Uber, AirBnB, WhatsApp… the news of startups disrupting established models to great acclaim continues to flow thick and fast.

While financial services may not be the amongst the sexiest of sectors, few others have the potential to impact all of our lives to such a great extent. And the good news is that there is an absolutely thriving start-up culture, bursting at the seams with innovation. It’s called FinTech and it’s happening all over the world, with London acting as a major FinTech hub.

Humans have been carrying out financial transactions since early cavemen bartered sheep for firewood, so it could be considered surprising that we haven’t perfected the whole financial services thing yet. Or maybe it’s right when they say ‘more money, more problems’! Here we take a look at some of those problems and the exciting FinTech start-ups that are aiming to fix them.

Splitting up the bills, not your friendships

If you have ever lived in a shared house you may be familiar with a whole host of domestic tensions: who does and doesn’t do the washing up, how long your housemates spend in the bathroom, tolerating dubious personal habits, prejudices… ‘lifestyle activities’ and how the household bills are split-up. FinTech may not be able to come up with the answer for finding a good washer-upper, but there is now an ingenious solution for divvying up those utility bills.

One Australian Fintech start-up, Easyshare has tackled this tricky problem by developing a platform that allows housemates to allocate how rent and other bills will be split, set up individual payment methods and then, of course, pay the money. It also adds communication functionality so that housemates can talk to each other, and get in touch with their landlords regarding maintenance issues. For users of the service, this is bound to offer valuable peace of mind, stop a few arguments as well as offering added convenience.

Credit where a credit score is due

Aire – a London-based FinTech start-up – proclaim on their website that 4.5 billion people have no formal credit profile. Without it, this multitude can be denied access to helpful financial products like credit cards and mortgages. The company founders themselves say that they were inspired to take action by their own personal frustrations with credit scores.

A credit score is essentially a prediction of how likely a given person is to pay back monies that they are loaned, in one form or another. Traditionally, it is produced by analysing previous financial behaviour. But what if you have no financial history? Or you have a chequered financial past but your circumstances have improved?

What they have come up with is a completely different way of producing a credit score. Instead of relying on your financial history, Aire’s approach is one based upon data-driven algorithms using basic information about you – it only takes three minutes apparently. Another important aspect to their approach is one of consent. The client is in control of what data they supply, how it is used and for how long it is all stored. To hammer the point home, Aire even clarify that they do no scraping of social media profiles or such like. They specifically say that if you like tweeting about cat videos on YouTube that’s none of their business. Phew! Because have you seen the YouTube videos showing cats get freaked out by cucumbers lying on the floor. That is some addictive viewing!

Seriously though, credit ratings are a huge, somewhat opaque industry, that doesn’t work in its current form for many people in the UK and worldwide. So innovation in this area could have a huge positive impact on people’s lives. Aire’s research and development led them to be cited as one of Europe’s hot ten Europe FinTech start-ups and a TOP150 Global Start-up.

A social approach to making payments

Social media may dominate most of our lives already and now that could extend to paying for things too. Fastacash started with a question: “If I can send you a photo through WhatsApp, why can’t I share money with you too?” Finding the answer to this question has led them to become the only platform that facilitates payment through social media channels. Their claim is that they can send any type of payment through any type of social media channel. So how do they do it?

Fastacash’s research and development focused on APIs (application programming interfaces) and SDKs (software development kits, also known as devkits) and widgets. Think of these as part of the central nervous system of the Internet that help digital systems like software and operating systems talk to each other. Generally speaking, they are a key area of digital R&D that, in the UK, often qualifies for R&D tax credits. Back to Fastacash though (who are headquartered in Singapore) and the APIs and SDKs they have developed allow a company to match up its payment services with numerous social media channels more quickly and cost-effectively than building its own platform or connecting individually to single social media platforms. A potentially mindbogglingly powerful technology indeed!

Then comes their patent-pending fastalinks. These utilise tokenisation to convert sensitive data – in this case payments or other things with intrinsic value (such as airtime or virtual goods) – into a non-sensitive substitute. As with APIs, tokenisation is a valid area of R&D in the UK to qualify for research and development tax credits. If you are working in this field in the UK, you should definitely explore your options for claiming R&D tax relief. Once encrypted, the fastalinks can be displayed in any form, like a normal web link or a QR code for example.

We are all aware of the need for security when it comes to data – and particularly financial data – stored online, and this is of course at the heart of Fastacash’s offering. They have more patent-pending technology called Host Value Emulation which uses cloud technology as an added layer of security, and also handily helps with integration into existing systems. In addition to these layers they use thumbprint, device validation, location-based consumption, PIN, Status Management, KYC/AML Regulations, Social Profile Validation, SSL Encryption and Unique Per Transaction, which all sounds reassuringly thorough. This handy infographic explains more.

The end benefit of this technology could be seen at both a peer-to-peer level where friends could, for example, organise an event on social media and collect payment all in one go, or at a commercial level either for paying for things online or in a physical shop.

No longer a bit-part player?

Bitcoin – the virtual currency – has been around since 2007, enjoying a rollercoaster ride to date where fortunes have been made and lost overnight. In itself it may turn out to be the most disruptive piece of FinTech in history, but no-one is quite sure. What is for sure is that a lot of Fintech is going into developing the underlying infrastructure in which Bitcoin can operate. One of the leading companies is Hong Kong based Xapo. They have raised $40 million to develop their products which are a Bitcoin wallet and vault. The wallet is where people can buy, manage and spend Bitcoin (they have even developed the World’s first real Bitcoin debit card) which can be used online, in stores and to draw money in local currencies from cash machines. It can be used anywhere that accepts VISA.

Their vault is a storage solution for Bitcoin. The Wall Street Journal described it as “the Fort Knox of Bitcoin storage”, reassurance indeed for people thinking of adopting the digital currency, particularly as there have been a number of high-profile thefts during its short lifespan so far. So what goes into building the Fort Knox of Bitcoin storage? Xapo says they have developed a new standard in Bitcoin security – one built on a three-layered solution.

First there is the cryptographic layer. This is a really interesting area of research and development and one which we have previously explored in this article. Some of the cryptographic techniques Xapo uses include multi-factor authentication and private key segmentation.

Then we move on to the physical security. Vaults are hidden deep underground spread over three continents. Tightly guarded offline servers are used to hold confidential information and these remain completely isolated from the Internet or any other network.

One of the features of Bitcoin is that it is completely independent of government control, so finally, Xapo’s security protocols include provision to protect Bitcoin being seized by any government body – by spreading the infrastructure across borders.

From looking to buying in just ten seconds

Onescan, owned by UK tech company Ensygnia, is a mobile payment platform predicted to make a big splash. At the World Mobile Congress in Barcelona it was voted amongst the innovations likely to have the greatest impact on the global mobile industry over the next 10 years. Since starting up in 2012 they have won a string of awards in the ‘start-up’ and ‘tech’ spheres – an exciting company for sure.

So what does Onescan do? Put simply it allows you to make mobile payments online in seconds. An app on your phone stores your personal details (but not financial details: these are tokenised on Ensygnia’s identity management platform and can only be accessed via a smartphone lock and key system). If you are shopping on a website signed up to the Onescan platform, you will get a QR code next to your desired product which you zap with your phone. Data is securely swapped between app and website and ten seconds later you have made the purchase. They call it a frictionless transaction – no usernames, no passwords, no card details. Here’s a video to demonstrate:

The UK based company has innovated in the fields of log-in and payment applications which is demonstrated by two successful UK patents. Again security is paramount so we see multiple layers of protection including tokenisation, digital signatures and integration with smartphones fingerprint readers to name a few.

Ensygnia cite their achievement in overcoming the traditional trade-off between ease of use and security that is typically present in financial transactions, i.e. the easier it is to use something, the more vulnerable it is to fraudsters. If their solution gives consumers the peace of mind of knowing that they are secure whilst taking away the need to remember usernames and passwords every time they buy something, then Ensygnia may just be on to a winner.

Are you innovating in Fintech?

FinTech and R&D go hand in hand. Particularly digital R&D activity, that traditionally may not have been recognised as research and development. The thing is though, it absolutely is – and can often qualify for R&D tax credits worth around 1/3rd of the associated costs. For a company investing £200,000 on qualifying activities that could translate to almost £70,000 worth of tax credits. The range of R&D we have explored in this article gives a good flavour of the kinds of activities that could qualify but there is much more. To recap and expand:

  • APIs
  • SDKs
  • Customer journey
  • Database management
  • UX
  • Encryption
  •  Tokenisation
  • Log-in
  • Authorisation
  • Stress testing
  • Algorithms
  • Hardware development

If you are developing products or services in any areas in Fintech, get in touch with ForrestBrown. We specialise in identifying and maximising digital and physical research and development to help our clients claim back tens, or even hundreds of thousands of pounds each year.

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