5 February 2020
Digital change has a firm grip on the financial industry. A range of emerging technologies are opening up exciting new opportunities and business models for companies and customers alike.
The entire banking ecosystem is changing rapidly. For many users, the first point of contact for financial matters is no longer a bank branch, but instead a smartphone. Companies need to stake their claim in this period of change. Cooperation between innovative, agile fintechs and the industry's established competitors is accordingly more relevant than ever.
At the Frankfurt Digital Finance event held recently in the city’s Zoo Palais, representatives of business and finance joined political decision makers and renowned scientists to discuss the key future trends and explore potential avenues of cooperation.
In his keynote speech Erik Podzuweit, founder of Scalable, explained how dynamic digital change is impacting the behavior of individual customers. The concept of the bank as a central point of contact for all financial issues is becoming a thing of the past. A handful of mobile apps look set to replace individual bank services; low costs and excellent user experiences are winning over customers. At the same time, the silos within established institutions are being torn down due to new technologies.
Various experts then took the stage to share their views on the much-debated topic of open banking, with Capco Partner Jan Stüve joining representatives of Google and IBM. “Open banking is not hype, but the new reality for the financial industry,” Stüve told delegates. “The established banks need to position themselves quickly in order to remain attractive via new business models.”
Frank Pohlgeers of Deutsche Bank agreed: “Our clients clearly indicated to us that they want to be able to get in control over their data. Through our dbAPI, we enable them to directly profit from personalized third party offerings. Our cooperation with Finanzguru, a Mobile App providing a structured overview of their accounts and financial recommendation to the customer, is one example of how we brought Open Banking to life.”
There was a strong consensus that open banking will have a significant impact on the industry. Ultimately, the biggest winner will be the customer, who expect improved transparency and user experiences.
A cross-industry dialogue then followed between representatives from various banks and officials from the automotive industry. These two sectors are both facing headwinds, especially in Germany, as well as enormous technological challenges. There was agreement that it will be essential for companies to inspire their employees to embrace change if they are to succeed in the digital age. Corporate culture will be the foundation on which new ideas and visions can be built.
Next up was the topic of payment transactions, with Capco partner Carsten Hahn chairing a high-powered panel of representatives from academia, trade and payment processing. The first topic on the agenda was the importance of payments for e-commerce. Professor Dr. Marcus Schögel from the University of St. Gallen noted: "For merchants, payment transactions can rarely be seen as a way to offer the customer added value, or even to differentiate themselves. But especially online, it is crucial that the payment works and is easy to complete. If not, the customer cancels the process."
Other panelists judged that it was key for retailers to provide customers with an appropriate choice between different payment options. It was also agreed that data security is an important issue for German online customers. Particularly as regards the US giants, in the area of credit cards and wallets they expressed significant reservations – but at this point payment transactions do not seem an area where traditional banks can emerge victorious Carsten Hahn stressed: "GAFAs, especially Amazon, have great potential in payment transactions. If Amazon offers its own payment service, this data can also be used for its own advertising. This is a dangerous scenario for other ecommerce providers."
Elsewhere, a regtech talk discussed the possibilities for cooperation between established banks and more digitally savvy fintechs. If both sides were to pool their expertise, then a multitude of regulatory requirements could be overcome. Unsurprisingly, blockchain was also on the conference agenda, with ambitious fintechs presenting potential use-case scenarios around the deployment of distributed ledger technology.
Another panel looked at artificial intelligence (AI), and how the use of smart algorithms will revolutionize the user experience for the end customer while offering immense efficiencies for financial institutions.
The motto of the event - "Better Together" - was presented once again in concrete ideas. Innovation teams from firms such as Deutsche Bank, ING and TechQuartier gave short pitches on how fintechs and established companies can work together to ease their paths forward. Several AI-inspired platform ideas, based on well-known solutions such as Linkedin or Tinder, were introduced as opportunities to showcase skills or look for partners with specific knowledge. Transparency and user-friendliness were again flagged as key elements.
In closing, Tamaz Georgadze, CEO of Raisin, reiterated that banks and fintechs should not see each other as rivals – rather both sides can benefit greatly from a cooperative approach and contribute their respective capabilities to strengthen Europe as a financial center.
Speaking after the event, Capco partner Carsten Hahn commented: "Given the strong competitors from Asia and the USA, it is crucial to exploit synergies. There are many innovative ideas in Germany and Europe. Together, we should strive for successful implementation. The event showed what powerful new technologies are available to us. These are exciting times for banks, and it is clear that customers can look forward to a variety of innovations and completely new business models."