FinTech – transforming finance - ACCA Global

1 FinTech . transforming finance About ACCA The report explores ACCA (the Association of Chartered Certified Accountants) is the transformation the Global body for professional accountants. It offers underway as a result of business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek the continued expansion a rewarding career in accountancy, finance and management. of FinTech and its ongoing ACCA supports its 188,000 members and 480,000 students impact across the financial in 181 countries, helping them to develop successful careers in accounting and business, with the skills required by services landscape. employers. ACCA works through a network of 95 offices and centres and more than 7,110 Approved Employers worldwide, who provide high standards of employee learning and development.

2 Through its public interest remit, ACCA. promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. It believes that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of Global standards. ACCA's core values are aligned to the needs of employers in all sectors and it ensures that, through its range of qualifications, it prepares accountants for business. ACCA seeks to open up the profession to people of all backgrounds and remove artificial barriers, innovating its qualifications and delivery to meet the diverse needs of trainee professionals and their employers.

3 In June 2016 ACCA formed a strategic alliance with Chartered Accountants Australia and New Zealand (CA ANZ). The alliance represents the voice of 788,000 members and future professional accountants around the world, who share the commitment to uphold the highest ethical, professional and technical standards. More information is available at: ACKNOWLEDGEMENTS. This report was prepared with the help of: Yoni Assia, Founder and CEO, eToro Steve Bailey, Founder, Carbon Architecture David Barnes, Global Managing Director for Public Policy, Deloitte Richard Brown, Partner, Santander InnoVentures Taavet Hinrikus, Co-founder, TransferWise Alastair Lukies, Chairman, Innovate finance Julie Meyer, Managing Partner, Ariadne Capital Bivek Sharma, Partner and Head of Small Business Accounting, KPMG. Dr Dominik Steinkuehler, Co-founder and Group Managing The Association of Chartered Certified Accountants Director, Lendico September 2016 Michael Wood, Co-founder, Receipt Bank Foreword 3.

4 Technology has become the driving force At the same time, regulators around the behind many changes to society and the world, operating in countries whose Global economy. That technology has financial services sector is in varying stages caused the rapid and continuous of development, must find the right disruption of a succession of industries is a balance between harnessing the given. In the financial services industry, with possibilities offered by FinTech and the the growth of financial technology right level of forward looking legislation to ( FinTech ), we are witnessing significant give it the best chance of flourishing. transformations to systems and processes that had stood the test of time. What FinTech transforming finance explores makes FinTech so potentially the features of this new landscape, transformative is the scope for materially highlighting the many ways in which this altering the fundamentals underpinning revolution is taking place.

5 For professional the applications that make up the accountants, this new terrain will provide backbone of our commercial lives. many opportunities as it permeates deeper and deeper into the fabric of society. A range of systems and processes in areas From the promise of blockchain, to the including payment, lending, retail banking, demands of valuation in a digital era, asset management, fraud protection and finance more than ever needs an regulatory compliance are now populated experienced, knowledgeable guide to not just by well-known and established make the most of the opportunities ahead. institutions but also by challenger start-ups vying for a say in the future. These new Ng Boon Yew entrants, alongside reconfiguring Executive Chairman, incumbents, are reformulating service Raffles Campus Pte Ltd design and delivery through technological and Chairman, ACCA.

6 Developments and advancements in Accountancy Futures Academy software, user experience and data mining. Executive summary 4. Financial Technology ( FinTech ) is here remittances, intermediaries, upon whose Financial Technology ( FinTech ) sweeping through finance and, if some security and technology everyone once is here sweeping through proponents are to be believed, threatening relied, are becoming redundant. traditional edifices that have stood for finance and, if some proponents centuries. This great surge is being fronted Some commentators believe the banks are to be believed, threatening by a host of new start-ups taking their lead are finished, while others see this as traditional edifices that have from the big tech innovators. Their their chance to fight back. Most big stood for centuries. maverick approach is helping to push the banks lack the agility of smaller rivals and FinTech industry into new territory across still rely on legacy IT systems that are the financial services landscape, raising outmoded and unwieldy.

7 Nevertheless, billions of dollars and worrying the they are also trying to adjust to the incumbents. So what are the main trends potential of FinTech by acquiring and driving forces shaping FinTech today? challengers, or, increasingly, finding ways to collaborate with nimbler new entrants. FinTech start-ups span the spectrum of financial services, from lending and Regulation could turn out to work in the advice to foreign exchange and banks' favour. The FinTech upstarts face a payments. One aspect that many of them raft of legislation that, depending on share is strong growth: thousands of per jurisdiction, limits what they can do. cent in some cases. Not surprisingly, this Nonetheless, regulation itself is under has been attracting attention from investors. constant review and some countries, And as technologies evolve at pace (did including the UK, are supporting innovators someone say blockchain?)

8 , the potential and entrepreneurs and the banks as for further disruption is ever present. they navigate the rules. The Regulation Technology (RegTech) sector, made up of New technology means new banks. firms that provide technology solutions to Without the need for bricks, mortar or even enable better compliance with regulatory physical money, many start-ups are requirements, is also set to play a changing perceptions of what a bank can, significant role in redefining the landscape. and should, be. Many of these new banks have appeared in the UK, owing to the For professional accountants, helping country's FinTech pull. FinTech is changing companies manage the regulatory, tax not only how banks operate, but also the and financial implications of the FinTech way people invest. By sidelining financial surge offers considerable opportunity.

9 Advisers, FinTech firms reduce the cost of The banks and many professional investing and make it simpler. accountancy firms are starting to adapt. Like the rest of the financial services sector, Cryptocurrencies such as bitcoin are all professional accountants and other presaging deeper disruption. The finance professionals will need to engage technology that underpins bitcoin with the wider opportunities presented by blockchain could transform the way in the digitisation shift and continue to which many financial transactions are provide analysis that helps companies conducted. From trading shares to wiring understand the value they are creating. 1. This is an evolution 5. FinTech is already big business. According All this action is worrying incumbents Tech-enabled disintermediation to Accenture, investment in Global FinTech whose long unchallenged run has of finance is responding to pent- grew by 75% in 2015 to $ (Accenture weakened their ability to adapt and evolve 2016).

10 Around the world, FinTech effectively, as emerging technologies do to up demand for change. companies exist across the entire spectrum finance what they have already done to a of finance . These services include: range of other industries. As with other sectors, this fertile period of tech-enabled borrowing money peer-to-peer disintermediation of finance is responding lenders such as Lendico, Zopa, Prosper to pent-up demand for change in a part of and OnDeck connect savers with the economy that has been resistant to borrowers to cut out banks altering the status quo. foreign currency peer-to-peer money . transfer service TransferWise is the GEOMETRIC, NOT ARITHMETIC, market leader in the foreign currency GROWTH. exchange sector The term exponential growth' is often international money transfer used to characterise the FinTech innovators here include Xoom, Azimo, landscape's extremely rapid success stories and CurrencyFair and rising valuations.