Next Money Fintech Finals 18 Conference

A vibrant ecosystem where banking models are challenged by data-and-ecommerce ones of Web platforms

Hong Kong has once again highlighted its power and the mixture of East and West technologies being discussed, compared, merged and taken apart by the fintech audience: guessing and taking notes from the presentations of notable speakers from different regions. Hardly anything new been said, but specifics doing particular things are more important than the call to action of doing new things. Conferences themselves tend to deviate: being either the monotony of thought leadership speeches, or a barrage a practical use-cases inspiring to iterate with AI, blockchain, digital identity, market opportunity scenarios.

Here is a short takeaway from the bright 2 days of Fintech Finals in Hong Kong:

Becoming a platform. Banks are seeing how their business is commoditised, with core activities suffering from low interest rates, standardisation of offering that many have learned how to do more or less well through mobile, regulation challenges and the cost of it, requiring thousands of people, billions in IT investment — and guaranteeing only the constant fear of penalties the cost of which surpass the economic cost of error. On the other hand, they, just like the insurance companies, have accumulated tens, if not hundreds, years of data on users identity, their creditworthiness and other parameters. They also see how other platforms, that of the Internet realm, have earned the users trust and through satisfying their core need, build up and add new services.

Making some of them free and some of them offered through subscription, they maintain a trusted relationship, making it easier for them to contextualise the interaction / transactional data to target users with next services they might want to use. While the overall trust of giving internet services one’s personal information varies from country to country, mainland China offers a perfect scenario with people leading the chart of how much is already known about them either to the state or state-sponsored platform agents. The formed ability to analyse it brings envy from banks, where big data analytics has so far been no more than a gimmick to be told from the conference stage. Making credit decisions using social and consumption data in mili-seconds and provisioning of new services like discounted tickets because of good behaviour is something banks would either have to learn how to do, or they would render themselves as simple money provisioning mechanisms though the created social fabric of the web platform.

Becoming a platform is what some banks (like Bank of China, offering their services through WeChat) are already doing. Banks in those geographies where the social phenomenon has not (as of yet) taken hold, are making a big bet on API and Open Banking, that, as they hope, would turn them into platforms, either pushing their services to other services and thus contextualising finance, or pulling services from elsewhere, creating mashups and motivating developers to use their developer platforms.

Digital Identity may be a great service for the bank as a platform. Looking at how people leave the breadcrumbs of their data and behaviour on the web, regulators are getting more concerned about how this can be misused (harvested to apply for loans hidden under a false, forged and even farmed identity, or influence other peoples mind in an election) and in their drive to regulate how platforms use personal data — they can potentially rely on the mechanisms banks have been creating for themselves to store personal data. Digital Identity, the need to give the reign over how it is used and shared with 3rd parties is already written down in a number of bills on giving the user power over sharing the data between banks, so that to cut costs of on boarding and buying products where AML/KYC are required.

Why not offer this infrastructure for identity — based services for the web in general? This is still much better than sharing secrets that would still be spilled and lost. Yet, should a multi-factor private-public key platform be created, banks can aid the quest to reign in personal data theft, as services can share federated tokens, holding either permissions or answers to specific questions that AML/KYC bound services need to learn about us:

  • Are you over 18 to order alcohol? (rather than disclosing in full your identity including elements that are not important for this interaction)
  • Do you suffer from particular maladies? (Answering this question rather than telling everything around one’s health)

In a world where speedy communication and the fight for personal leisure time renders one obsolete in terms of proving for best deals and pushes one away from the mundane job of shopping etc, bots will take over — and would assume our identities to interact and bargain for the best deal while we see the next best collection of LOLcats. Sharing data in full is scary, as consumers would not change the root password of their devices storing it, and cloning a standard set of data invites all sort of malign ways to misuse it. Data sharing will be tokenised and identity should win much more from it that the payments industry.

Leapfrog nations follow the commerce path — and that influences the nature of agents offering financial services. Russia, as many other emerging markets, is slowly developing its currently inward-looking fintech ecosystem through e-commerce rails. The need to buy things over the internet and mobile broadband created the prepaid networks that, having been seen by banks enjoying their corporate relationships as a sideshow, grew to start creating mobile wallets, coupling those with prepaid virtual cards — and educating the user through the habit of consumption. The banks could have reigned in the decoupling of experience only recently, the major saving factor being that they have little legacy to pivot — but that also intensified the competition, where certain aspects of the banks (also suffering from low profit margins and high cost/income) operations are being solved by fintechs. The challenges remaining are the small size and the limited relationship the Russian financial market has with those of its neighbours that skews the scaling opportunity for startups, currently seeing no more than 3 potential buyers.

Simplify design. To successfully compete with fintechs, as well as test new approach at serving customers, several good lessons were voiced by the challengers — Starling (a UK challenger bank-platform), Neat (a mobile-card offering in Hong Kong) and Revolut (now a global travel card / FX retail/corporate banking offering). For most of them, light regulation helped to quickly iterate and test the overall approach — also helping the regulator itself. Creating a flexible regime for fintechs allow quick time to market for new ideas — as they increase competition, improve stability and reduce concentration of capital in too-big-to-fail institutions. Only that has allowed Revolut, for example, to achieve 1.4 million users with virtually zero marketing (all organic, they say). Fostering the right mindset and get-things-done culture is also important, proving the point for the management overhead a classic bank has to have — where in Revolut more than half of their staff are engineers who often don’t need a big corporate meeting to relentlessly improve their code and the product they all understand and believe in.

Design of the apps are no longer about the UI — but about UX: when planning the experience, marketing and viral elements are embedded in the code and the iinterface (Revolut offering better service or granting access, if a user shares info about it with friends).

As shown by the great two days at FF18, fintech is driven by:

  • Platformisation of services
  • Tokenisation of data (including identity)
  • Smart design
  • Light regulation and regulators cooperation, building bridges that allow fintech innovation scale, being based on similar approach.
One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.