Banking license handed to new fintech – FX firms should go this route

The world has changed for everyone during the course of 2020.

It makes no difference whether a large corporation, or an ordinary man in the street, the draconian and absurd lockdowns have driven everyone into private confinement in many parts of the world, and as a result, the amount of previously analog services that have now had to resort to online business has rocketed.

In Britain, one of the most avantgarde nations in the world for business, and certainly one whose public has not been subject to bullying by masked men in uniforms brutalizing people for daring to mind their own business and go about their day normally such as the behavior has been from the authorities in many parts of the world, the banking authorities are beginning to broaden their horizons further, and have this week issued a banking license to a fintech startup which aims to loan money to high net worth individuals.

The company, called Monument, is in its absolutely initial stages, however,  having raised £20m in funding since its inception, it is yet another testimony to the ease at which VCs part with millions for these ‘fintech’ startups yet will not give well established FX brokerages with their own infrastructure and highly advanced trading systems one dollar.

Sky News recently reported that Monument was set to raise more than the £10m it had targeted in its Series A round, with a number of blue-chip investors backing the startup.

What does this tell us?

It sends a clear signal that some of the contingents within the FX and OTC electronic trading sector should be maximizing their opportunities in our ever changing world, especially given the vast increase in activity that was evident among retail traders during the middle of 2020 when many countries were in lockdown. Markets were volatile and people were at home, trading.

Companies with great pedigree are absolutely geared up to take on these startups and outperform them.

Saxo Bank, Swissquote, Dukascopy, IG Group and others all have banking licenses in top tier jurisdictions – namely Switzerland and Denmark, and as a result all provide individual custodian accounts on a per-trader basis.

This could easily be rolled out and they would likely be granted a UK banking license in a heartbeat. They also have the expertise and acumen to develop their systems which have been painstakingly developed in house over a series of years to meet the demands of electronic banking and in the case of Saxo Bank and Swissquote, they are already used to working with high net worth investors.

Moreover, they would not need venture capital. Most of the challenger banks and fintech startups which are charged with holding client funds are still on their VC rounds, which means they have no money.

Would you invest your savings with a firm that has no money?

Monument estimates that there are 3.5m people in the UK within the so-called mass affluent bracket it is targeting, with at least £200bn in liquid savings.

The fintech is aiming to serve a more affluent customer base than challenger banks such as Monzo, Starling and N26. It is chaired by former Co-operative Bank boss Niall Booker, and has board members and executives who previously held roles at Barclays, HSBC and UBS.

Demand for digital banking services has surged since coronavirus lockdown measures were imposed earlier this year, prompting a wave of banking licence applications from challengers looking to disrupt the market.

Mintoo Bhandari, Monument chief executive and one of its founders, said the bank wanted to deliver “the exceptional levels of client service that the mass affluent deserve and which has been lacking from existing premier and private banks”.

That is a great market, and our leading electronic trading firms are well poised to get a UK banking license and approach it.

Open the floodgates, I say.