WITH the inaugural New York Fintech Week well under way, we continue our exploration of the likely themes at the event.
In the second part of our summary of the key messages that emerged from the fintech community’s summer gathering in London, we start with the topic that was on everyone’s lips:
People can’t stop using the C-word
Whether it was partnerships between corporations and start-ups, regulators teaming up with tech firms or banks building bridges, collaboration was the buzzword at London’s Fintech Week. Ian Gilbert, chief revenue officer for ‘onboarding’ automation software provider Agreement Express told a panel on the state of play in UK financial services there was “an emergence of less of a disrupt-the-incumbents-at-all-costs attitude… and more one of disrupt through collaboration”.
Alexa Fernandez, head of partnerships for BBVA, said that in response banks shouldn’t supply funding alone but support and expertise to help fintechs grow. “Clichéd as it sounds, it’s about mentoring and giving advice and supporting in ways outside of the traditional ‘let’s do something on a contract’.”
A panel on regulatory innovation heard Santander’s director of new business models Stephen Dury enthuse over the collaboration that can happen both within organisations and across the industry. “If you can put a team of people together with a common goal, forgetting where they came from… it’s amazing what you can achieve.”
And Diana Paredes, co-founder of regulatory software developer Suade Labs, said working with fintechs could get corporations quick results: “The bank gets a lot of benefit because it’s a lot cheaper to do [research and development] through a small company because they will be very efficient and agile.”
But banks don’t always get it right
Barclays’ head of commercial transformation Ed Carrell said banks no longer had either the capital or brand attractiveness to take entrepreneurs in-house. So creating the right environment for partnerships was essential. “You can’t go in with an approach of saying ‘come work with us’ and we’ll stick an arm around you and suck you into the beast,” he said.
Cultural change was needed to empower bank staff to support fintech out of innovation labs and into the mainstream, rather than using safer but less-innovative established companies, Carrell acknowledged. As Paredes pointed out, many people within banks who championed fintech innovators had ended up getting fired.
Meanwhile, Jeff Tijssen, head of fintech for the Capco consultancy, said too many banks effectively used fintech firms for PR exercises. “Stop wasting valuable time for these start-ups. Don’t play around with them,” he demanded.
And fintechs have to get noticed first
Daniel Doderlein, who heads up Norway’s payment platform provider Auka, said his firm had to sign up 200,000 customers to its mobile wallet service before banks took notice.
“It’s the fintech community’s job to push forward and get real customers on the platform, and then try to partner and sell, because it’s extremely hard to just sell a concept, a piece of tech, into the banks. The invitations will come from the banks to partner you because you are sailing up on the horizon as an actual competitor, not just a technology vendor.”
Africa punches above its weight
Just $0.8bn has been invested in fintech in Africa since 2010 – less than one-tenth of the sum ploughed into the UK’s sector – according to Ian Dowson, of William Garrity Associates. Yet a large, strong and highly innovative private-sector fintech ecosystem is “developing before our eyes”. He said M-Pesa’s cheap mobile-phone services allowed 34.3m people to access cash from 160,000 agents across Kenya. A decade ago, people relied on just 4,000 banks. “Kenya didn’t have an effective means of exchange for the majority of its population. It now has,” he said.
Mobile payments have in turn created a huge Pay As You Go economy, providing 800,000 solar panels, which could be applied across utilities such as sewage, electrical microgrids and gas. And the Kenyan government is enabling development through financial inclusion, he said. “It has led to the world’s first treasury bond available on your smartphone. I can’t do this in the United Kingdom, the supposed hub of fintech,” he added.
And Bitcoin can make a difference too
Another Kenyan company, the foreign exchange company BitPesa – which also works in Nigeria, Uganda and Tanzania, helps traders that might once have been forced out of business by a lack of access to US dollars to survive, according to its chief operating officer Charlene Chen. “Freelancers were being paid into Paypal but, without a US bank account, it was costing them 17% before they were able to get paid in Nigerian Naira,” she said, during a panel debate on how technology could help the “unbanked”.
So why hasn’t it truly taken off yet?
Acknowledging it was very difficult for the average user to adapt to Bitcoin, block.one founder Brendan Blumer said it was “a fundamentally new building block” and that we didn’t yet understand its full potential. “Trying to understand what we can do with the blockchain at this stage is like trying to predict Facebook when we first discovered email,” he added.
Blockchain ‘will decentralise’ society
Looking to the future, Blumer envisages diminishing roles for regulators and central banks. “In the future the auditors will be the public. You’ll essentially have the entire world acting as an auditing body. That’s happening with all these currencies already.
“This new economy does it completely differently, is 100% transparent, doesn’t start fuelling things with liquidity, doesn’t print money… I don’t think the role of the central bank will change in the old system but I don’t think the old system will remain the majority over a large period of time.”
However, asked about the inefficiencies of handing power over to people, he accepted that the public doesn’t always make better decisions than a centralised group and so an elected body might end up stepping up to fill that role.
But it doesn’t stop at finance
Talking about content network Steemit, Blumer says the website has no central server, meaning nobody can shut it, take control or censor information surrounding posts, likes or interactions.
“In five years’ time, if you don’t timestamp your articles on blockchain you’re going to be considered a fraud, if you don’t put content on the blockchain you’re going be considered a revisionist. These organisations will become something people can trust at a degree you can’t trust centralised entities.”
The nature of trust has already changed
Western Union partnerships vice president Christina Hamilton said customers already had a much more powerful voice. “Trust is no longer built on that one-to-one relationship people might have had with a brand or bank,” she said. “Today it’s built on peer reviews and how many likes they have on Facebook.