”

Source: Core Site.com 2023

Banks look to invest in measures which enhance the customer experience for financial services. Also, with scalability and affordability of colocation data centre services offered by companies like IP House, it means that banks and financial services firms can reduce their overhead costs for acquiring and retaining customers.

Leading authority Gartner listed the main priorities for banking and investments in 2023 as including:

·       Growth

·       Digital transformation

·       Customer experience

Digital transformation using colocation data centres and cloud services is helping to expand and develop FinTech services. Furthermore, Gartner has predicted the key focus for banking and investment services in 2023,

“According to the Gartner 2023 CIO and Technology Executive Survey, banking and investment services CIOs will spend the largest amount of new or additional funding in 2023 on cybersecurity, data and analytics, integration technologies and cloud.”

Source: Gartner.com, 2023

IP House And The FinTech Industry

IP House colocation data centre in London is a leading provider of services for the FinTech industry. With cutting edge technology IP House provides affordable, pay as you grow solutions for financial services firms. The innovative technology used at IP House also means that services can be expanded rapidly and seamlessly. In addition, the cybersecurity and 24/7 monitoring provides the robust security that is essential for the FinTech industry.

Boston Consulting Group (BCG)

BCG is a global consulting firm and a pioneer in business strategy when it first started in 1963. They work in partnership with leaders in business and society to help face the biggest challenges and embrace opportunities.

“Our success depends on a spirit of deep collaboration and a global community of diverse individuals determined to make the world and each other better every day.”

Source: BCG.com, 2023

BCG predicts that FinTech sector will grow from a current 2% share of global financial services revenue to 25% by 2030. In monetary terms that equates to $1.5 trillion dollars in annual revenue.

Also, BCG forecast that B2B and B2B2x (B2B to any user) will be the two main sectors that will lead the way in future.  Equally, BCG state that ‘emerging markets are expected to continue to see disrupter, full-stack models reign as they expand financial inclusion.’

They emphasise that regulators need to be ‘proactive and lead from the front to develop policies that create a collaborative, safe, and open financial ecosystem’. This is needed to allay the fears of executives who have concerns about using cloud services and colocation data centres for hosting FinTech services. Large corporations tended to house their software and data onsite in the past due to cybersecurity dangers. However, the tide is now changing. The overall flavour from BCG is that FinTech is,

“Not just a passing trend but a foundational force that will continue to transform the financial landscape for years to come.”

Source: BCG.com, 2023

The World Bank’s View OnThe Future For FinTech

“FinTech, the application of digital technology to financial services, is reshaping the future of finance– a process that the COVID-19 pandemic has accelerated.”

Source: World Bank.org, 2023

The World Bank has a positive view for the future of FinTech stating that the ongoing digital transformation of financial service and money is creating opportunities ‘opportunities to build more inclusive and efficient financial services and promote economic development.’

They identify ‘a paradigm shift’ with FinTech transforming the financial sector. In a similar vein to BCG, the World Bank emphasis the need for a review of ‘regulatory, supervisory, and oversight frameworks to ensure they remain fit for purpose and enable the authorities to foster a safe, efficient, and inclusive financial system.’ Lastly, the World Bank is encouraging cross-border co-ordination and sharing of information and best practices.

Financial Times

The FT has an upbeat and dynamic view of the future of FinTech,

“The FinTech space is booming and as finance and technology converge further, investors will continue to pour billions into new innovations that deliver services more efficiently.”

                                               Source:  Financial Times, 2023

However, there is a caveat on their buoyant optimism because they have observed that Silicon Valley’s transition to financial services has been ‘relatively gradual’. Nevertheless, they cite Google as having plans to work with existing financial services firms like Citigroup. Google’s goal is to expand the use of Google Pay. The FT commented that FinTech strategy appears to not ‘disrupt or replace banks, but to act as partners.’

The FT’s Innovation Editor John Thornhill believes that FinTech is completely ‘redesigning in finance in China from the smartphone user’s perspective.' Smartphone payments in China are 50 times that of the USA.

Selleo’s View On The Future Of FinTech

“The need for simple, safe, online payment systems has grown dramatically along with e-commerce.”

Source: Selleo.com, August 2023

Selleo, a global brand working within FinTech, highlights the growth of FinTech services in tandem with e-commerce. They also point out that all over the world,

“There are sizable, neglected communities all over the world that have little to no access to banking or financial services.”

Selleo see FinTech providers as the solution to supplying services to these communities to help overcome barriers of social development and to generate fast economic change. They also emphasis the massive amounts of data which e-commerce transactions, online searches and social media provide. This allows FinTech to choose what to charge customers and which services to offer them. Data is hugely important for the FinTech sector.

Conclusion

“The UK FinTech market is expected to reach a global market share of 12% by 2030. Today almost 70% of UK individuals use less cash and more digital payment solutions, a phenomenon that accelerated during the recent pandemic crisis. This is a clear opportunity for UK FinTechs to scale faster.”

Source: Roberto Napolitano on Linkedin, May 2022

As well as considerable growth in the UK, ‘the global FinTech market is expected to triple and reach £380bn by 2030’ states Napolitano. This is immense growth for a sector that is at a leading edge of technology and data services. The pandemic accelerated the digital revolution for financial services massively and it seems set to continue. FinTech’s success is partly built on the ‘high adoption rates by small investors and retail customers looking for convenience and ease of use’ explains Napolitano in his excellent Linkedin article from 2022.

The USA is number one for FinTech investment closely followed by the UK in second place with 50% of the total investment in Europe going to the United Kingdom. Napolitano believes that the future of UK FinTech depends on,

“How well equipped the ecosystem of political institutions, entrepreneurs, investors and incubators is to support growth, maintain competitiveness and face the challenges ahead.”

Source: Roberto Napolitano on LinkedIn, May 2022

Stanford Law School believes that,

“FinTech innovation is changing customers’ experience and expectations by promoting a more client-centric and interactive approach to financial and banking services.”

Source: Stanford Law School, 2023

FinTech innovation is harnessing the global reach of data networks and smartphone technology. Large portions of the world population are getting access to financial and banking services via this technology. This is in turn putting pressure on the banks and other regulated organisations to embrace the wave of new Fin Tech technology.

Gradually, we are seeing the banking and financial regulatory authorities evolving as the FinTech revolution continues. Regulation in FinTech is an essential bedrock to make online financial services safe and secure as this thriving industry seems set to grow in the years to come.

IP House with our colocation data services, cutting edge technology and cybersecurity are part of this dynamic FinTech revolution. Together we are partnering with financial services institutions to help them realise their ambitions.

If you would like to find out more about IP House's colocation services for FinTech, fill out the form below. Let's Talk!

Sources

1.     Gartner: Gartner.com, 2023

2.     Stanford Law School: Stanford Law School, 2023

3.     Financial Times: Financial Times, 2023

4.     Selleo: Selleo.com, August 2023

5.     BCG: BCG.com, 2023

6.     Core Site.com: Core Site.com 2023

7.     World Bank: World Bank.org, 2023

8.     Roberto Napolitano on LinkedIn: Roberto Napolitano on LinkedIn, May 2022