Maria Micallef

Managing Partner, RSM Malta

Maria Micallef is managing partner at RSM Malta. She has extensive experience in servicing local and international companies in M&A, corporate finance, business planning and risk management. She is a visiting lecturer at the University of Malta and provides training courses on risk management and internal audit. Ms Micallef has a B.A. Hons Accountancy degree and is a Certified Public Accountant and a Certified Fraud Examiner. She is a fellow of the Malta Institute of Accountants, a member of the US Institute of Internal Auditors and a member of the Association of Certified Fraud Examiners. She is also a council member of the Malta Institute of Accountants and was its President from 2013 to 2015.

Fintech revolution – opportunity knocks

Wednesday 07th December 2016

Tech and finance have managed to combine seamlessly to give rise to FinTech.

According to Wikipedia, Financial Technology, also known as FinTech, is an industry composed of companies that use technology to provide financial services, enable provision of financial services (through utilisation of technology) or drive technological innovation in the provision of financial services.

FinTech provides users with an array of financial services that were once almost exclusively the business of banks. Fintech’s rise however is not confined to banking services and covers a wider spectrum from lending and financial advice to eWallets, foreign exchange, credit reports, fraud protection and financial advice.

Most large banks rely on outmoded and unwieldy IT legacy systems, making them unable to act with the agility expected by today’s clients. Some are trying to overcome this handicap by engaging and collaborating with FinTech startups, resulting not only in faster response and better service but also helping to spread out an entrepreneurial culture within the banks’ typically large structures.

FinTech is literally transforming financial services.

Investors are responding favourably to FinTech ventures – according to Accenture investment in FinTech amounted to US$ 22.3 billion in 2015, an increase of 75 per cent over the previous year.

The Economist is of the view that the FinTech revolution will reshape finance—and improve it—in three fundamental ways: by cutting costs, identifying new ways to assess risk and creating a more diverse and stable credit network.

One major handicap being faced by the FinTech startups is the tough regulatory regime operating in reputable financial services jurisdictions.

An interesting development that is intended to help entrepreneurs to overcome the sometimes massive barriers that can be created by regulatory regimes is that of the UK, referred to as the ‘regulatory sandbox’. The regulatory sandbox, created by the Financial Conduct Authority, FCA, aims to create a ‘safe space’ in which businesses can test innovative products, services, business models and delivery mechanisms in a live environment without immediately incurring all the normal regulatory consequences of engaging in the activity in question.

The first cohort of the FCA regulatory sandbox closed to applications on 8th July 2016. FCA received a total of 69 applications from a diverse range of sectors, geographies and sizes. 24 applications were deemed to meet the sandbox eligibility criteria and were accepted to develop towards testing, including early stage start-ups, challengers and incumbent firms.

Should this be something that we consider introducing locally? In my view, it is certainly something we should look at closely to carefully understand and analyse the risks and opportunities it may present and how these may best be exploited.

The Brexit vote has brought a level of uncertainty for UK-based FinTech companies. The possible loss of passporting rights which enabled FinTech firms with UK banking licenses to operate across EU borders may present opportunities for the local market.

The FinTech firms are not about to kill off traditional banks – at least not in the foreseeable future – but they are likely to give banks a good run for their money in certain of their more profitable services.

On a different note, the FinTech development is one that will invariably have an impact on the accountants’ profession. Our profession, in fact, needs to come to grips with the FinTech phenomenon and develop the skills necessary to be able to understand its dynamic features that are transforming the industry. We need to develop the skills to manage the change in strategy, processes, technologies and culture that FinTech brings with it. In reality there are significant opportunities for the accountants that are able and prepared to help FinTech entities to manage the regulatory, fiscal and funding regimes they operate in.