March 12, 2018
Having trekked between the ExCel convention center and central London for most of last week – Finovate Europe moved to this larger and more remote location from the historical Old Billingsgate Hall this year – I can’t help but think that the changed location and format of the event reflect the wider changes happening in the fintech space.
So what’s different? A bit of background first. Finovate debuted in New York in 2007. The conference, which showcases banking and financial technology (fintech) innovation, became an instant success. It tapped into budding demand for digital innovation and quickly spread to other locations – Bay Area in 2008, London in 2011, and Singapore in 2012 (although the latter event was never repeated). Each event follows the same format – presenters have seven minutes to introduce their company and demo their product live; no slides are allowed.
Starting with Finovate Fall 2007 in New York, much has changed. Two days of demos are now followed by two more days of presentations, fireside chats, and roundtables of industry experts and practitioners (full disclosure – I was one of them). Finovate is also gaining three more editions: in Asia, Middle East, and Africa; and Finovate Europe has moved to the ExCel to enable a larger number of attendees.
Finovate organizers are keen to emphasize that these changes are in response to attendee feedback. I can see where the demands are coming from. From grandmas in the suburbs investing in cryptocurrencies, through startup accelerators and competitions run by global firms including Barclays, BBVA, and UBS, to software and service firms bundling fintech ecosystems into their products and marketing materials, fintech is no longer niche. It’s big business. While overall investment in fintech has fallen from its peak in 2014 and 2015, at $31 billion in 2017, it still captures a big chunk of overall tech investment, according to figures compiled by KPMG.
I have written previously about the wounded unicorns of the fintech industry and how this will prompt the maturing of the space, with a greater understanding of the different subcategories of fintech and individual firms, saturation of certain areas like lending and payments, and opportunities in others. All of this was reflected at Finovate Europe this year:
- Fintech has lost its direct-to-consumer ambition. Previous editions of Finovate have seen presentations by now established brands like Fidor Bank, eToro, Kabbage, rPlan, and Scalable Capital. Most of these startups have since shifted their business model from just direct to customers – consumers or businesses – to some form of B2B2C, working with incumbents as their distribution partners. That’s because despite all the claims about incumbents neglecting their customers’ needs, customer acquisition in financial services remains hard and expensive. Almost all of this year’s presentations offered software or white-labelled solutions for incumbents. And much of the debate in the latter two days of the event focused on best practices in incumbent/fintech collaboration.
- We have more work to do on digital customer experience. Technology vendors Backbase, Crealogix, Meniga, and W.UP (all this year’s Best of Show winners) continue to capture audience’s imagination. For many years now, these and other frequent Finovate presenters such as ebankIT and Tink have pushed the envelope on digital banking engagement, making banking personal and fun with social media-like transaction feeds, spending and savings insights, tailored retailer offers, and gamification. Until conversational interfaces grow in maturity, I can’t think what more we can do in this space. Yes, we can embed more third party content into digital banking, but do we really want to turn digital banking into our windows onto the world? I’m tempted to think that it’s banking that will be integrated into other ecosystems – commerce, for instance – rather than the other way around. What we could do is actually implement some of the existing technology. As our online and mobile banking benchmarks show, plenty of banks have more work to do, sometimes on basic functionality and usability.
- There’s even more work to be done on digital operations. Digitizing operations is rarely glamorous and wasn’t going to steal the show, and yet much of the friction in customer journeys is due to the cumbersome and outdated processes in the back office. Plenty of fintech firms are jockeying for the lucrative business of identity verification, eKYC, and fraud detection (DFT Empower, Electronic Identification, Fortytwo Data, HooYu, IBM Trusteer, Lleida.net, iProov, Onfido, and SecuredTouch). KBC Bank Ireland and Google put the technology to work by demonstrating digital account opening in five quick steps. Lending and debt collection are becoming automated and, believe it or not, engaging too (ApPello, Intelligent Environments, ITSector).
- Insurance and investing have much to gain from AI. From augmenting and automating the work of insurance agents and financial advisors (aixigo, Anorak, Avaloq, Envestnet, and Wealth Wizards), to analyzing news for buy or sell signals (Yukka Lab), insurers and investment firms can expect higher productivity and effectiveness from their staff. While Alexa and other digital assistants seemed to suffer from stage fright in a number of presentations, machine learning was a clear winner.
- Open banking has unleashed a host of innovation. Fintech startups are catering to both banking minimalists – who just want to be compliant – and maximalists, whose ambition is to become platform businesses. Startups like Fintech OS, Hydrogen, NDGIT, Tesobe Open Bank Project, and Salt Edge offer an API layer, account aggregation, an app store, or apps built with partners’ APIs. Yoyo, a digital wallet, demonstrated the power of integrating banks’ transactions to deliver loyalty offers without the need for a separate loyalty card.
- Regulators are into, and onto, fintech. Just as the European Commission unveiled its Action Plan on how to harness fintech opportunities, members of the European Banking Authority, as well as French, German, and Lithuanian central bankers debated the perils of regulating the fintech industry. If you have an image of central bankers as old stuffy bureaucrats – think again. The openness towards fintech players, the understanding of the trade offs between values like innovation and data privacy, and modesty when it comes to trying to regulate emerging technologies like blockchain were very impressive.
- It’s becoming harder for digital leaders to ignore cyber security. While a few startups demonstrated the power of AI technologies to battle fraud, the proliferation of digital technologies and simple human errors are giving the bad guys the upper hand. Ethical hacker Jamie Woodruff left us all genuinely afraid of being hacked. Indeed, one of Forrester financial services predictions for 2018 is that at least one large financial firm will suffer a cyberattack that destroys trust and proves fatal to its business.
- artificial intelligence (AI)
- digital business
- digital customer experience
- digital disruption
- digital transformation
- ebusiness strategy
- financial services
- innovation management