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Fintech: What Does the Future Hold?

 4 min read / 

A Brief History

When we think about technology making a significant impact in the financial world, we may think of the introduction of the internet and e-commerce business models in the 1990s, or even the banking computer systems of the 1980s. However, a few decades before that, technology in the 1950s was used to improve efficiency and costs when credit cards were being issued to aid non-cash transactions. Fintech already has a long history, and it continues to play a big part in how the financial sector operates.

The Rise of Fintech

There is no question that fintech is taking centre stage. Q2 in 2017 saw global fintech investment more than double to $8.4bn – showing no sign of slowing down. Furthermore, earlier this year, Barclays announced that it wanted to launch Europe’s largest coworking space for fintech start-ups in the heart of London. The multinational bank said its aim was to enhance Barclay’s customer and business opportunities and to “help create the future of financial services”.


Source: Money of the Future Report

Re-defining Finance

Advanced technology provides a great opportunity. Robots are quite literally changing the way hedge funds are managed. The hedge fund model is under assault with more investors perhaps preferring a more passively managed portfolio than the more traditional and actively traded funds. Last year, The Guardian found that the 25 best-paid hedge fund managers pocketed $13bn in 2015, with more of them relying on secret algorithm boxes to gain more promising returns. It came at a time when manager Bill Ackman had a “disastrous” year due to his poor bets on the pharmaceutical company, Valeant. It begs the question whether investors will now start to prefer funds that are showing more strengths than faults, alongside potentially lower operational costs.

New Technology, New Questions

While the majority of people see fintech changing the sector in countless and novel ways, a large number have not identified the questions that have to be addressed in order to fully adopt such a technology driven industry. Here are just a few examples:

An algorithmic hedge fund that deals in DAX futures must report trades for regulatory requirements. It is not immediately obvious whether the box or the manager executes trades. A manager might say that they have the ultimate decision on all trades based on their computer system set-up, but having to accept or reject hundreds of possible trades per day might be laborious. Moreover, should the clients be entitled to know how the algorithm(s) operate in order for them to make appropriate risk assessments?

Suppose the same fund has a series of unfortunate IT systems failures. If all trades for a billion dollar fund are based on a small black box , should the firm be considered as having a higher operating risk?

Conflict of interest is also an issue. Could an entirely algorithmic-based fund have a lower chance of having conflicts of interest if trades are determined by computers, not by personal opinions?

Another potential issue is telephone recordings. In light of MiFID II, phone calls are starting to be recorded (in particular those that lead up to trades and execution). If technology is starting to make compliance reporting easier (Natwest is testing AI compliance technology), it may be expected that more firms will incorporate state-of-the-art software to record and analyse conversations. Will some people object because they can never know what calls should be recorded and analysed in advance? If technology completely takes charge, can the software ever be 100% efficient? Is the only fool proof solution to separate business phone devices and personal phones devices?


As always, the development of technology is fascinating. With unchartered territory come novel questions – questions that some people may not be aware of, or even be concerned about. Above are just a few problems within a long list of complex issues. In 10 years time, the very technology that society has developed may pose the world very unexpected questions.

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