London is becoming a centre for disruptive finance
I believe that we are close to a tipping point in disruptive business models in alternative finance that will turn traditional retail and corporate banking activities on their head in a way that the internet has already changed so many other industries. And, our capital city is going to lead the way and become the global centre for this new phase of the financial industry.
There are good solid reasons why this is happening in London:
-The city is a world leading financial centre, and London is viewed as the logical place to start an Internet finance business with global ambitions. As traditional finance activities come off the boil, disruptive finance can step into its shoes and capitalise on the city’s existing human resources, global network and access to capital.
– The regulation is easier to navigate in the UK and it is still globally recognised. A lot of these business models are based around disintermediation, whereby two individuals or companies can transact directly with each other, and the business is simply matching the transactions, so they are not acting as a primary and do not need heavy duty regulation.
– The internet is maturing and London is becoming a centre for innovative technology with a growing pool of capable programmers. The Silicon Roundabout activity is an example of this.
I meet people every week who are involved in developing some sort of a disruptive business normally based around an online marketplace or exchange where anyone can participate in the price discovery process. Here are two good examples of new business’ that I’m in contact with:
Phillipe Gelis is French, lives with his family in Barcelona, but decided to have his main office in London for the above reasons and commutes every week. The company that Phillipe started is called Kantox, it is a P2P/B2B forward exchange rate matching facility. For example, a UK company needs to buy 250k Euros in 6 weeks, and a French company needs to sell 250k Euros in 6 weeks. They take the mid-rate, for a 6 week forward, and when the maturity date arrives they swap the money at the agreed rate, using Kantox as the clearer of the trade, and who charge a small matching fee. 3 customers recently agreed a 4 week forward deal for $1.5 million USD/EUR, the biggest deal that Kantox have matched yet. I think the business has great potential, I’m also heartened to see an entrepreneur such as Phillippe decide to start his business in London.
Another, soon to be launched disruptive business is Pelican exchange, a “follow me” trading/portfolio tracking system that can sit on your spread betting or stock broking account. This clever system enables traders/fund managers to transparently show their track record and rather than give them money to invest you simply track their trades in real time. If the lead trader decides to buy Gold or BP, the followers automatically trade in their chosen quantity. This could change how fund management works, as good fund managers can set up easily and without regulation because they are not taking client money – people are simply choosing to follow them and fees should accordingly be more efficient.
I am finding that more and more ambitious City professionals are looking to start disruptive and alternative finance businesses, and a cluster of these are developing in London. In the same way that the electronic markets disrupted the open-outcry markets ( I saw this first hand as a former Options trader on the floor) now we are seeing the next stage of development of online marketplaces whereby everyone from the smallest consumer upwards can access efficient pricing through open marketplaces.