Brexit’s operational impact on the FinTech ecosystem started unrevealing with many prominent financial institutions, including N26 and Revolut, starting to relocate or shut down their British operations. If there is a silver lining to Britain, the apple of the European FinTech ecosystem’s eye, leaving the EU, it’s that the pivotal industry conferences started shifting more to Continental Europe, making these events more accessible (and economical) globally. Thus, I was among the European FinTech enthusiasts that greeted Finovate’s Continental Europe debut in Berlin favorably and wrote down my observations for FinTech Istanbul.
The Opening Remark by Steven van Belleghem with a focus on customer experience was underscored as one of the highlights of the event. His speech emphasized that companies need to invest in branding more than ever. Steven claimed that the companies that are not obsessed with convenience would inevitably disappear, pointing out KLM as an example of a company that found a way to augment the data and therefore gained an advantage over Lufthansa, although Lufthansa has better troops. He also briefly talked about AI, stating that AI will not replace but enhance jobs, starting from customer experience, and that tech people will have the chance to define the second part of the AI curve.
Dave Birch, who believes that once AI comes along, the consulting business will be finished, was among the familiar speaker line up. Just like his Paris Fintech Forum speech, he highlighted the importance of RegTech’s role in fighting financial crimes. He asked the panelists, and the audience which technologies are the ones that people talk the most stupid about, and the results weren’t too surprising; it’s blockchain, AI, and quantum computing.
Chris Skinner opened the payments stream by stating that payments are the central force of tech, not just banks and finance. He unfolded how the payments sector can become a lucrative business by mentioning how seven lines of code can be worth $7 billion. Skinner reminded the crowd that 1/3 of FinTech investments that happened in 2019 was directed to payment companies. He then encouraged fresh entrepreneurs by reminding them that all they need is a good idea to start a company nowadays.
During the blockchain panel, Maximilian Lautenschläger said that he expects the incumbent financial institutions’ roles to be re-defined shortly. He added that thanks to the new crypto regulations, for the first time in history, being in Germany is an advantage for banks and financial businesses.
Francis Gross of ECB was another keynote speaker with an interesting angle. He presented the economy as a network of contracts as the system we need to strive towards. Some of his key messages:
- More IT will deliver value only if data improves.
- Standardization is the heart of deep transformational processes.
- When building new concepts, we need to ensure that they will also be valid in 20-30 years.
- Language is the technology itself when put in a machine.
Pointing out the fact that there are not enough tech people in the regulator policy teams, Gross stressed that we need to be careful with new technology experimentation, since “banks working with quantum can be as dangerous as his son building a powerplant in the backyard.” In case you were wondering, he is currently working on new policies that aim to create an invariable identity of natural and legal persons (Global Legal Entity Identifier), which is literally supposed to function like a license plate.
In the meantime, panelists Benoit Legrant of ING, Dara Hizveren of Garanti BBVA and Raphael d’Ostuni of Keytrade Bank focused on transforming legacy systems and creating a culture of innovation and classified innovation into three different categories (incremental, midterm sustainable, radical), stating that all categories should be treated differently. Moderator Andrew Vorster compared banks that are investing in innovation, which does not have the prospect of becoming something, to an innovation theater. Panelists also pointed out that most bank innovation departments still insist on working as R&D departments, which is an outdated method of working. One of the panelists had a noteworthy point about bank departments lacking communication with each other, with different bank departments working on the same topics, and being in talks with the same service providers without being aware of it. All in all, the panel stressed the urgency in optimizing daily bank operations, with the main point being the importance of communication, collaboration, and sharing across units for a perpetual state of change and transformation.
The clash of the challenger banks (Power Panel: What Leading Challenger Banks Have Learnt On Their Journey To Build A Digital-Only Bank), including solarisBank, insha, and Nova Bank, was also quite in-demand and the panelists appeared to put on a good show. Although it is always a good idea to have solarisBank around for panels and speaker-gigs, the question of whether solarisBank was the right candidate for such talk was raised, since solarisBank is more a service provider (“tech company with a banking license”) than a challenger bank. In this sense, it can be argued that a definition of a challenger bank is not set in stone.
At this point, it makes sense to look into the very definition of a challenger bank, which differs a lot. Chris Skinner defines a challenger bank as “a start-up bank that is able to offer a deposit-taking account with a full banking license.”Wikipedia definition is ” small, recently-created retail banks (in the United Kingdom) that compete directly with the longer-established banks in the country.” On the other hand, Oxford Dictionary states that a challenger bank is a relatively small retail bank set up with the intention of competing for business with large, long-established national banks. Burnmark approaches the topic from a different angle, accepting “challenger banks” as the umbrella term for all banks that are “challenging traditional banks”, which is separated into three different categories (Embryonic, Real, or Pseudo Challengers).
However, the widely accepted treats of a challenger bank include offering banking services, which disqualifies solarisBank here. On another note, Finovate showed the same pattern on the “Germany’s Top 10 Challenger Banks List” released this week. Finovate threw in names like Bitwala, Kontist, solarisBank, Consorsbank, and Fyrst together for the same list, which attracted some fair attention social media that is also worth mentioning here:
Ville Sointu, Head of Emerging Technologies at Nordea, talked about iOT and whether banks can become more connected using data (the answer is “maybe”). Putting machine-readable, lawyer readable, digital, and valid contracts at the heart of the process, Ville Sointu stressed that blockchain is not a solution for iOT, and that digital contracts might be distributed in the blockchain at one point, but right now it’s not necessary.
Clara Durodié from Cognitive Finance Group gave an impressive speech about building ethical AI for the FinServ ecosystem, while additionally clarifying some common mistakes that are made when talking about AI. Listing business strategy, corporate governance, and profitability as the items on the AI start-ups’ checklist, Durodié stressed that to build scalable products, tech should follow the business strategy and not the other way around. Her reminders on how 70% of the money spent on tech is going to waste, revealed the importance of tackling the digital transformation challenges: lack of tech-savvy BoD members, governance, and ethics. She rightfully pointed out that companies have the responsibility to develop ethical AI and need to enforce explainability, audibility and accountability principles at the same time to align governance and ethics when developing new products.
Just like the other events of 2020, RegTech was under the spotlight during Finovate as well. During the RegTech panel, Ghela Boskovic suggested turning compliance into a profit stream (productizing compliance) instead of seeing it as a mere cost factor/burden. She stressed that although RegTech specifies problems across the value chain, it doesn’t look at the bigger picture, and mostly when solving a specific issue, institutions ignore thinking about what other problems this solution might be causing.
At the main stage, Product Consultant Meaghan Johnson displayed attention-grabbing FinServ UX samples from Monzo, Capital One, and more. Advocating updating customer experience constantly according to the user needs, she listed being timely, relevant, personalized, and predictable as the characteristics of a good UX design. She recommended FinServ providers to experiment, to speak with their customers and to test early and often.
Finovate, in cooperation with EPWN, offered a diversity panel as is the custom for these events. It appeared as the fact that the panel was scheduled concurrently with the demo sessions made it a less popular destination for the conference participants. The panelists stressed the importance of the definition of diversity – that is not about having different genders but different religion, sexual orientation, and opinions around the table. However, the audience demographics (90% women) showed that this message didn’t receive all its participants. Bottom line? All internal clogs of financial institutions have the responsibility to put diversity on the main agenda, striping it off from its compliance checklist duties.
Demo Sessions introduced a lot of new and growth stage start-ups, which prepared amusing role-playing gigs for their 7-minute pitch. The participant start-up batch demonstrated a range of supporting customer support, fraud detection, and digital financing solutions, using artificial intelligence and big data. Horizn, Crayon, Itscredit, and Payever were among the attention-grabbing start-ups that pitched during the event.