The Practical Edge to FinTech

By: William Fenick

The European economy has changed radically in recent years as both businesses and consumers have become more adept at harnessing new digital technology. When you combine this growth in technology adoption with regulatory changes in the financial services industry, you can begin to understand why there has been disruption in the European marketplace with the emergence of the FinTech phenomenon.

The introduction of MiFid in 2006, as well as other regulatory changes in its wake has meant that the European market has opened up to a plethora of new entrants in both the capital and commercial markets. This opening up has created an opportunity for more agile FinTech firms to develop and build solutions that can address specific customer challenges. At the same time, the emergence and availability of the cloud has provided quick and cost effective infrastructure for FinTech firms to build upon.

This combination of factors has resulted in FinTech growing in presence across the European B2B market as established institutions look to keep pace in the digital world with both existing and new customers. In partnering or fostering FinTech communities, those established players are getting insight into a new way of delivering services that both reduces cost and increases efficiency that they may not be able to achieve themselves.

Yet while FinTech continues to receive increased attention from established institutions, the market is looking for mature solutions to come from FinTech. While many European institutions currently have a significant appetite for risk when it comes to investments, we are rapidly approaching the point where a theoretical idea is no longer good enough and securing customers for products becomes key.

With a more practical edge coming to the FinTech industry, one thing the larger European institutions will not take a risk on is the infrastructure of a new product. The prospective institutional customers of FinTech firms will query immediately the underlying infrastructure of any new product/ application/ service they adopt. If it is based on the cloud, prospective customers will need to know where the cloud is based, crucial with regards to legal jurisdiction and particularly in light of the recent Safe Harbour ruling by the European Court of Justice.

Much of the success of a particular service could now depend on the compliance department of the institutional players, as they will ultimately have final say on whether a particular contract can go ahead. Prospective customers will also be looking for any FinTech firm to have a mature infrastructure which entails business continuity, disaster recovery and ultimately the ability to address "what-if" scenarios.

Customers of potential FinTech firms are looking for ‘maturity’ and all it entails in terms of reliability and security. Those that can offer this will quickly distinguish themselves from the crowd. For any FinTech company, the transition from the starting blocks to the first hurdle is arguably the most important part of its overall success. Increasingly infrastructure is playing a fundamental role in this process and those FinTech companies that work with trusted partners will get a head start.