En­trants ‘still lack fire­power to match old guard’

Yorkshire Post - - BUSINESS - MARK CASCI BUSI­NESS EDI­TOR ■ Email: mark.casci@ypn.co.uk ■ Twit­ter: @MarkCasci

THE BOSS of an up-and-com­ing chal­lenger bank has said that the sec­tor is some way off from hav­ing the fire­power to suf­fi­ciently chal­lenge the main­stream bank­ing sec­tor and called for the es­tab­lish­ment of a mean­ing­ful in­vest­ment fund to sup­port fin­tech start-ups.

Alex Letts, chief ex­ec­u­tive of U Ac­count in Sh­effield, said while chal­lenger banks were far bet­ter placed to make im­por­tant in­cre­men­tal changes to their busi­ness mod­els than their es­tab­lished bank­ing coun­ter­parts, the sec­tor did not have the cap­i­tal to get across what he called the “chasm” that lay be­tween chal­lenger and main­stream banks.

Speak­ing at a fin­tech sum­mit in Leeds, Mr Letts also ques­tioned whether the chal­lenger banks were rad­i­cally dif­fer­ent from main­stream bank­ing, posit­ing that some had sim­ply “put new clothes on the em­peror”.

Mr Letts, who launched U Ac­count last year and now has nearly 50,000 cus­tomers, said: “There is no ques­tion in my mind that evo­lu­tion, revo­lu­tion, ev­ery in­cre­men­tal change for the es­tab­lished in­cum­bent banks is in­creas­ingly more dif­fi­cult. And this is be­cause they have a 300-year-old busi­ness model.

“On other the other side are what I call the ‘neobanks’, peo­ple com­ing in with much hur­rah and hys­te­ria and telling every­one that the big banks are fin­ished and that they are go­ing to take over the world .

“I can ab­so­lutely tell you they are not.

“But what I can say is that in­cre­men­tal change for them is very easy and sim­ple. They have beau­ti­ful dig­i­tal foot­prints, the sup­port of reg­u­la­tors and in many cases some very bright peo­ple run­ning them and a mod­ern at­ti­tude.

“What is hap­pen­ing for these neobanks is that they will hit the chasm and in that time they are go­ing to use an aw­ful lot of cap­i­tal. It is not clear to me that they nec­es­sar­ily have the cap­i­tal to do cross that chasm.

“I do be­lieve in their skills and that they can of­fer a brighter fresher fu­ture for bank­ing but I don’t be­lieve they have done any­thing truly dis­rup­tive. I do not be­lieve that they have done any­thing more than put new clothes on the em­peror.”

Mr Letts added that above all he felt greater fund­ing was needed to help en­trepreneurs in the sec­tor get started.

“If you set up a fund, from Gov­ern­ment, that in­vested in fin­techs and you had a bil­lion pound fund where do you think busi­nesses will come to? It is very sim­ple.

“It needs some­one with the bot­tle and guts to stand up and say we are go­ing to put to­gether, not a £100m north­ern tech fund which does 50p here and 50p there, you need a proper fund setup here and the busi­ness and en­trepreneurs will come.”

Later in the de­bate the North­ern Pow­er­house Part­ner­ship di­rec­tor Henri Muri­son said that the na­ture of fin­tech was that it could evolve with­out the ge­o­graph­i­cal con­straints seen be­tween the North’s ci­ties, al­low­ing it throw off some of the in­hibitors seen in other sec­tors.

“Be­cause Fin­tech is not de­vel­oped yet it is not con­strained by the same re­al­ity of that sets ci­ties like Leeds and Manch­ester up against each other. We have the same po­ten­tial uses for the same po­ten­tial in­vestors and that is hugely use­ful in terms of col­lab­o­ra­tion.”

Dan Ra­jku­mar, chief ex­ec­u­tive of Leeds-based re­build­ing­so­ci­ety. com, said that at­ti­tudes around fin­tech pre­sented huge op­por­tu­ni­ties for the sec­tor’s po­ten­tial.

“Most of us will have shopped on ebay, or taken an Uber in­stead of a cab, or stayed at an AirBnB in­stead of a ho­tel.

“And it is not un­til you use these ser­vices that you start to ben­e­fit from the economies of dis­tance me­di­a­tion by re­mov­ing them and sav­ing money.

“The op­por­tu­ni­ties that ex­ist in peer-to-peer lend­ing and Fin­tech ap­pear to be grow­ing rapidly.”

ALEX LETTS: ‘I don’t be­lieve they have done any­thing truly dis­rup­tive.’

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