Lenders face the tech test

Scottish Daily Mail - - City & Finance - Alex Brum­mer CITY EDI­TOR

Bri­tain’s Big Four banks have enor­mous ad­van­tages over chal­lengers. scale means that they con­trol huge amounts of data which, with the use of ar­ti­fi­cial in­tel­li­gence, yields valu­able informatio­n about clients.

in the case of Bar­clays and HsBC in par­tic­u­lar, the cre­ation of ring-fenced banks means they have stores of lockedin cash which they use to of­fer the most com­pet­i­tive terms for mort­gages.

now that most is­sues of bad behaviour are out of the way, royal Bank of scot­land and Lloyds should be able to stump up tons of cash in spite of su­per-low in­ter­est rates.

there is no room for com­pla­cency. trendy tech chal­lengers such as Monzo, revo­lut and star­ling are nib­bling away around the edges. But there is a view that mak­ing real prof­its is in­cred­i­bly hard be­cause they are giv­ing away too much for free.

the big­ger dan­ger for the High street banks is that they will be by­passed by more sub­stan­tial play­ers.

it was a sig­nal mo­ment when World­pay (once part of natwest) was bought by Fidelity national in the Us for £29bn. at that price it has a sim­i­lar mar­ket value to rBs, and it shows how quickly the in­ter­lop­ers could eat its din­ner.

Even more scary are the ad­vances be­ing made by ap­ple, Face­book and ama­zon in fi­nance. they have even more data about most of us than the banks.

rBs et al have no choice but to in­vest in bet­ter tech­nol­ogy. not only do they have scle­rotic sys­tems but they are hav­ing to in­vest in new ap­pli­ca­tions.

One choice might be to buy fin­tech rivals. rBs de­cided to take a dif­fer­ent route with the launch of Bo, which tar­gets 16.8m cus­tomers with sav­ings of un­der £100. it would plan to of­fer this group cheaper credit by amass­ing de­posits and slash­ing costs.

ini­tially this might be seen as an ex­cuse for rBs to lower over­all costs by cut­ting staff and clos­ing branches. this in the week that span­ish-owned tsB has been in the stocks for shut­ter­ing out­lets.

the UK must have a de­cent branch net­work to serve the needs of small busi­nesses and the na­tion’s sil­ver army. But the com­mer­cial re­al­ity for new rBs chief ex­ec­u­tive ali­son rose is that stand­alone Bo, us­ing big data to cap­ture a par­tic­u­lar co­hort, is the more re­al­is­tic an­swer if sil­i­con Val­ley is to be kept at bay.

Kick­ing off

Pri­VatE eq­uity firms are not known for over­pay­ing. We must as­sume, then, that sil­ver Lake knew what it was do­ing when it in­vested £388m in Manch­ester City, plac­ing a cur­rent mar­ket value of £3.7bn on the Premier League cham­pi­ons and mak­ing it the most ex­pen­sive sports club in the world.

it is the big­gest deal for a sports en­ter­prise since Lib­erty Me­dia took over For­mula 1 mo­tor rac­ing in 2015 for £6.2bn, with the promise to ramp up rev­enues by tak­ing it dig­i­tal.

Man City’s big­gest in­vestor, abu Dhabi royal sheikh Man­sour Bin Zayed al nahyan, must be cock-a-hoop hav­ing bought the club for just £200m a decade ago.

Even if one adds £1.3bn of in­vest­ment in sta­dium, fa­cil­i­ties, play­ers and man­agers, that is an enor­mous gain. there is no short­age of money in the arid, en­ergy-rich state. the at­trac­tion must be the op­por­tu­nity to spread own­er­ship to the Us, where Premier League soc­cer vies with the nFL, base­ball and bas­ket­ball for air­time. top-class sport is a big come-on for ca­ble tele­vi­sion.

sports fran­chises rarely re­main pre-em­i­nent for ever. Manch­ester United has sunk down the earn­ings league. the new York Yan­kees have not won the base­ball World se­ries since 2009. City’s suc­cess partly has been built on the ge­nius of Pep Guardi­ola but he is not go­ing to be around for ever.

the big­gest risk comes from tech­nol­ogy. the cost of tV rights for Cham­pi­ons League foot­ball has peaked. stream­ing means that the com­puter-lit­er­ate can watch the Premier League foot­ball on lap­tops for next to noth­ing. City also is un­der Euro­pean in­ves­ti­ga­tion over its fi­nances.

sil­ver Lake may know some­thing we don’t. But this could be an own goal.

Body parts

rE­MEM­BEr relx? it is the £36bn FtsE100 electronic me­dia gi­ant which has out­per­formed the index for the past eight years.

it con­tin­ues its trans­for­ma­tion from print to tech with the pur­chase of 3D4Med­i­cal in Dublin, which uses 3D graph­ics to help stu­dents and teach­ers study anatomy.


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