Hello readers, and welcome to another issue of the Future of Money.
Scams and fraud are perennial topics, but the cost of living crisis has worsened their impact. Not only does every penny count more than ever, but hard times increase the appeal of becoming a money mule — routing stolen cash through an account in return for a small cut.
Banks are adamant that the problem lies primarily with Big Tech firms (and to a lesser extent with telecoms providers). The UK’s Online Safety Bill — despite its many, many flaws — does at least put the spotlight on platforms for dealing with fraud, including paid-for advertising.
Such issues are not the most imminent concerns for companies like Meta, but consumers and businesses are paying the price. Given the lax approach taken by many platforms, higher rates of fraud can be expected in 2023.
If you’ve got thoughts about this or a topic that would suit a future installment of the Future of Money, email me at sid.v@ft.com.
Latest News
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The Financial Conduct Authority has warned about Big Tech firms’ growing interest in payments, lending and other finance products, saying it may leave traditional providers at a disadvantage.
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At a time when many fintechs are struggling, German banking-as-a-service provider Solaris has grand plans. FT’s Olaf Storbeck reports on the company’s ambitions despite problems retaining existing clients and pressure to cut jobs.
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The world of payments may be dull from the outside — but it is immensely lucrative. Lex reports on US legislation to challenge the duopoly of Visa and Mastercard, which is unlikely to pass on many benefits to consumers.
Fintechs and the fight for digital inclusion
It’s hardly a secret that the pandemic accelerated a shift to mobile banking. Lockdowns forced even consumers who preferred in-person banking to grapple with digital alternatives.
Data from open banking fintech Yapily reflects the potential value of allowing more consumers to access digital services. Close to 90 per cent of consumers surveyed said they had used a digital money saving or money management product over the past year.
But for those who are digitally excluded — for a host of reasons including the difficulty of acquiring devices and connectivity problems — the current path to digitisation risks leaving them isolated.
“The reality is that the current digital services available don’t work for everyone,” said Natalie Ceeney, who chairs the Access to Cash Review, a campaign to ensure that hard currency is available in the UK.
Chris Holmes, a Conservative peer who has long campaigned for a review into digital payments, said it was important to avoid thinking one solution will serve all individuals.
“My belief is that if we could focus a review correctly and if we could scope out and address the issues around access to digital payments potentially you could have financial inclusion driving digital inclusion,” he added.
As one example, Holmes pointed to the Access to Cash Review, which led last year’s launch of bank hubs — these are joint operations between the Post Office and major lenders to offer services in communities without any branches.
Digital and financial exclusion are also tightly interlinked, campaigners say, meaning that those struggling to get online are more likely to be socio-economically deprived.
“Fintech has the potential to help a lot of people who are financially squeezed, but we have to fund investment in these firms in the right way,” said Jamie Evans, a researcher at the University of Bristol’s Personal Finance Research Centre.
With the end of the easy money era, many fintechs are looking carefully at their runways. Supporting individuals who are digitally and financially excluded may be too costly a project for firms looking to prove their worth to investors.
And Mick McAteer, founder of the UK’s Financial Inclusion Centre and former FCA board member, emphasised another important point — that fintechs serving the digitally excluded should not follow the examples of Big Tech and turn to dubious data harvesting practices for revenues.
“Whenever you get segmentation and profiling, you get exclusion and discrimination,” he said. “There’s a lot of effort going into things like open banking which are great, but the risks associated with this area have not been fully explored.”
Quotable
The Holy Grail among neobanks especially in Western markets is to become a financial superapp like Alipay in China. If you can build one that’s much more convenient and faster for consumers, they’ll use it — we just haven’t seen it. — Robert Le, analyst at PitchBook
The idea of a western superapp has been kicked around for a while — Sifted’s Amy O’Brien did a good job looking at the European competitors including Revolut, Klarna and Lydia.
Analysts have various takes on the space: Aman Behzad, a managing partner at Royal Park Partners, is not convinced an all-in-one approach will work in part because there’s strong customer loyalty to specific brands for particular features.
But given Big Tech’s moves into fintech (which regulators like the FCA are watching with concern) a degree of merging between formerly distinct apps seems inevitable. Given the difficult funding environment, it’s not hard to image semi-superapps emerging from acquisitions as much as from organic development.
Recommended Reading
Just three of Europe’s top 20 most valuable unicorns are profitable Selin Bucak at Sifted reports that as investors look for paths to profitability, less than a handful of the most valuable start-ups in Europe are profitable — and they’re all fintechs.
Egyptian fintech MoneyFellows raises $31mn to digitise ‘money circles’ Cairo-based MoneyFellows recently completed its Series B fundraising round, with CommerzVentures, Middle East Venture Partners and Invenfin among the investors, reports Oliver Smith at AltFi. The fintech digitises informal savings, building on longstanding offline practices.
Will Rishi Sunak help UK catch up with EU’s regulatory pace? AltFi’s Daniel Lanyon asks whether the new prime minister can push the UK to follow the EU’s recent speed around financial regulations in areas such as crypto.
Read the full article here