Talking Finances and the Future of Fintech
We asked BCGDV partner Ella Rabener to fill us in on the state of the fintech sector — and got a few valuable personal finance tips too.
BCGDV partner Ella Rabener has a proven track record of fintech entrepreneurship, having played a key role in the launch and development of wealth management platform Scalable Capital before joining DV. She was kind enough to come by the DV office in Berlin to share her financial expertise with an audience as part of the DV Life Talks event series.
We caught up to her afterwards to get her perspective on the current state of the fintech sector and asked her for some personal finance tips.
BCGDV: If you could offer one personal finance tip, what would it be?
Ella Rabener: It’s hard to pick just one, but the most important would be to have a monthly savings plan that you use to buy ETFs, which are cost-efficient funds that track the performance of an index. You could, for example, just pick a very broadly diversified global equities fund, such as the MCSI World Index, which tracks thousands of stocks worldwide.
A monthly savings plan going directly into a diversified investment like this instils discipline, encouraging you to set aside a certain amount of money every month and to make sure that the money leaves your current account and isn’t used for purchases or to settle your credit card bill — it’s purely for investment. It’s the discipline of saving every month that’s the most important part of this, establishing a continuous habit of saving and making sure it doesn’t just sit around in a savings account somewhere, it’s invested.
Why is technology so important for personal finance, and what does it offer in contrast to the old model, where you might phone up your stockbroker or let your bank handle everything?
I think it’s particularly relevant for people who don’t want to invest on their own, which is actually the vast majority of people. There are also many people who have been investing on their own so far simply because there wasn’t an alternative to doing so.
These days, with digital wealth managers or “robo-advisors”, there’s no longer an excuse not to invest because they make it so easy to find an appropriate portfolio tailored to your circumstances and risk profile. It’s always been hard for people to assess the level of risk they’re comfortable with and how their time horizon for investing fits with that. Digital wealth managers do that for you, helping with risk assessment during the onboarding process, which is very difficult for consumers to do on their own, and then managing your portfolio in a way that is compatible with your risk profile. They do the hard work for you and the costs are relatively low.
You’ve spoken before about how financial technology benefits women in particular, could you explain why this is the case?
It’s relevant for everyone, but there’s a higher share of men who feel comfortable making investments on their own than there is women, which is a little ironic as when you look at statistics women are actually better investors than men, both in the case of professional fund managers and private retail investors.
Men feel more confident, which means they’re more comfortable on their own, whereas women feel less confident. It’s therefore important that women have a way by which they can outsource investing cost effectively to someone who they know will do a good job.
How can we expect the fintech sector to develop over the next few years? Do you see growth continuing? What trends might we see?
I think we will see more tailored recommendations regarding how people can make savings brought together into a more holistic offering. Right now, you have different products for saving by rounding up your purchases to the nearest pound, euro or dollar and saving the difference; digital wealth managers that help you invest money that you give them; and apps that analyse your spending and recommend areas for improvement or better deals on insurance or credit cards.
It all feels relatively disconnected, and what I hope we will see is something that’s far more integrated and covers the entire financial lifestyle, something that can set tailored saving or investing targets relative to salary, recommend somewhere to invest it to achieve individual retirement goals, offer retail estate recommendations and identify better deals…essentially cover the entire financial life, like a financial concierge.
Recently we’ve seen some of the huge tech companies enter the finance space. Apple are launching a credit card with Goldman Sachs and Facebook are developing their own cryptocurrency.
How do you think this might impact the fintech sector, which has been more startup-driven in recent years? Will the big players have too much of an advantage, or can startups continue to move quickly to retain or grow their market positions?
A company like Apple does have a huge advantage, because the brand is so powerful and they have a relationship with so many customers already. It’s not just that the brand is known, it’s that it has such a favorable reputation. The credit card has a couple of great features and the price offering is really good, so it’s an attractive card objectively speaking. But even if that wasn’t the case I think many people would go for it just because it’s the Apple card. If you’ll excuse the pun, that’s a card you can’t play as a startup, because you don’t have the reputation of Apple.
Whenever Apple or Google or another giant launches something, it will obviously generate a lot of attention. Startups can’t replicate that. But, at least for now, the giants look like they’ll just be operating in the plain vanilla mass-market space. Investing isn’t one of those, it’s quite a complicated process and requires compliance with a lot of regulation. Issuing a credit card is a lot easier. I think that, at least in the short term, the giants will stick to these areas and startups will continue to own the more complex spaces.
There are more regulatory issues in the fintech sector than for other areas, and there are different regulatory landscapes in the EU, UK, US etc. What impact do you think this will have on the development and growth of the industry in different markets?
I think the difference in the regulation itself isn’t so relevant, because as a startup you deal with the environment you’re in. What’s important is the extent to which each regulator is in favor of innovation.
In my experience, the BaFin (German regulator) is very open to innovation, and really want new companies to enter the market and disrupt the industry. It’s the same for the FCA in the UK and I would guess it’s the same for FINMA in Switzerland. I’ve heard very positive thing about the regulator in Singapore, too. I can’t speak to the situation in the US, but we’ve seen a huge number of fintech companies come out of that market.
So I don’t think it’s the regulatory environment that is the main factor, it’s just something that startups need to deal with. And what’s hugely helpful is the ability to passport your licence to the EU. Obviously if you’re in a country where the regulator is moving very slowly, that’s an issue. But in Europe or the US or forward-looking Asian markets such as Singapore I don’t think it’s going to determine competition too much at all.
