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The most investable fintech sectors in 2017

Welendus’s Founder and CEO Nadeem Siam with his fintech predictions for 2017, the leading cover story in the November edition of the Fintech Times:

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Please find the fully referenced version of the article below:

Since Brexit fintech innovation in the UK has become even more high profile, with a new Government backed conference unveiled (1) to “cement our position as the global Fintech capital”. But what then should global investors be on the lookout for, which are the most innovative sectors in the UK’s fintech scene?

Certainly, the UK has a significant advantage over its nearest fintech global rivals, California and New York, in the form of a single regulator, the FCA with a focus on promoting innovation. The FCA sees lending, and P2P lending in particular as a key sector (2), driven by the current high margin, low interest rate landscape and tech developments like real time data sharing to the API Open Banking Standard. Nadeem Siam, founder of P2P short-term lender Welendus says innovation is vital to success:

“Fintech is a big thing here in the UK with innovation in different sectors from peer-to-peer lending to block chain and credit assessment. But this is not enough, we need more innovation to stay ahead of the game. At Welendus, we are building one of the most technologically sophisticated peer-to-peer lending platforms to bring short-term loans to the peer-to-peer lending market for the first time. I am personally looking forward to the UK banks opening up their APIs for businesses. This will further revolutionize the Fintech sector in the UK.”

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Alternative credit assessment is another exciting sector, where the UK is facing strong competition from the US. At the recent Money20/20 conference in Las Vegas, fintech startups heard about the opportunity presented by, “20% of the 63M ppl in the US w/ no credit score when checked w/ alternative methods turned out prime”. (3) Helping people with a ‘thin’ credit history such as young adults, or the self-employed, is UK fintech startup Aire co-founded by Aneesh Varma. “Many of us will end up being mobile or self-employed which the current credit risk-scoring system will have to recognise. As things stand, genuine hard-working people are being penalised by the way credit scores are created, that’s not good for growth, innovation or wellbeing.”

Oliver Bussmann, the ex-CIO of UBS, who while at UBS highlighted to the potential for blockchain technology to disrupt the banking industry, believes the next big thing is artificial intelligence (AI) not blockchain: “It’s all about processing big data so that you understand the investment signals.” Banks are particularly interested in start-ups that can build artificial intelligence algorithms: “They’re teaming up with start-ups and hiring engineers and scientists and building joint teams of business and IT people to work on this challenge.” (4) For proof of the power of AI look no further than UK tech startup Comply Advantage, which uses AI to ensure compliance rules are followed by financial firms. It’s just raised $8.2m (£6.7m) and opened an office in New York. (5) Certainly London, blessed with an abundance of fintech startups and academic excellence, looks to be pole position to advance the innovative use of AI in the fintech sector in the years to come. (6)

References 

(1) https://www.gov.uk/government/news/new-conference-to-showcase-britains-world-leading-fintech-sector

(2) http://lending-times.com/2016/10/11/analysis-of-fca-speech-on-p2p-market-in-the-uk/

(3) https://twitter.com/DuenaBlomstrom/status/790301084262641664

(4) http://news.efinancialcareers.com/uk-en/263509/how-to-get-into-fintech

(5) http://www.cityam.com/251414/uk-startup-using-ai-compliance-just-raised-  millions

(6) https://www.theguardian.com/technology/2016/mar/05/artificial-intelligence-brains-money-london