Attending this week’s Fintech conference in London took me back 20 years to a period of excitement, renewal and revolution – the early days of the Internet. Our amazing invention was going to sweep everything before it. I bet the farm on all the hype being fulfilled. It wasn’t. But I wouldn’t change that exciting ride for anything.
Fintech is where the Internet was in 1997. The conference I’m referring to is the  Innovate/Finance Global Summit, which was held over two days and attracted 2 000 participants from all over the world. Most of the companies featured are at most a couple years old. But, like those of us at First Tuesday meetings in the 90s, this new breed of innovators have the confidence of those who know they’re changing the world.
It’s hard to argue against them. The Blockchain is as revolutionary as the World Wide Web. But the most remarkable thing about technology that powers this new distributed ledgers is most start-ups are creating solutions designed to solve problems of the developing world. This focus is sure to trigger the leapfrog places like Africa have been waiting for.
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In the same way the Internet democratised access to information and hence education, the biggest beneficiaries of the Blockchain are those now excluded by cost from financial services. It is those at the bottom end of the pyramid, the unbankable, who will be the big winners. Once that genie has escaped, global competition will soar.
Take trading in shares. Easy Equities has done a great job in South Africa, introducing fractional ownership and low trading costs to open the stock market to anyone with R100. But consider TIQL.co, a London-based start-up that has already signed up 500 000 customers. It offers a platform where the minimum trade is literally one cent. How expensive, over-engineered stock exchanges can survive this disruption is anyone’s guess.
Then there’s NOW Money which is transforming the lives of Indian and Pakistani manual labourers in the Middle East. Less than a year since raising its first $500 000, the Dubai-based start-up has 50 000 customers who previously fell outside of the banking net. They now use an App on their cheap smartphones on their remittances back home to relatives – eliminating fees of up to 20%. The days of old style currency changers are numbered. Â
A start-up to catch my eye was Nigerian peer-to-peer lender FINT which is driving a bulldozer through the huge gap between what Lagos’s banks pay (8% on deposits) and charge (interest of 60% to 85%). Another was crowdfunded property investment vehicle Yielders.co.uk whose investment entry point is just ÂŁ100. The wave is tidal – and obvious.
I wouldn’t go dumping those banking stocks just yet. As one Fintech pioneer put it: “Two years ago it was all about how we would destroy banks and force them to clean our plates. Now we’re forging partnerships.” By end 2017, 15% of big banks will be offering Blockchain-based products. The challenge for investors is to separate banking’s dinosaurs from the evolvers. Because right now Mr Market is (incorrectly) pricing them the same.
