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UK backs FinTech ship just as it heads for the rocks.

Editorial Staff

The UK government is to host a conference on FinTech as part of FinTech Week 2017. Chancellor Phillip Hammond is pleased to say that it's got Bank of England Governor Mark Carney and City Minister Simon Kirby to speak. If that sounds like a non-coup, just think about this: the FinTech bubble is already under strain. It may well have burst by the time the conference takes place in the middle of April.

The second annual FinTech Week includes events hosted by, for example, the Financial Conduct Authority. Hammond says that FinTech currently contributes GBP6,600 million to the UK economy. But there is already competition: only last week, the UK and Scottish governments (no, they are not the same) announced that a "FinTech hub" would be launched in Scotland, in an incubator at the Royal Bank of Scotland's Gogaburn headquarters.

But the big growth in FinTech, according to The Economist, is that "it was the right thing in the right place at the right time."

We hate to say "we told you so," but in 2002, Nigel Morris-Cotterill, speaking on money laundering risk management at the Bank of China's headquarters in Beijing, at an internal event part of which was open to reporters, said that China was on the brink of a banking revolution, that its systems, far out of date, had a huge advantage: they could learn from the mistakes made by banks all over the world and skip expensive, slow and unreliable payment methods and go straight to the most advanced methods of payments and, incidentally, reduce both fraud and money laundering risk. In the meantime, China's banks have more than modernised, unfettered by legacy systems and sunk costs. As their cycle of development accelerated, so did mobile phones and internet access. Across the whole financial sector, young people, growing up with the technology, have embraced FinTech in numbers that no other country can approach. Also, local development has produced localisation and that has led to fine-tuning of products in ways that others, hoping for global dominance have failed to address.

And in December last year, Morris-Cotterill warned of a FinTech bubble.

Forbes, always the standard bearer for positive news even when there is a counter-argument, says that FinTech is thriving, yet the reality is that, while there are ever more startups, the venture capital tap is slowly but surely being constricted.

While individual companies are crowing about investments, the industry is at a tipping point. Investors are now, as they were with internet shopping websites two decades ago, faced with a brutal choice: back lots of FinTech companies and hope some come good, or wait for the fall-out and pick up the pieces for ten cents on the dollar in a couple of years. The idea of being selective now seems to be yesterday's concept: there are so many companies chasing the same niche markets.

Last week, Wrexham Glyndŵr University, announced that it was to award a degree in FinTech. But it's not about the tech per se. "Rather than teaching students the technologies behind the rise of fintech, the course will teach them how to generate new business ideas and create their own startup using the technologies available to them," said Anna Sung, the course leader. Good luck with that: by the time the first BScs are awarded, the sector is likely to be in tatters.

There will, of course, be opportunities but by then the cost of accessing customers may well have become prohibitive for startups and it may be that the only route to success will be creation and licensing or selling patents.

The University of Strathclyde, in Scotland, offers a one-year MSc in FinTech. The first intake will be in September this year.

The dark clouds are already gathering where previously there was only shining light: in Singapore, which ha led the FinTech revolution in trying to ensure that it gets early mover advantage for incubators, KPMG says that the overall investment in FinTech in SIN fell 65% in 2016 v 2015.