Fintech Talk: December 8, 2016

Adel Raslan  Follow

The fintech industry has grown rapidly in recent years to more than 4,000 firms between the US and UK alone. Similarly, investment in the sector has grown from $US1.8 billion to $US24 billion worldwide in the past five years, according to Thomas Curry, head of the Office of the Comptroller of the Currency (OCC).

To give this rapidly growing industry a new opportunity to expand, while increasing government oversight of the sector, the OCC, last week, announced that it would, for the first time, allow financial-technology firms to apply for federal charters (paywall).

Commenting on the announcement, Mr Curry said, “It will be much better for the health of the federal banking system and everyone who relies on these institutions, if these companies enter the system through a clearly marked front gate, rather than in some back door, where risks may not be as thoughtfully assessed and managed.”

The OCC also said it would allow fintech firms to become “special purpose national banks,” a move the tech industry has long lobbied to achieve. This would make it easier for them to do business by giving them a chance to operate nationally on their own with one license, rather than seeking permits state by state, or without partnering with a traditional brick-and-mortar bank. Many firms say the current process is cumbersome and costly, making it difficult to expand as a start-up with limited resources.

The OCC’s decision comes as American regulators have struggled to strike the right balance between encouraging innovation in finance while extending traditional protections to new financial products. Both consumer groups and banks have raised concerns about the rise of the fintech industry, with older financial institutions calling for a “level playing field.” Some fintech firms have complained that other countries, notably the UK, have done more to update their financial-regulatory systems to allow for financial experimentation.

Given the aforementioned level of disruption, the growth of the fintech sector globally and the success of its inaugural list of 100 most influential fintech leaders in 2015, Hot Topics, the fasting growing digital community for tech leaders, has decided to repeat the endeavour. To do so, they partnered with leading tech executive search firm 360Leaders, and London-based business publication, City A.M, to identify the most influential fintech leaders for 2016.

The fintech leaders had to meet one or more of the initial criteria, which looks for individuals who have:

  • founded, built or run companies that are driving innovation in financial services through technology
  • invested in the companies that are dominating the fintech sector
  • driven change within large, global financial institutions through investing in and integrating technology
  • a significant following and influence within the fintech sector and have set the agenda for key trends throughout the year.

 While the list includes some household names, there are a few surprises and a good geographic distribution. Please see here for the full list.

As we all know (or should do by now), Blockchain is one of the hottest technologies in the fintech sector and has developed in leaps and bounds over the last few years. However, it’s not all rainbows and butterflies, as illustrated by recent developments at the powerful R3 blockchain consortium. Goldman Sachs, one of the nine original members, has withdrawn its support for the partnership, which was set up to develop the technology with the intention of cutting tens of billions of dollars of costs from the financial sector. It’s reported that Goldman baulked at being asked to chip in for a $150m “Series A” funding round and was unwilling to invest alongside dozens of co-investors, and wanted more operational control. While more than 90% of its original 42 bank members expressed an interest in investing, Santander, Morgan Stanley and National Bank of Australia joined Goldman in refusing.

In other news, Stripe, the online payments company that has essentially become the default acceptance service for startup companies in the U.S., has raised around $150 million in a new round of funding. The company is now valued at $9.2 billion after the cash infusion, up from $5 billion last year. Alphabet’s late-stage investment arm, CapitalG (formerly Google Capital), co-led the round along with existing Stripe Investor General Catalyst. Stripe has now raised more than $400 million in venture capital.

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