Alexandra Foster is

Alexandra Foster is global head of strategy & business development, financial technology services, BT

Over the last decade the financial markets industry has experienced significant regulatory upheaval. We have witnessed a new approach to supervising financial institutions, with regulators moving from a “light touch” approach to an “interventionist” one, writes Alexandra Foster

This new regulatory landscape has levelled the playing field and acted as an incubator for innovation.

And more recently we’ve seen a proliferation of fintech start-ups. The UK has housed a latent fintech scene for a long time, dominated by peer-to-peer lending companies. But recently this has rapidly expanded to other areas including payments and investing.

It’s clear that the architecture of the financial markets is being rapidly re-engineered. And innovative technology is playing an increasingly pivotal role in this process. In fact, according to research by PwC in 2014, 86% of bank CEOs felt that technological advances are poised to have the greatest impact on banking.

But fintech start-ups face many barriers to entry when trying to introduce new solutions to large financial institutions. Their small size creates challenges around market adoption, delivery and meeting the stringent contractual or compliance expectations of large financial institutions.

It is clear that smart start-ups are a growing source of innovation for the global financial markets industry. But how do they get the scale and flexibility to deliver services into major financial institutions?

One way is to join an established specialist, secure financial cloud community.  These communities bring together brokers, institutions, exchanges and clearing and settlement houses from around the world. Through a single, resilient and secure network connection, members can reliably access applications and services from a range of solution providers.

Reach for cloud 

Fintech start-ups that join one of these communities can enjoy the established benefits of cloud technology, such as scalability and speed to market for their solutions.  With a ready-to-exploit market reach fintech companies of all sizes can grow quickly.  To do this, fintech companies should host their applications and services in data centres, or on the growing range of cloud computing services connected to an established financial cloud community.

In addition to that, fintech companies should keep in mind the commercial, compliance and service level agreements expected by major financial institutions.  Smart start-ups should look for simple and proven models from cloud community providers.  These could include both managed hosting and connectivity services delivered separately or as a seamless bundle, with in-built security and resilience, to deliver the 100 per cent availability expected by their clients.

The blend of cloud and fintech innovation is both exciting and enticing. The right combination could provide new routes for the global financial institutions to address increasing regulatory demands, drive efficiencies and identify new opportunities for growth. At the same time it would provide the increased visibility and direct market access for the fintech companies, eliminating these two traditionally major hurdles in their way to success.