As banking sectors across the globe grapple with the fallout from the coronavirus pandemic, a Wall Street veteran suggests the crisis may expose the need for new technology.
David Rutter, who had a decade-long stint at interdealer Icap and now heads up financial tech firm R3, believes issues like the lending of coronavirus loans have shown banking bosses where their companies are falling short.
“During crisis periods, when markets go through extreme stress, you see where the cracks are, and there are solutions that exist to avoid them. [This crisis] may be an accelerant for the deployment of new technologies,” he tells City A.M.
Banking sector under pressure over coronavirus loans
Banks will not be the only ones exposed to the fallout but cracks are already appearing in the system. Banks came under fire earlier this month after the rollout of the Treasury’s business interruption loan scheme.
The latest available data shows coronavirus loans doubled last week to £2.8bn, but only around half of 36,000 applications were approved.
While HSBC set up a digital portal for applications, banks in general have been criticised over a large backlog of applications awaiting processing.
“There are new challenges we couldn’t have envisioned,” Rutter says. “With the American federal stimulus and the UK package we have to identify small businesses and process requests.”
“This is at a magnitude and there is a worry it’ll be inefficient with duplications.” He argues banks will be pushed to change their technology systems when they look back at the deployment of their support.
Fintechs piling pressure on larger lenders
Britain’s fintech industry is racing to fill the gaps in the government’s support package. A number of the top firms have pushed for accreditation from the state-backed British Business Bank to provide loans under CBILS. Starling Bank and Funding Circle have now joined major high street banks in lending to businesses affected by the coronavirus outbreak.
A move towards paperless transactions appears to be Rutter’s main focus in a bid to increase the speed of processes. And this is where Rutter thinks his software blockchain firm R3 can step in to help.
R3 was launched in 2015 as a consortium of top-tier banks. It set out to develop blockchain technology for the financial services industry.
Rutter claims R3’s blockchain platform Corda “creates opportunities for organisations to solve problems” and will help cut costs.
Indeed, he reveals R3 has spent time with governments and other organisations to try to mitigate the coronavirus fallout. He is also working on projects with clients looking to provide financing to organisations, but declined to provide further detail.
“We are not trying to be opportunistic at the cost of human suffering. Instead we’ll try to use the time to solve issues through technology,” he insists.
London will be the hub of banking innovation
As the dust settles from the current crisis, innovation in the banking sector will originate out of London, Rutter believes.
He remains bullish on the prospects of the capital and says expansion in the fintech sector is “unbelievably positive for the UK”. He adds the timing couldn’t be better with challenges like Brexit.
But the biggest challenge facing London in the coming months will not be the departure from the EU but the threat of a global recession. It is not a threat that is passing Rutter by. He laments that “the startup community is under extreme duress. It is hard to get investment at the best of times.”
“Understandably it is not the first thing on the priority list for the government but I’d encourage them to listen…It is one of the single most important things to drive jobs, the economy and tax receipts. You don’t want to lose that momentum.”