The conference, which took place at Palais Brongniart and gathered more than 2600 unique attendees from 72 countries, combined main stage discussions, pitch/showcases, interviews, panels with the perfect mix of an exhaustive knowledge of financial institutions, thought leadership expertise and the reach to the fintech world.
Banks and fintechs – still plenty of room for collaboration
Collaboration between fintech startups and traditional banks is surging, while the two seem to (truly) recognise the mutual benefit of symbiosis. There is a lot of room for cooperation between banks and fintechs, said BNP Paribas’s CEO Jean-Laurent Bonnafé. From the various business areas of banks, the payments space and digital onboarding are the major target niches of the collaboration. For banks, such partnerships mean speed, convenience, lower and lesser costs, and solid technical know-how.
“Banks need to innovate to keep customers, and they’ll continue going to fintech for that kind of innovation”, added Jacob de Geer, co-founder of payments company iZettle. Thus, “fintech is a blessing for banks”, as strongly agreed by Teppo Paavola, the CEO of BBVA New Digital Businesses.
For startups, partnerships with financial institutions will provide future growth and the possibility to make scalable, sustainable impacts.
Citi Ventures, for instance, the innovation engine of Citi, is committed to conceiving, launching and scaling new initiatives with the potential to transform the future of financial services. Proof-of-concepts and pilots test and learn in a wide range of emerging technologies, including blockchain and cryptocurrencies, biometric authentication, the IoT and artificial intelligence.
The great rebundling of banks
Looking back, the first phase of fintech was ‘unbundling’ banks — taking one of the features of a bank and making it digital, customer-friendly and cost-efficient. Building businesses around individual products in areas like business lending, FX or payments and offerings, with products that targeted specific demographics and use cases. Bundling teeny tiny payments that banks didn’t like that much, making them better. Biting small pieces of a bank`s pie.
No doubt, the unbundling was a lovely model and necessary to address poor services and high costs, but it was far from being efficient and, just as importantly, with so many new financial products, it created fragmentation. A whole lot of it.
However, back in 2015, the great rebundling started to happen, with fintechs offering a multitude of financial products, adding a broader range of services personalized to customers` needs, with platforms that are able to give them financial management functionalities across multiple financial products and financial institutions.
Some fintechs that initially started by offering a bank account and a debit card as a core product, realised they must offer a broader range of services to satisfy their clients’ needs and become an all-encompassing platform - N26, Monzo, Qonto, etc.
Others added a bank account to their offering – and some of them are applying for banking licenses. Take Revolut, Zopa and TransferWise. Revolut started as an electronic wallet app and then has been adding new features that make it act more and more like a bank account. Now, Revolut provides personal IBANs, a credit feature, business accounts, travel insurance, and phone insurance. Also, now it`s looking into adding cryptocurrencies in the offerings. Moreover, Zopa - that pioneered peer-to-peer lending in 2005 - is currently pursuing the UK banking license and planning to launch a bank offering FSCS-protected deposit accounts for savers. Furthermore, TransferWise – who found that the bundled model of banking was unfair - has begun rolling out its borderless bank account and debit card to private customers.
The impressive evolution of business models
More and more actors want to offer banking and payment services. New solutions allow Fintechs and banks to deploy their services in a fast, reliable, and scalable way in order to provide end-to-end digital enablement to their customers.
The Paypers had the opportunity to listen to Fintech companies such as Kantox (B2B FX player, offers products and solutions for banks and corporates on its distributed ledger engine), Tink (a free private finance app that helps users keep track of their money) and Moneymailme (the CEO revealed the worlds first multi-platform blockchain app store for smart contracts).
Also, we had insightful discussions with Invoice exchange (the online P2P factoring platform which enables SMEs to sell their outstanding invoices to financial investors), Covercy (UK licensed and backed by fintech investors like SGVC – Covercy offers Covercy terra, a platform that provides auto investor onboarding, capital flow management, and reporting), and 4stop (offers global compliance and risk management - through a single API, companies can access 1800 global KYC data sources to manage compliance requirements on a global scale. This is achieved with 4Stop’s proprietary anti-fraud technology, real-time intelligent monitoring and data aggregation analysis).
Moreover, we are glad to have met Ipagoo (part of Orwell Group, offers a mobile banking app offering multi-country and cross-currency accounts) and FinReach (helps financial organisations maximize their customers lifetime with SaaS products - in 2018, FinReach will launch Herbie, the online behavioral analytics tool, which identifies relevant leads for banks), as well as solarisBank (the Berlin-based company offers a banking platform that enables companies to offer their own financial products).
“PSD2 - sort of has happened and sort of it hasn`t”
...said Teppo Paavola of BBVA.
“PSD2 is about breaking up the value chain and driving innovation and competition”, says Starling`s Bank CEO, Anne Boden. Indeed, PSD2 and Open Banking will revolutionise banking, make the system more competitive, and give consumers access to the best products for them.
However, while everyone is excited about the benefits that will flow from Open Banking, for the more skeptical it could cause issues with the security of previously private data.
PSD2 poses a key challenge for banks as they have to find ways to ensure compliance and strong authentication adoption. There are numerous concerns raised about the security and privacy risks increased by an Open Banking regime and how financial institutions and third-party providers will tailor risk management and authentication platforms.
It is a happy Darwinian world after all
Fintech startups are jostling for a place in the market, backed by new technologies providing alternative solutions and business models. The battle between fintechs is on.
However, key metrics such as customer adoption, investments, chance of survival, innovation, and marketing seem to provide challenges for fintechs, which, if overcome, can lead to game-changing success. There are always windows of opportunity for small but fast and flexible players, whose solutions adapt quicker to market demands. Time (2018, especially) will tell how it worked for fintechs.
We thank everyone whom we had the chance to meet for a great, insightful conference!
The Paypers is the Netherlands-based leading independent source of news and intelligence for professionals in the global payment and e-commerce community. Our products are aimed at merchants, payment services providers, processors, financial institutions, startups, technology vendors and payment professionals.
We have a special focus on all major trends and developments in payments-related industries including online and mobile payments, online/mobile banking, cards, cross-border e-commerce and e-invoicing. We are also keen on keeping our readership informed with regard to online fraud prevention innovations and the most significant trends in the digital identity space.
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