BoE Governor Mark Carney warns of Fintech disruption to traditional banking

by | Jan 26, 2017

The Governor of the Bank of England Mark Carney has warned that online lenders may begin to endanger the stability of the financial system, highlighting the ever-increasing influence of fintech on the financial sector.

Speaking at a G20 event in Germany, Carney (seen below) said policymakers need to be aware of the ability of fintech companies to transform banking and the risks surrounding this. He also specifically referenced democratization of finance (as is our goal here at invstr), saying, “The opening up of the customer interface and payment services business could, in time, signal the end of universal banking as we know it”.

Fintech lenders have played an ever more central role in providing finances for businesses, particularly SME’s over the past few years, as well as for regular consumers who have looked elsewhere for personal finance solutions instead of conventional banks. 14% of new lending to small businesses in the UK is done through online peer-to-peer lending (or P2P).

This is not the first time major figures in the industry have spoken about the need for new rules in P2P lending, as fintech continues to cause more disruption.

Many in the financial sector have concerns about alternative finance – the Governor was one of many who have highlighted the threat of cyber attacks on these businesses which could strip customers of digital money, without the conventional protection offered by larger institutions and their regulators. Another concern is whether the credit-worthiness of borrowers is being properly assessed. Elsewhere the UK’s FCA (Financial Conduct Authority) has been keeping a close eye on increasingly popular avenues of what is known as ‘alternative finance’ such as online crowdfunding, which allows individual investors to put in sums to help businesses get off the ground and grow. They’ve found certain aspects of it need to be regulated more closely, similarly to online lenders.

However these worries haven’t stopped consumers looking elsewhere instead of traditional high-street banks to borrow and deposit. Rating’s agency Moody’s said that UK demand for fintech lender loans surged by 85% between 2014 and 2015, as UK consumer lending has increased strongly in recent years with consumers regaining an appetite for credit cards and personal loans. Crowdfunding has also grown massively over recent years.

This shows clearly that consumers tastes are changing – but will the role of banks continue to shrink? In an article with the International Business Times, senior analyst at Moody’s Carlos Suarez Duarte said, “Technology is the new frontier in the fight for consumer loan business, but banks will remain competitive, limiting the impact on their business. Banks have responded to the challenge by revving up their own digital strategies.”

It’s a fact that P2P lending is growing, but why? Very low interest rates for savers and lack of willingness from banks to part with loans for businesses since the financial crisis have made regular banks less appealing to deposit with and borrow from. These factors, as well as new and innovative user-friendly technologies have allowed fintech to disrupt the sector. It’s just one portion of the many ways in which fintech has changed the landscape, what with Bitcoin and Blockchain also leading the charge and becoming the talk of the town when it comes to alternative currencies and e-wallets.

At invstr we are closely following all of these developments as a financial technology business ourselves. We are striving to democratize access to financial information and education. Through our app and content we want to encourage those people who feel disengaged from finance to take charge of their financial futures by learning about the markets and trying their hands at trading in a safe and fun way. We see the new landscape in financial technology as an exciting opportunity, as new technologies continue to even up the financial sector and make it more open to consumers.

One thing is for certain, this will not be the last time that officials in central banks and other financial institutions will warn of the ways in which fintech could disrupt conventional banking.

invstr CEO and Founder Kerim Derhalli recently gave his thoughts to eFinancialCareers about why jobs in banking are set to change too. Read it here

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Oil's Slick Upward Move

Technocratic officialdom just declared UBS, Zurich Insurance, Nestle, and in fact, the entire Swiss stock exchange, 'off-limits.' They've done what, now?

Once upon a time, a complex myriad of red tape allowed Swiss stocks to be traded across the European Union (EU). Brussels said enough's enough to that and decided to craft one deal to rule them all. While that was being drafted, a Swiss subplot started to boil. Elections, euro-skepticism, and trade unionists became a focal point, and the EU's immovable deal hit a Switzerland's unstoppable sentiment. The treaty crumpled.

In short, the EU just sent the bloc's fourth-largest exchange packing. The SIX, valued at $1.7 trillion with Nestle and Novartis on its register, is out it's own bounds. We can't invest in it anymore!

It's hard to tell who has this worst. For a start, Swiss companies may be forced to other stock exchanges outside Switzerland. A few already have. Investors still with access could end up paying more for shares as, with a European third of orders gone, brokers recoup money by setting higher asking prices. And the officials behind all this? Truly at each other's throats. 

Within the political mire, many hoped both sides could iron out their differences and keep the "equivalence" agreement going. Nope. Switzerland is furious with the EU for what it sees as a flex of power in front of Britain, still in its Brexit muddle. Creating a theatre, it sounds like Brussels is shouting 'don't mess with us!' in the direction of the UK, now teetering closer to a no-deal cliff edge. As Brussels endures its own leadership merry-go-round, Downing Street doesn’t even know to whom it should address its strongly worded letters…

All this couldn't happen to British stocks, could it? Could it?!

ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.

Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.

Brokerage services of US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth, LLC a registered broker-dealer and member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. 

DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any securities transaction or investment strategy. DriveWealth acts as the clearing firm for securities transactions entered on the Invstr mobile platform. DriveWealth is not affiliated with Invstr. Invstr does not participate in DriveWealth’s decision-making.

There is no minimum initial deposit required to open an investing account with DriveWealth. Expenses and Fees associated with the DriveWealth platform in conjunction with Beanstox includes either a monthly membership fee of $4.99 with a commission charge of $0.01 per share* or, in the event the membership fee is not paid, a commission charge of $0.0125 per share applies, subject to a minimum of $2.99 per transaction. There are no monthly minimum fees, or required ongoing minimum account balance. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost). View a full list of our fees at http://bit.ly/DWFees

The monthly subscription charge is four dollars and ninety-nine cents (US$4.99) per month plus one cent (US$0.01) per share traded (as examples, for a Transaction of 0.90 shares, the per share traded charge is one cent (US$0.01), and for a Transaction of 1.6 shares, the per share traded charge would be two cents ($0.02), and the quarterly subscription charge is fourteen dollars and ninety-nine cents (US$14.97) every 3 months plus one cent (US$0.01) per share traded. The monthly and quarterly subscription charges may be greater or less depending on additional services offered by a DriveWealth partners as part of the subscription model offering, or based on any subsidies provided by a DriveWealth partner as part of the subscription model offering. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost).View a full list of our fees at http://bit.ly/DWFees

This communication is not an offer or solicitation to purchase or sell securities. Investing in securities carries risk, including the loss of principal. Past performance is not indicative of future returns, which may vary. Online trading has inherent risk due to system response and access times that may be affected by various factors, including but not limited to market conditions and system performance. An investor should understand such facts before trading. The risks associated with investing in international securities, including US-listed ADRs and ETFs that contain non-US securities include, among others, country/political risk relating to the government in the home country; exchange rate risk if the country's currency is devalued; and inflationary/purchasing power risks if the currency of the home country becomes less valuable as the general level of prices for goods and services rises. Before investing in an ETF, an investor should consider the investment objectives, risks, charges, and expense of the investment company carefully. ETF prospectuses are accessible within the mobile application via a link under each company’s “Description.”

A fractional share is a share of equity ownership that is less than one full share. Fractional share investing has certain limitations and restrictions that investors should understand prior to purchasing fractional shares: ownership of less than one full share does not give the fractional share owner the right to vote on company matters; fractional shares are non-transferrable, meaning they cannot be transferred to another brokerage firm; and fractional share orders will be accepted as market orders only. For more information and details on fractional shares, and any associated limitations or restrictions please visit: https://drivewealth.com/fractional-shares-disclosure

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:

Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.

Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.

Brokerage services of US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth, LLC a registered broker-dealer and member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. 

DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any securities transaction or investment strategy. DriveWealth acts as the clearing firm for securities transactions entered on the Invstr mobile platform. DriveWealth is not affiliated with Invstr. Invstr does not participate in DriveWealth’s decision-making.

There is no minimum initial deposit required to open an investing account with DriveWealth. Expenses and Fees associated with the DriveWealth platform in conjunction with Beanstox includes either a monthly membership fee of $4.99 with a commission charge of $0.01 per share* or, in the event the membership fee is not paid, a commission charge of $0.0125 per share applies, subject to a minimum of $2.99 per transaction. There are no monthly minimum fees, or required ongoing minimum account balance. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost). View a full list of our fees at http://bit.ly/DWFees

The monthly subscription charge is four dollars and ninety-nine cents (US$4.99) per month plus one cent (US$0.01) per share traded (as examples, for a Transaction of 0.90 shares, the per share traded charge is one cent (US$0.01), and for a Transaction of 1.6 shares, the per share traded charge would be two cents ($0.02), and the quarterly subscription charge is fourteen dollars and ninety-nine cents (US$14.97) every 3 months plus one cent (US$0.01) per share traded. The monthly and quarterly subscription charges may be greater or less depending on additional services offered by a DriveWealth partners as part of the subscription model offering, or based on any subsidies provided by a DriveWealth partner as part of the subscription model offering. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost).View a full list of our fees at http://bit.ly/DWFees

This communication is not an offer or solicitation to purchase or sell securities. Investing in securities carries risk, including the loss of principal. Past performance is not indicative of future returns, which may vary. Online trading has inherent risk due to system response and access times that may be affected by various factors, including but not limited to market conditions and system performance. An investor should understand such facts before trading. The risks associated with investing in international securities, including US-listed ADRs and ETFs that contain non-US securities include, among others, country/political risk relating to the government in the home country; exchange rate risk if the country's currency is devalued; and inflationary/purchasing power risks if the currency of the home country becomes less valuable as the general level of prices for goods and services rises. Before investing in an ETF, an investor should consider the investment objectives, risks, charges, and expense of the investment company carefully. ETF prospectuses are accessible within the mobile application via a link under each company’s “Description.”

A fractional share is a share of equity ownership that is less than one full share. Fractional share investing has certain limitations and restrictions that investors should understand prior to purchasing fractional shares: ownership of less than one full share does not give the fractional share owner the right to vote on company matters; fractional shares are non-transferrable, meaning they cannot be transferred to another brokerage firm; and fractional share orders will be accepted as market orders only. For more information and details on fractional shares, and any associated limitations or restrictions please visit: https://drivewealth.com/fractional-shares-disclosure

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