Innovate Finance Global Summit 2019: Deflating the Blockchain Bubble

I’ve been on a bit of an event hiatus whilst we’ve been focusing on building out our core technology at Qadre, so the Innovate Finance’s Global Summit was a fantastic way to rejoin the circuit with a bang!

I was primarily there to speak on the topic of ‘Bursting the Blockchain Bubble’ (more on that below), but it’s hard to pass up the opportunity to see old friends from the early days of blockchain, whilst luxuriating in the beauty of Guildhall.

I was pleased to see a healthy sense of informed scepticism around blockchain this year, following previous encounters of bewilderment, outright denouncement, or unchecked fervour. Both blockchain and AI were finally getting a more rigorous evaluation on business models, team, and technical competency, looking to avoid the pitfalls of recent cryptocurrency and ICO missteps.

There was a similar view when evaluating the broader fintech ecosystem, with Tim Levene (Augmentum Fintech) analogising neatly the need to abandon “novelty solutions” for considered business models. We heard repeatedly that fintechs need to be revenue generating above all else — demonstrating a need for their product or service, rather than a flashy user interface or noteworthy board of advisors. Whilst we’ve seen that strategically building out value upfront can be an effective long-term strategy, more formulaic business models need to be relying on revenues, not brand.

Eileen Burbage (Passion Capital) forecast that the fintech economy would continue to grow, but we would see a shift from B2C to B2B products (music to the ears of someone who has been pushing enterprise solutions for years). The logic seems reasonable — the nascent solutions are typically B2C because people solve the challenges they face personally, enabling the incumbents to familiarise themselves with the technology in their own time, and a second wave of B2B solutions to emerge. This is further compounded by the fact that we will see diminishing returns in B2C before we start tackling the proverbial financial elephant in the room — i.e. cripplingly inefficient and costly back-end infrastructure. Eileen also spoke to the UK’s international reach being greater than that of China or the US (despite their comparatively weightier domestic markets) — encouraging news in light of the UK’s precarious global position.

One panel (which I missed but am assured was the most amusing of the event) saw Ben Davey (CEO, Barclays UK Ventures) inform several fintechs that his internal team are significantly more agile and competent than their new-entrant competitors (followed by bemused silence). It’s a valid point, as many fintechs begin to rest on their laurels post-Series A, while the incumbents replicate their best features and provide them to their considerably more sizeable customer base, and leave the challengers with the crumbs from their lunch. A reminder to fintechs to avoid the hubris of their predecessors and to remain constantly hungry.

Anne Boden (Starling Bank and a proud Welshwoman) was, as ever, very passionate about inclusive design and making money equal. This was one of many examples where diversity was well-represented and assimilated into the discussion. While Anne and I have disagreed (amicably) on previous panels on the topic of quotas, the results speak for themselves in the Starling team and beautiful products. Both she and Chris Sier (HMT) did a standup job of reminding us the UK doesn’t end at the M25, consolidated by Innovate Finance’s announcement of the launch of the National Network. If interested in diversity, keep an eye out for the Women in Fintech Report to be published by Bahrain Fintech Bay.

Other highlights included fantastic speeches from Mark Carney (Governor, Bank of England) who emphasised our need to encourage sectoral resilience through “[a] new finance with products that are more cost effective, better tailored, and more inclusive.” and Chancellor of the Exchequer Philip Hammond who confirmed that “[t]his government is determined that the UK will remain a trailblazer in this field, which is why we are supporting skills, facilitating capital raising, attracting talent and promoting international cooperation”. Do take a look at the recently published UK FinTech State of the Nation report for an overview of the UK’s current position. It seems like London is here to stay as a fintech hub, Brexit or nay.

Bringing blockchain to the mainstage.

‘Bursting the Blockchain Bubble’

Our moderator, the fabulous Jeremy Wilson (Barclays) started by guiding our panel through our real-world examples of blockchain use-cases. I’m always happy to discuss where we are on the Gartner hype-cycle, but it’s become particularly poignant now that we have more than the handful of early live use cases of DLT. For those who didn’t catch it, I primarily spoke to our validation of our technology over the last five years across the public and private sectors, most recently profiled in the StateZero Labs first cohort.

We went on to discuss the impediments to accelerating the adoption of blockchain. My key points were:

  • Recognise why you are exploring blockchain. This is something we’ve been advocating for several years, but are still seeing rife across industry, academia, and the public sector. Avoid innovation theatre and keeping up with the Joneses — ensure when exploring a potential technology you are solving a real problem with a real solution, rather than being a hammer seeking a nail. If blockchain isn’t the best technology for the job, then don’t use it.
  • Regulators and policy makers need to be proactive. We are fortunate enough to operate in a jurisdiction with forgiving, informed, and engaged regulators, but the UK is outstripped by countries like Singapore in terms of collaboration between industry and policy makers. We are past the point where confusion between DLT and cryptocurrency is a blockade. Now we need to be leading globally in moulding our legislation around the future of finance that technology is shaping.
  • Collaboration is key. New entrants, incumbents, regulators, and academia need to adjust their mindsets to a more strategically open approach and work together. There is already too much duplication of work and talking shops at play. Standards, best-practice, and integration are all topics that can’t be addressed in isolation, so if you’re a financial institution then initiate that debate.

With the World Bank actively asking for participation from central banks with their blockchain bond and other R&D projects, surely we’re not far from removing this question from agendas. It’s my hope that soon all blockchain panels will address more poignant and practical discussion topics, such as how we can work as an industry to address redesigning and reengineering financial market infrastructure for today’s financial world. Let’s engineer a more mature space and begin evaluating blockchain’s capability in live environments.

Summary and recommendation:

If you’ve any interest in FinTech in the UK then SIGN-UP for IFGS 2020! It’s a fantastic event (illustrated by the fact it was trending higher on Twitter than Game of Thrones) and well worth the time spent there — whether you’re there for minuting the keynotes or the open bar.

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