FinTech brought the ‘unbundling’ of banking; now we are witnessing the ‘rebundling’ the banking. Roxana Mohammadian-Molina, CSO at Blend Network spoke to Business Leader about the democratisation of property investing.
The first three months of this year saw a record investment in UK FinTech firms as confidence returned after a cautious year for investors. What trends have you seen in the market over the past 12 months?
I think many people will agree that 2020 will be recalled in the history of finance as the year that saw the equivalent of a decade of digital transformation, such is the speed with which the global FinTech sector responded to demand at every level, from digital payments to digital wealth management. The Covid-19 pandemic gave FinTech companies the chance to show what they are able to do and accelerated the uptake of digital financial solutions in ways hitherto hard to conceive.
The technologies being developed, tested and rolled out today are helping not only here and now, but will also shape the future of finance across the world in years to come. In terms of the trends we have seen, a surge in demand for online investment platforms would be one of them. Over the past 12 months, people have managed to save a lot more.
According to a recent report, Brits are sitting on a whopping £192 billion worth of lockdown savings built up since the first restrictions were imposed on 23 March 2020. So, while the report forecasts an additional £50 billion expenditure once lockdown restrictions have eased, people are also looking for ways to invest their money.
We at Blend Network have seen a surge in lenders over the past twelve months, to the point where now our loans get funded by dozens of investors in just a few minutes.
The recently published Kalifa Review of UK FinTech told the government that it must urgently introduce effective policies in five key areas if the FinTech industry is to continue to thrive: skills, spreading the industry nationally, investment, overseas trade, and policy and regulation. What are some of the practical ways you believe the Government can support the FinTech sector in those areas?
I do think skills and education are two areas where the Government can do a lot to support the FinTech sector, and it can do so by joining forces with delivery partners such as FinTech companies themselves or independent organisations such as Innovate Finance.
One concrete example is Innovate Finance’s FinTech For Schools program which aims to promote awareness of FinTech in young people and to showcase the very diverse range of ways to get involved and to inspire the current and next generation of innovators.
In our case, as a property lending platform that is trying to help solve the country’s housing crisis by allowing private investors to invest in real estate projects from only £1,000, we see several area of private-public collaboration such as working with local councils to reach out to more developers in need of funding.
FinTech emerged in the aftermath of the 2008-09 Global Financial Crisis and saw FinTech platforms take away a lot of business that banks were no longer willing or able to do (for example, SME lending or development finance lending). Have you seen any change in the way that banks and FinTech firms interact over the past decade? How about more recently in the past year or so?
Yes, you are absolutely right. It was the Global Financial Crisis that really kick-started the FinTech frenzy we have seen over the past few years because 2008-09 was a time when banks went ‘back to basics’, if I may use the expression, meaning they decided to refocus on their plain-vanilla product offerings and decided to stay away of anything that didn’t form part of their basic product suit.
Consequently, things like SME lending and development finance lending took a hit, and we saw FinTech platforms such as P2P lenders emerge to do the business that banks were no longer doing. And banks didn’t mind that in the slightest. But I think now we have started to see a subtle change in this trend in recent years. It increasingly appears as though banks are looking at FinTech firms from the corner of their eyes and watching carefully their moves.
I do believe we may have reached a point where some FinTech companies are becoming too important to ignore from the traditional bank’s perspective, and banks are certainly open to collaborations. So, in that sense, I do think that following the ‘debundling’ of banking and FinTech we saw a decade ago, we are about to witness a ‘rebundling’ of banking and FinTech.
In fact, Starling Bank’s Anne Boden recently said they are actively searching for lending businesses to buy and JP Morgan CEO also had flattering words for alternative lenders when he predicted a shift to non-bank lending.
You talked about the ‘unbundling’ and ‘rebundling’ of banks and FinTech firms. How do you think that banks and FinTech firms can coexist and thrive by collaborating with each other?
That’s a very good question and one that we have given a lot of thought to at Blend Network. Let me give you an example. In 2016, the UK Government created the Bank Referral Scheme whose aim was to help businesses who have been unsuccessful in a credit application process with a traditional bank to obtain funding from non-bank lenders and alternative lending platforms.
The scheme (which according to the latest information we have has not been hugely successful in referring borrowers to non-bank lenders) was designed as a partnership between traditional banks and FinTech platforms within a regulated framework. To me, this is a concrete example of how banks and FinTech firms can thrive by cooperating with each other and help end users.
You have been very vocal about post-Brexit UK having the potential to becoming a FinTech powerhouse. Tell us more about what you believe are the key opportunities for the UK FinTech sector on the global scene.
Yes, that’s right. I recently wrote a piece for Business Leader explaining how post-Brexit UK could become a FinTech powerhouse (link). I do think that the UK’s regulatory strength is a key selling point that the UK could use to position itself at the front and centre of the global FinTech and innovation scene.
Since the start of Project Innovate in October 2014, the Financial Conduct Authority (FCA) has led the UK’s regulatory leadership and helped unleash the potential of financial institutions. For example, it encouraged the trialling of self-regulation within the industry (the first P2P industry association in the world) and encouraged the industry to develop virtual sandboxes or umbrella sandboxes.
It also facilitated collaboration between traditional financial institutions and challenger contenders by encouraging the early adoption of Fintech and solutions such as open banking. For example, in November 2016, the UK regulators encouraged large financial institutions such as HSBC to collaborate with start-ups. In line with this, I strongly believe the opportunities lie in expanding the UK’s regulatory leadership and unleashing the potential of financial institutions.
Blend Network recently won FinTech Business of the year at the GoTech Awards. Tell us more about what Blend Network has been up to over the past few months and what’s in store for 2021.
Yes, indeed our company recently won FinTech Business of the Year at the 2021 GoTech Awards, so I’d like to thank all the judges and everyone else at Business Leader who worked so hard on these awards. Putting aside the challenges and hardships that Covid-19 brought for many people, it’s been a hugely exciting past 12 months at Blend Network.
To start with, we doubled our lending volume last year amid the pandemic and were able to support many more SME property developers who were looking for funding as ‘lockdown on lending’ left many developers unable to borrow. As a result, Blend Network was also included in Business Leader’s list of the top-32 business heroes of Covid-19. We also kept expanding our team; we hired lending managers and lending associates, and most recently we also hired a COO.
We were also recently granted direct authorisation by the FCA, something we had been working for several months. On top of it all, we moved to bigger nicer offices in January amid the lockdown. We did this to be able to accommodate our growing team and also to be able to ensure everyone returns to the office in a safe and Covid-secure environment. So, it would be safe to say that our team has not stopped over the past few months.
Looking forward, we believe 2021 will be another record year for Blend Network as we continue to see a growing number of lenders in our platform every month. As part of the trend described above around increased collaboration between FinTech firms and traditional financial institutions, we are also working on some exciting partnerships, which we will be announcing in due course. So, watch this space!