With Elon Musk setting out his intention to enter the UK financial services market, Financial Technology Research Centre’s founder and futurist Ian McKenna considers the implications notably for advice firms.
In setting out an agenda that he says, will cover everything from payments to securities and will replace the need for banks, Elon Musk is throwing down the gauntlet to all sectors of the financial services industry.
The UK financial services industry is clearly a target for several of the Big Tech players, not least because the overwhelming majority of the 11 million plus consumers who have started saving for retirement via auto enrolment over the last decade, have done so without advice. The National Savings Employment Trust (NEST) alone now pulls in £500 million in new savings every month, illustrating the scale of this opportunity.
The UK is widely recognised as a global leader in the adoption of open banking with the number of payment transactions growing by over 100% to 11.4 million in July 2023. This offers huge potential to do exactly what Musk wants to do, i.e., undermine traditional banking.
The key question here is can the established advice sector capture the opportunity to provide mass affluent and mass market advice, or will it be left clear for new entrants to reap the benefits?
I’m seeing an increasing number of adviser firms looking to build hybrid advice solutions to support those underserved for advice, but this move by Musk shows that they need to move quickly given the increased competition.
Both the much-delayed Pension Dashboard project and the Data Protection and Digital Information (No.2) Bill presently going through the House Of Commons will extend access to consumer long-term savings information in the same way as their banking data, this will be another major catalyst for the next generation of advice services.
The UK would be an obvious second jurisdiction for such a service. It may make some sense for Musk to target the UK before launching in the US where banking licences are granted at a state level. CNBC reports suggest he has already acquired licences for money transmission or money services in nine US states, but that leaves a lot more to gain authorisation from.
By comparison, the UK with an integrated regulatory system covering the whole country could be a simpler opportunity, there are several challenger banks with suitable licences. There are precedents for Big Tech companies launching services in the UK before the US, for example Amazon’s UK insurance marketplace was launched a year ago while an equivalent service still does not exist in the US. According to Search Logistics, the UK is the 6th most popular country for X with 18.4 million users, by far the largest number of users of any European country with nearly as many users and the next two European nations, France in 12th place with 10 million users and Spain 13th with 8.75 million.
It is easy to see how X could evolve to a western version of WeChat to disrupt the payments industry in the way he started as part of the Paypal team over 20 years ago.
