FINTECH BRIEFING: Women less likely to invest - Zopa on banks and P2P lenders - Brexit and passporting

Welcome to The Fintech Briefing, a morning email providing the latest news, data, and insight into disruptive fintech in the UK and Ireland, the Continent, and beyond, produced by BI Intelligence.

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WOMEN LESS LIKELY TO INVEST. There's a gender investment gap in the financial services industry, and firms are losing out on potential business, while consumers get worse returns, because of it, according to a recent study conducted by P2P lender RateSetter. Only a third of RateSetter's investors are female, and only 48% of women in general own investment products - compared to 66% of men, according to research carried out by the firm. RateSetter began investigating the discrepancy after discovering its female employees were much less likely to invest than its male employees, even when a financial incentive was offered. The research aimed to find out if female reluctance to invest was a general pattern amongst UK consumers. They also held a panel event to discuss the results of the research this week, the first in a series of events designed to explore issues in the world of finance.

• Women more likely to save, but less likely to hold stocks and shares. 62% of women hold their own savings account, compared to 55% of men. However, only 11% of women hold stocks and shares, compared to 23% of men.
• More women say they don't understand investment products. Around half of women say they understand stocks and shares, compared to three-quarters of men, and more importantly for the P2P lending industry, only 26% of women say they understand P2P lending, compared to 42% of men. This further indicates that men are more engaged in fintech across the board, but also more confident that they understand complex products.
• Women describe themselves as risk averse. Women were twice as likely (28%) to describe themselves as "strongly risk averse" than men (15%).

P2P lenders, and the fintech industry as a whole, are missing out on a big chunk of potential funds if women continue to avoid investing. P2P lenders also want to raise awareness that they are an investment tool for everyone, especially those who traditionally haven't previously invested. To start addressing the issue, RateSetter is looking to spark a conversation in the industry about potential solutions.

BI Intelligence suggests three ways for gaining market share among female consumers:

• Ads targeted at women. These could include more gender-neutral adverts, as commentary from the RateSetter event suggested most P2P lender adverts target men.
• Education and clear information about P2P lending. The provision of clearer information about products is necessary, especially given how many products are currently on the market.
• Highlight the merits of IFISA. The P2P industry hopes that government support of the Innovative Finance Individual Savings Account (IFISA), due to launch in April, will encourage more people, of either gender, to invest in their products and achieve a better return.

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ZOPA'S EXECUTIVE CHAIRMAN ON BANKS AND P2P LENDERS. In Friday's Fintech Briefing, we ran a story on the future relationship between banks and P2P lenders. In the story, we used analysis from the Economist, misattributed to Giles Andrews, Executive Chairman of Zopa. We spoke with Andrews last week to clarify his views on future relationships between banks and P2P lenders.

• One of Zopa's key value propositions is that its risk analytics are more sophisticated than that of many banks, according to Andrews. The firm has 11 years of through-the-cycle data, which it uses in its models, and has lent nearly £1.4 billion ($2 billion) to-date.
• Banks that lack unsecured loan capabilities are most likely to partner. These banks and P2P lenders like Zopa are natural partners, according to Andrews.
• Banks with unsecured loans capabilities can still benefit from partnerships. Zopa's risk analytics could offer banks an edge, even if they already have existing unsecured loan capabilities.

This doesn't mean that all banks will avoid building their own P2P lending solutions, just that in some cases partnering is the easiest and best way to enter the market.

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THE IMPACT OF BREXIT ON LONDON'S FINANCIAL SERVICES INDUSTRY. This summer the UK will decide if it should make an exit from the EU. If Britain were to "Brexit", London's financial services businesses would suffer a loss of business and protection against discrimination, according to a new report from The City UK. Businesses would lose the benefit of Passporting, which allows businesses authorised in one EU country, whatever the national origin of the business, to offer services remotely in the other 27 EU states without further authorisation.

• Protection against discrimination. Passports guarantee incoming firms will be able to do business on the same terms as local ones, so long as they comply with local regulatory requirements. Without access to passports, UK-based firms (including subsidiaries of non-EU businesses which have set up offices in the UK), would face barriers in other EU countries that could impact their ability to operate.
• Loss of business. Currently, UK firms can sell products across Europe through a cross-border service provision without a physical presence in other member states. The loss of passporting would mean this was no longer automatically possible.

The biggest problem financial services firms currently have is uncertainty. At this point, it's unclear what a Brexit would actually look like so the perceived risks are mostly speculative. For example, passporting in its current form is not a perfect solution - UK firms still must comply with country-specific regulatory requirements in other EU states. In the event of a Brexit, some of these problems could be potentially be addressed in the negotiation of a new agreement between the UK and the EU.

Around the world...

HONG KONG LOOKS FOR FINTECH TALENT IN LONDON. InvestHK, the department of the Hong Kong government responsible for Foreign Direct Investment, wants to boost Hong Kong's fintech industry by encouraging startups and established firms from London and New York to set up in the region, according to SCMP. Hong Kong has a strong financial services industry, and the government is starting to see fintech as a complimentary sector worth supporting. Hong Kong already has 86 fintech startups, and it's hoping to take advantage of its position as a gateway to China to attract firms looking to move into the country and Asia more broadly.

JAPAN DEBATES BITCOIN REGULATION. The Japanese parliament, the Diet, will soon vote on Bitcoin regulations put forward by the Japanese finance minister, Taro Aso, according to nasdaq.com. The regulations will classify Bitcoin as a currency, impose new requirements on exchanges, and remove the firewall that currently prevents banks and securities firms from investing and trading in Bitcoin.

BRAINTREE MAKES STAFF CUTS. The US-based payments company owned by PayPal has cancelled its annual hacking competition "BattleHack", which is designed increase awareness of its services amongst the developer community, and cut some staff associated with it. The project was designed to encourage developers who participated to use Braintree's services if they were later hired to work on eCommerce projects. This likely signals a change in marketing direction, rather than a bigger upset in the company, as it processed £35 billion ($50 billion) last year.

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