5 min read

Fintechs vs Banks: The War for Talent

Laura Watkins

This week on Fintech Insider News David, Jason and Simon were joined by Innovate Finance’s Sophie Winwood and making his Fintech Insider debut, Banking Editior at The Economist, Patrick Lane, to tackle the latest news from the last week.

Listen to the episode in full here or play and read below

Hiring talent “war” and how to get a job in fintech

One of the bigger stories of the week is this one from Bloomberg, denoting how "Banks and Fintechs Are Duelling In a ‘War For Talent’". Europe’s financial technology startups are on hiring mode, fighting each other – and the incumbents for the best talents. Additionally, while the piece explains that earning opportunities and roles are still as available in traditional banks as fintechs, traditional banks aren’t helping themselves with hiring opportunities with many senior execs going on record spouting “robots will replace your staff” rhetoric. Likewise, UK big banks have two issues - losing staff to fintechs, and losing staff to Europe post-Brexit, where the European companies are looking to poach the best talent away from London for the same reasons. David says that the industry is in a period of reversing traditional hiring models where people are leaving big banks to join start ups or create their own start ups... not that we can think of anyone from our team who might've done that(!), but he also goes onto say that the big banks are beginning to fight back to redress this issue and poach the best talent from the start ups back to the big banks, particularly in the software, tech and development departments: "The Empire Strikes back... but can they really do it?". David compares the big banks' strategy to Manchester City hiring a load of star Brazilian football players back in the day to rebuild their team and take them into the higher leagues.
"The Empire Strikes back... but can they really do it?" David Brear
This idea of reversal brings up the other side of the argument, is it a good move if you leave a start up for a big bank? "It depends on what level," says Patrick. If you're quite senior and you leave it could reflect badly on you as an individual as it may look like you were not able to accomplish key objectives within a start up. Jason argues it's too much of a narrow viewpoint to say that banks are battling fintechs, when overall it's all about talent, where every industry is in competition. This leads to the next story in the FT stating that Business schools have a problem with fintech. This story reports that in an FT global alumni survey into subjects taught best to worst, finance came out on top and fintech languishing at 16th out of 18. Firstly, many schools don’t have fintech courses and to quote the article: “As one dean put it to me recently, fintech is really just about writing apps” - Could this be why it scored so low, as even the professors teaching the courses don't understand the subject matter. David thinks it's a "misnomer" to run academic studies into such a fast changing industry as fintech, saying "fintech isn't old enough yet."
"Working in startups is the best form of experience" - Jason Bates
Continuing with the theme of studying the team slightly rubbish the next story surrounding a lecture given at Oxford Fintech & SmartLaw Society, endeavouring to teach what is fintech and how to build a career in it. The skills they recommend for such a career are: Data - not a discernible skills on its own, API (likewise), risk management and coding, with soft skills including an agile mindset, leadership, and adaptability. David said this list of skills sounds like his mum's attempts to describe his job - ie, the list was written by someone who doesn't fully understand what the industry is or requires, and the soft skills are applicable in all industries. Jason continues this theme by arguing that academia teaches you practices that are completely reversed in the real world, for example in university, copying is forbidden, in the working environment it's encouraged; likewise at university you must work alone, in the workplace working together and skill sharing is essential. "Working in startups is the best form of experience" says Jason. What do you think? Is studying fintech important or is it better to just get started and get hired into a startup? Share your thoughts here.

The US shutdown and reliance on credit

For our next batch of stories we head to the US, where they’ve not been having a great week… The US government was officially “shutdown” in a failure to meet the official budget approval date and failing to agree on an extension date, resulting in the closure of many federal services including health, defence, transport and treasury, forcing many workers to take unpaid leave. (Many essential services were kept running however, despite the shutdown, including national security, electricity, air traffic control and emergency healthcare). It is the first time this has happened when the Senate and Congress are controlled by the same party. Along with this political drama, this week there was also this Payments.com story on the US big banks' credit losses as numbers are in for 2017. The big four U.S. retail banks dealt with an almost 20% increase in credit card losses last year. Citigroup, JPMorgan Chase, Bank of America and Wells Fargo suffered a combined $12.5 billion - $2bn more than 2016. JPMorgan added $200 million to its reserves for future card losses in the fourth quarter. Does this look like Financial Crisis number 2, asks Jason, throwing to Patrick for clarification, who thinks not. He says the banks have taken precautionary measures to secure themselves against future losses and at an overall view, the big banks aren't doing too badly! However it does bring up a wider discussion on the US' huge reliance on credit and a culture which "encourages people to load up on debt", in Patrick's words. Sophie brings up some stats on the US' credit debt which stretches to $1 trillion dollars! Strong opinions on the US' reliance on credit and whether the system can be changed to ease this? Share them here.

Australian faster payments

Moving away from bad news in the US and heading Down Under where there was some good news, of sorts... Australia is expected to launch the New Payments Platform (NPP) in early 2018 to support the need for real-time payments of its digital economy. The NPP is a new national infrastructure to support payments between business accounts and customers at different financial institutions in Australia. It aims at providing “fast, versatile, data-rich payments anytime and any day”. Central infrastructure of the NPP has been live since November 2017 between employees at the participating financial institutions. Services to the public will be launched by participating financial institutions in early 2018. It is expected that over 50 banks, credit unions and building societies will be connected to the platform when it launches in early 2018. While this is a big step forward for Australia, David thinks this isn't really news: "it's great but it's something they have to do to compete globally... I love the ambition but we'll see what's delivered."
"It's great but it's something they have to do to compete globally... I love the ambition but we'll see what's delivered." - David Brear
In addition to this faster payments initiative CMO.AU reports on Westpac bringing transacting to text messaging . In what it’s claiming as a banking first in Australia, Westpac’s new iMessage shortcut will allow customers to make payments, generate a cashless card code and share their bank details digitally while still within a text message. David questions the security of this. Jason says it confirms what they've been talking about on the podcast for some time that "Payments have gone from the banking app now to where customers are." Patrick questions whether so much competition in such an emerging payments market will actually make it "significantly worse" until faster payments and P2P payments are actually established with customers. Time will tell and we'll be keeping an eye on this one. Share your thoughts here.

Google and Tencent Team Up

From new technologies to new alliances as Bloomberg reports that Google and Tencent agree to share patents in what they're calling a Global Tech Alliance - is this amazing or terrifying? Sophie opts for terrifying, Jason calls it the "axis of evil" while Patrick wonders what's in it for Tencent. Alphabet Inc.’s Google and Tencent Holdings Ltd. have agreed to share patents covering a range of products and technologies, an alliance between two of the world’s largest corporations. They are the 2nd and 5th largest companies in the world respectively. This alliance should allow them to share AI software tools and ramp up investment. “By working together on agreements such as this, tech companies can focus on building better products and services for their users,” said Mike Lee, Google’s head of patents. Simon took the view that this alliance is under the mantra of "my enemy's enemy is my friend".
"My enemy's enemy is my friend" - Simon Taylor
Amazing or terrifying? You decide - share your thoughts here.

Transferwise and Flinks team up in Canada

Moving to a slightly less world dominating prtnership, our next story is the partnership between Flinks, a financial data aggregator in Canada, with Transferwise. Flinks operates as a partner API syncing financial apps with customers’ banks to verify account information, transactions, and balances in real-time. Flinks will facilitate instant account verification and act as the link between Transferwise and Canadian banks to perform secure payments in a more seamless way. "We realized that US-based solutions were not reliable enough to provide Canadian consumers a good user experience,” said Yves-Gabriel Leboeuf, CEO of Flinks. Jason says that while this isn't really a big news story, it highlights that we're "living in the in between times where these services are important". He thinks that Flinks and the services they offer are the interim solutions before fully integrated APIs. Looking at Canada as a whole, this story takes on a bigger perspective as, in David's view a market not previously known for competition is doing things and competition is now a reality - "the fact that stuff is happening in Canada is a big deal". Sophie agrees "it wasn't on the fintech map before... 2018 could be a good year for Canada".
"It wasn't on the fintech map before... 2018 could be a good year for Canada". - Sophie Winwood

PSD2 - things we might've missed

It wouldn’t be Fintech Insider in 2018 without a PSD2 story. This week we discussed this one from the IB Times, depicting seven key facts about PSD2 that could cause some head scratching. The facts themselves were:
  1. PSD2’s reach extends beyond EU member states
  2. PSD2 has tightened its interpretation of the "commercial agents" or "limited networks" exemptions which could cause a problem for some digital marketplaces and ecommerce platforms that used the former definition as a way to avoid becoming a licensed provider of regulated payment services
  3. No more card surcharges except for corporate cards
  4. PSD2 and the FCA’s Payment account regulations define a payment account differently
  5. Reinstating monthly statements - FCA decreed these must be provided to customers in a “durable medium” -
  6. Outages must be reported to the FCA, announcements on Twitter may no longer be enough
  7. Re-authorisation requests - all existing e-money and payment services businesses need to be re-authorised to continue operating beyond mid-July 2018, with a submission deadline of April 2018, and many have not yet been submitted.
The one that caused the most issue was the bank statements being provided in a durable medium. PSD2 defines a durable medium as “any instrument which enables the payment service user to store information addressed personally to them in a way accessible for future reference ... and which allows the unchanged reproduction of the information stored." Examples of “durable mediums” as given by the FCA are quite old school and include - printouts, CD-ROMs, DVDs, etc. The FCA says "in certain circumstances internet sites" may qualify as a durable medium… this is not exactly in conjunction with the paperfree/ cloud based/ digital receipting approaches of many fintechs.
"Now it's here that's not the end, there's still work to be done." - Sophie Winwood
On the wider subject of PSD2 as a whole, Simon says that PSD2 and Open Banking are almost entirely separate things - PSD2 affects the banks directly, whereas Open Banking affects the customers more, "have we done it disservice?" queries Simon, worrying that we've depicted Open Banking too often from the consumer perspective without looking at the new rules for the banks themselves. "PSD2 worries me", says Jason, "Are we going to see its implementation across Europe?" "Now it's here that's not the end," adds Sophie " There's still work to be done." We will of course be following the work to be done as it unfurls. If you have thoughts on this story, please share them with the team here.

And finally

We had two contenders for the "and finally" slot this week, so naturally we covered both. Firstly this excellent headline in Devon Live: Man who ordered £3,000 Bitcoin gear online furious after being sent Boss Baby DVD instead. An Exeter man tried to buy a Tanli ASIC Processing Bitmain AntMiner S9 13.5 TH/s - instead received Boss Baby on DVD, for the cost of £3150. It took 2 months and three attempts to get a refund - but it’s not clear whether he had to return the DVD. Secondly: Grumpy Cat wins $710,000 payout in copyright lawsuit, by request of Jason. Grumpy Cat Limited sued the owners of US coffee company Grenade for exceeding an agreement over the cat's image. The company only had rights to use the cat to sell its "Grumppuccino" iced drink, but sold other Grumpy products. Jason and Patrick think there's a missed opportunity here and we must all begin to monetise our pets, causing Jason to set up his own cute kitten talent agency. You'll have to listen to the episode for full details on that one! To listen to the episode in full head here. To ensure you never miss an episode, subscribe to Fintech Insider now! Come talk to us @11FSTeam or @FintechInsiders on Twitter or hello@11fs.com if you want to send us an email.

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 Laura Watkins
About the author

Laura Watkins

Laura is Head of Content Creation for 11:FS. At 11:FS she writes and produces the content for the Fintech Insider, Insurtech Insider and Blockchain Insider podcasts, as well as live events, video content and sponsored content for global clients including Microsoft, RBS and many more.

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