24 October 2018
SIBOS day 3 – How do fintechs see the future?
In addition to banks, also technology suppliers, third parties and fintechs present their views on the future of the payments industry on Sibos. The funny thing is that the vibe of a session changes when fintechs are on stage. The suits make way for jeans and sometimes even shorts and short sleeves. At the same time, the story they tell is very interesting. The session The Future of Money, that took place in a packed room on day three of Sibos, was proof that fintechs have detailed and up-to-date visions of the future. They covered how data are the new oil, the role of bigtechs in the payments industry and, of course, the future of banking.
The bankers in the room were immediately put on edge when Neal Cross, Chief Innovation Officer at DBS, stated that it is unbelievable that banks need regulations like PSD2 to change. He said that there are a significant number of industries that have embraced platformification – which means for banks that they would operate as the core financial platform, directly linked to fintechs – but banks did not respond on their own initiative.
Advantage for bigtechs: people are already customers
The advice of the fintechs was: do not focus on the products but on the customer experience. This was also underlined in previous sessions. The panel members also mentioned the competition between banks and bigtechs like Facebook and Amazon, as bigtechs are joining the payments market. The advantage for bigtechs: they already have a huge customer base. Bigtechs have mountains of data with which they can see exactly how customers think about certain brands and what they want to spend their money on. The already have ‘share of mind’ and can easily move to ‘share of wallet’ and offer contextual financial services that are directly tailored to the customer's wishes and needs. They don't have to advertise to get customers on board. In fact, without realizing, many of us already do business with Facebook and Amazon on a daily basis.
This makes it directly clear why data are called the new oil. Data provide perfect insight into what customers want and expect. But for privacy reasons, people are also skeptical when it comes to providing data. Where do you draw the line? According to Cross, providing just a little bit of data can actually be worse. “If I only give my e-mail address to a company, I receive spam, because they don't know me well enough. If I give more information, companies can start personalizing. Giving out too much data is not good either. When all personal details are available, some people can no longer afford to insure themselves because they would be classified as ‘high risk groups’. In that respect, data can work like a knife. You can use it in different ways, sometimes in a good way, sometimes in the wrong way.”
No daily contact with banks
This session also discussed the future role of banks. The conclusion: there is no clear answer to the question what banks will look like in a decade's time. Banks must choose who they want to be: maybe a global provider at the front-end that does business directly with customers? Unlikely, according to the panel members. Banks are not a natural daily partner for customers, says Brett King, CEO of Moven, as consumers don’t have contact with their banks on a daily basis. Consumers have contact with their banks only a few times per year, when they need to take out a mortgage for example. Facebook and Amazon however, are constantly in contact with their customers. That’s why these bigtechs have much more and better data. Another option is for banks to become utilities at the back end and offer services over a certain network. The tricky part is that scale and volume are needed to earn a decent living here.
The third option is to become an enabler as part of the customer experience. This seems the most realistic option to me. At equensWorldline, we believe banks will remain key players in the payments ecosystem, but they will have to change. Banks need to open up to third parties and the rest of the world. Co-creation is the magic word. Fintechs can for instance help banks to successfully enter the digital payment market, while banks can provide additional security through their key infrastructure and regulations. After all, the big advantage for banks is that they enjoy the trust of the customer. Jie Song of Ant Financial Service Group also recognizes this: “We cannot do it all by ourselves and we are eager to collaborate with banks and share our technology.” I therefore certainly expect banks to remain relevant in the future, as friendly partners alongside fintechs and bigtechs.