Digital Innovation, DLT disruption, is The New Normal

“Never let a good crisis go to waste", - Winston Churchill or Rahm Emanuel.

We've come a long way from the pits of The Financial Crisis, which paved way for a better competitive financial landscape resulting in a great number of #fintech and startups we see today. Those entrants recognized Amazon-purposed-principles on "customer-obsession" as a niche underserved, and a purpose which that will lead to ultimate success.

And they were right. Today we have profitable Neobanks like Starling, a plethora of #OpenBanking finance management apps like Emma, investment apps like Freetrade and now a number of #fintechs with banking-like features which are offering access to the that previously feared, alternative financial eco-system based on Distributed Blockchain Technology (DLT).

And the most recent London conference at the?#Payments?#DigitalCurrencies360,?The Payments Association?sessions have emphasised some interesting observations on these topics, with the undertone of forward-looking, customer-focussed solutions underpinned by [any appropriate] technology. This was not a conference about "cloud strategy" as a misnomer.

This conference was all about "What Value can we bring to our customers, to serve them better".

It was the intersection of?#fintech??? bleeding-edge?#tech?meets ???#regulation. The conversation is there. A very healthy multi-way conversation with an emphasis on learning and thinking out loud. "What If" and "Could it be that" is a mature conversation to try to make sense of the new challenges and innovation on the horizon. This was side by side with the acknowledgement of the new DLT-based asset-class, and interest to try to learn and regulate it the most appropriate way, over time.

This is a world away from our friends in the US of A, where the segregated government agencies (SEC primarily) are battling over the new asset class - providing clarity by enforcement. That results in a large confusion for both the industry and looks to stifle innovation across the board. We are learning from these mistakes in the UK and EU nation-states it would appear.

All these innovations, disruptions have taken in just about a decade.

The conference featured session Spotlight on UK Payments Landscape was very insightful. TLDR; UK is doing great, and?#openbanking?will lead to better customer-centric products and services with?#openfinance. A great panel of speakers?Marion King?at?NatWest Group?Jana Mackintosh?at?UK Finance, our very own?#nationwide?Mark Nalder?Chris Hemsley?at?Payment Systems Regulator?and Andrew Hewitt at Payments & Data Solutions (FIS). The main emphasis is that ISO20022 standard as the messaging standard for the financial industry will unlock better value for customers and fraud reduction(expected) with enhanced data enrichment and data analytics use-cases that will follow.

Think more business use cases for cross-product financial messaging (mortgage versus loan versus credit card) and how ISO standards may help derive better customer insights.

The incumbent banking services are going through digital transformation(s) to ensure they can also benefit from the agile, on-demand, resilient cloud service offerings. This is all to ensure they can not-just-retain, but at least attract the Next Generation of users as their customers, - The Pace of Change and Innovation just keeps on advancing, - and it appears to be accelerating. And users are speaking with their... bank accounts. See the full breakdown of #fintech adoption by demographics, a report from Fiserv and FinanceOnline.

Think Ziglu app and access to custody-held Bitcoin (BTC). You'd think it's the same old. Just another e-money licensed UK startup with a debit card that happens to offers BTC on their platform? But wait, there is more; #DeFi is no longer for the few who happened to have followed down the proverbial rabbit hole on this topic.

It is here. Today, Ziglu offers 5% APY for BTC holding up to ￡10,000. It's a far cry from the Traditional Financial offerings (#TradFi) of circa 1%APY available on the high street or even fintech dabbling with TradFi.

For example Chip, a UK fintech - that is also raising a new funding round on Crowdcube - which is focused to make savings for the average user most convenient is able to offer a somewhat better improvement on 1% APY. They recognised the need for improved risk-reward exposure and access to the better-yielding assets and asset-class by working on the product which will be able to track the crypto-financial ecosystem, with investment into picks-and-shovels in underlying blockchain companies themselves. For the yield. This is coming.

But Enough about Traditional Finance. And this was ironically a shared sentiment in the wider context of the attendants, as panel speakers attended and mixed both traditional Traditional-Payments panels and Digital Currencies discussions alike.

The unscripted panel discussion about?#cbdcs?#payments?vs?#assets?in the new era of?#defi?and?#tradfi?was my highlight of the conference.

The panel was made up of Lee McNabb?at?NatWest,?Shiv Chowla?at?Bank of England,?Martin Etheridge?at?Mastercard, and Ciara Conway?at?Aviva.

This was pretty expertly moderated by?David Birch?(Director of Innovation and Global Ambassador at?Consult Hyperion) who asked really good provoking questions.

We've come a long long way from "Crypto is for criminals". All (bad) jokes aside, this was a good open-minded discussion on opportunities, threats and potentials to shape the new exponential landscape.

TLDR; Panel recognised the nature of adoption of the new shadow financial ecosystem, the intent to work-with rather than ignore, as an approach for the future innovating in this space.

I have jotted my several favourite (paraphrased) one-liners from the speakers, to give you an idea of the conference tone;

• Bank of England - "CBDCs research is ongoing and further consultation will commence in 2022. If successful, and a definitive use-case is established, we think it can be rolled out before the end of the decade"
• “...the impact of smart contracts and how digital currencies and distributed ledger tech has a real impact on the fabric of society…”. Focus on being customer-focussed, and let users vote with their wallets and their feet, rather than the "build-it-and-they-would-come" perspective.
• An ongoing theme that “there seems to be a bit of a holding pattern with lack of regulatory framework - who and how and which protection forms need to be created and what is the desired outcome and for whom..”
• FCA says “just for clarity… we don’t want to regulate innovation..”
• EU has MiCA bill worked through which seeks to address many of these risks with regularity clarity. It won’t address decentralisation. But it’s a start to start assessing and map those risks through the holistic financial system (payments)...
• Ciara from Aviva had an interesting take “the impact of smart contracts and how digital currencies and distributed ledger tech has a real impact on the fabric of society…” There are myriad new use-cases and user journeys that are quite real, not quite enabled. Once the innovation providing fintech comes along with a solution, this will change up the payments game, once again.
• On Crypto Payments vs Assets. Discussion on what could and may this mean for the industry or perhaps this is to self resolve. Need to derive the foundational principles on “meaning of money, and assets”.
• The First NFT mortgage was done back in 2020. There could be more novel use-cases...
• Speaker "You/Industry sector (Payments) can’t put fingers in ears… and pretend it’s not here or going away…"
• On Yields, Savings and APY. “You can’t compete with it (crypto). The customer ... will vote with their feet, least resistance route, and find better yields (on #DeFi)…
• There is a convergence event incoming. Perhaps under the decade. You can’t fight it. This so-called shadow baking and finance is already here… so may as well educate yourself on it… and join it”
• The moment there is a regulation comes in with some better clarity… This source at the hedge fund, says their company would be looking to digitise and tokenise EVERYTHING.
• Interoperability is key, private chain, public chains, multi-chain, and #TradFi rails. The future is not about winner-takes-all but perhaps a coexistence of multi-assets and multi-chains, as regulation, catches up.
• FCA and Regulations. Risks and underwriter control factor. This may be more to ensure we have some degree of understanding and control over who controls what, liquidity, and trade for the macroeconomy.

There is a lot to unpack. Brain-on-Fire.

Here are a couple of simple Key Takeaways

• Business Use with customer focus is key. This ought to be the leading strategy. And once again, technology is the enabler, - whether it is DLT or Cloud Managed Services.
• The Data and Data Analytics - Think use emerging use-cases of data enrichment with ISO20022. There will be emerging fintech solutions for better customer insights.

Let's start the conversation.

At Contino we already partner with Form3 to deliver modern payments services, leveraging mainstream cloud providers such as AWS, Azure or Google Cloud (GCP) for our enterprises' customers in Financial Services.

With the same case in point, all above considered use-cases pave way to generating a lot of data, with much value-add to extract from