The growing abundance of data, the power of innovation and the inflation of regulation are reshuffling the cards for fast growth on increasingly intricated financial services markets. Banks are now collaborating with innovative and disruptive FinTech companies and consumers are using more ground-breaking solutions than ever in their daily lives, notably via their smartphones. On May 10 and 11, during the seventh edition of ICT Spring Europe, speakers from 10 major worldwide financial centers, including the CEOs of 20 promising European start-ups and some of the most famous FinTech specialists, discussed the latest trends in the financial industry, from the bank of tomorrow to the opportunities offered by Blockchain.
FinTech Startups and Banking Institutions Moving Towards a Common Destiny
“FinTech continues to trend across the financial sector. There are companies that bet on FinTech as an investment opportunity, that foster innovation and creativity and those that invest in FinTech for the overall betterment of the industry. We are inevitably heading towards an evolution of the banking industry”, said Jonathan Prince, co-founder and Partner of Digicash Payments in his opening address.
The first keynote speaker of the summit, Michael Jackson, a Partner at Mangrove Capital who contributed to build Skype a few years ago, stated that FinTech was not just the “largest Internet disruption”, but a genuine “apocalypse” for traditional financial industry players. He advised investors to remain cautious, reminded the “startup guys” that “it was hard”, told employees in financial institutions “don’t panic, you have a lot of structural advantages”, and finally insisted on the fact that startups and incumbents had no option but to work together.
“In Luxembourg, financial institutions and insurance companies are already collaborating with FinTechs”, said Nicolas Mackel, CEO of Luxembourg for Finance and moderator of the next panel session. “They are putting in place structures and mechanisms for collaborating with startups, in the interest of their customers”. The question raised was to know if “FinTech was entering a Maturing phase”. For Peter Vander Auwera, co-founder of Innotribe, “FinTechs are maturing but there is still a long way to go. From a scalability or regulation point of view, there are not mature yet.” “We are seeing new FinTechs offering banking services to other players in the financial industry, which is a sign of maturity”, said Marc Bernegger, Web Entrepreneur and Fintech Investor. According to Melinda Roylett, Senior Director at PayPal, “the ecosystem of mobile payment is still hyper-fragmented technologically and geographically. And customers want interoperability across silos”.
Pascal Denis, Partner and Head of Advisory at KPMG, lead the next discussion entitled “The view of Fintech on the Future of the Fund Industry” with FinTech industry representatives. Sylvain Forte, CEO of Sesamn, explained how his young company was “analyzing emotions on social media to innovate trading indicators”. “At Scaled Risk”, we deploy new technologies in the financial industry, like big data and data lakes, to improve data management”, explained Hervé Bonazzi. According to Ran Fuchs, CEO of FNA, the markets are becoming extremely connected and the existing mathematics don’t take it into account: “We use network theory in a simplified way”. “Today there is too much information and no time to understand”, said Balázs Klemm, founder & CEO of Almax Analytics. “This is why we use technologies like artificial intelligence and natural language interface to extract relevant information”.
The next session explored the FinTech venture capitalist vision through a panel discussion moderated by the Nasir Zubairi, FinTech Advisor. FinTech specialists Reinier Musters, a founding partner of Orange Growth Capital, Rémi Bourrette, Head of Strategic Investments at HSBC and Michael Meyer, General Partner of Middlegame Ventures took part to this discussion. They covered a range of themes including trends identification, overvaluation, Blockchain commercial viability, regulation burden, and technical ecosystem.
After a short break, Benoit Legrand, Head of Fintech at ING Group, took the stage to present the Bank of tomorrow. “Banks can profit from the FinTech revolution”, he said, if they “opt for a new banking model, from cost driven to customer value-driven, based on “authentic values” such as “consideration, transparency, simplicity and performance”, a new model “opened to the external world, partnering with FinTechs, walking away from the non-invented here syndrome”. Financial institutions also have to “embrace innovation at their core” and transform their corporate culture from a military-like vertical model to a collaborative, structured, empowering horizontal model. And at the end of the day, “the main challenge of the digital revolution is not digital… it is human and cultural”.
At the end of his speech, Benoit Legrand was joined, for the last panel discussion of the morning, by Huy Nguyen Trieu, author of Disruptive Finance, Sarah Khabirpour, Head of Strategy, Regulatory Affairs & MarCom for BIL, Yann Ranchere, Partner at Anthemis Group, and Björn Ottersten, Director of the Interdisciplinary Centre for Security, Reliability and Trust at the University of Luxembourg. They discussed the future of banks and banking, analyzing the difficulty of integrating innovation in the financial and transforming the culture of large organizations, the role of regulators, and the potential for further involvement in the banking field of players coming from other industries.
Innotribe: Organizing the Voice of the Customers
After the lunch break, the afternoon sessions were devoted to Innotribe, an initiative launched in 2009 by SWIFT with the objective of identifying emerging trends in financial services innovation and generating discussions about how these trends could impact the industry going forward. The animation and moderation of the half day were handled by Leda Glyptis, Director at Sapient Global Markets.
Following a short presentation of a partnership between Luxembourg for Finance and Innotribe on wealth management and fund distribution by Nicolas Mackel, CEO of Luxembourg for Finance and Fabian Vandenreydt, Global Head of Securities Markets at The SWIFT Institute, two entrepreneurs were invited to showcase their respective FinTech startup: Silvan Schumacher, co-founder & CEO of Swanest and Pascal Rode, co-founder & COO of Fundbase.
The participants to the following panel session discussed in depth the topic of the role of Luxembourg to attract and support startups. The panelists were Jean Diederich, Partner at Kurt Salmon, Fabian Vandenreydt, Nicolas Mackel, Nasir Zubairi, and Leda Glyptis. Fabian Vandenreydt then presented SWIFT’s Platform & Business Architecture, a group inside SWIFT “listening to the voice of the customers” and leveraging business references and architectures to drive R&D.
Pitch Your Startup
The afternoon ended with the second edition of Pitch Your Startup, a startup pitching contest organized by Docler Holding, in collaboration with Luxinnovation, the National Agency for Innovation and Research, and its ICT Cluster. The event gave 17 international Start-ups the opportunity to present their projects in front of a jury composed of Karoly Papp (Docler Holding), Jean Michel Ludwig (Luxinnovation), Marton Fulop (Docler Holding), Xavier Buck (DCL Group & ICT Cluster), Nicolas Mackel (Luxembourg For Finance), Keith Hopper (Docler Holding), Jean Hilger (ICTSpring Advisory Board) and Andras Danko (Docler Holding).
Just like last year, each Start‐up was granted 3 minutes and 33 seconds to present its project, followed by 2 minutes of questions and answers. The winner of the contest, SESAMm, received a 50.000 € prize from Docler Holding. SESAMm is an innovate FinTech startup which provides investment indicators based on Big Data analysis of social media. These products are used by banks and hedge funds that are interested in new technological approaches for trading strategies. SESAMm’s team is composed of passionate specialists with strong competences in Natural Language Processing, machine learning and quantitative analysis.
Nomoko came 2nd and works on the first compact 1000 megapixel camera, together with proprietary software for 3D modelling, a product is called lifelike 3D. LuxAI, a spin-off from the University of Luxembourg, which uses the latest advancements in Artificial Intelligence and robotics in building social robots for educational and therapeutic applications, came 3rd.
“FinTech is here to stay”
“How can FinTech contribute to an overall improvement of back office and compliance processes? How can traditional banks comply with new standards expected by the customers and add digital value to their offer, particularly in the field of payment? What are the opportunities that the Blockchain technology can offer”? These are the questions raised by Jonathan Prince at the opening of the second day of the summit.
The first speaker of the morning, Alexandre Rochegude, FinTech Evangelist & Partner at KPMG, approached the topic of Next Generation Payments. “People don’t like to pay. It’s a burden”, he said. Alexandre Rochegude considers that “what we have to change is the whole check-out process, off-line and on-line, not only the payment action” and that, in the future, “the payment gesture itself will disappear”.
The next lecturer, Jean-Louis Schiltz, Former Cabinet Minister and Guest Professor at the University of Luxembourg where he teaches internet and telecommunications law, addressed the evolution of KYC procedures and requirements, from the early stages until the current reflections on KYC 5.0 “that must be part of the Digital Single Market” in addition to being “global and portable.” Professor Schiltz also evoked a few legal challenges including the possibility to regulate the KYC actors, data protection issues, the requirements of the new GDPR, the nature of the information itself, and the principle of informational self-determination.
Imran Gulamhuseinwala, Partner & Head of FinTech at EY, lead the next panel discussion entitled FinTech: Myth or Reality. “In other words”, he said, “where are we in terms of FinTech Lifecycle?” For Raoul Mulheims, CEO & co-founder of Digicash Payments, there is no doubt: FinTech is a reality as “20% of the population in Luxembourg are Digicash’s technology”. Jed Grant, Founder of KYC3, a RegTech company, considers that “FinTech is here to stay” because it is “unbundling financial services” after the crisis and the associated “to big to fail” syndrome. “Bitcoin was a myth two years ago and today it’s a reality”, witnessed Nejc Kodrič, CEO of Bitstamp. For Bert Boerman, CEO of 2Gears, a RegTech startup, “banks are still afraid to move from something totally unstructured to a completely structured approach, but they have no other choice” and, according to Robert Somogyi, Director Strategic Initiatives at Clearstream, “it is not a myth anymore and we see solutions growing”.
Blockchain, Brexit, New Payment Ways: Opportunities or Risks?
After the coffee break, Matteo Rizzi, co-founder of FinTech Stage, orchestrated the second part of the FinTech Venture Capitalist Vision. All the panelists agreed on an enthusiastic view of the perspectives for the future. “You can’t build in isolation. You have to cooperate”, said Yann Ranchere, Partner at Anthemis Group. “Banks have been used to client-supplier relationships. Now they have to move to partnership with VCs and FinTechs because there is a lot of value to extract from this kind of cooperation”, he explained. For Jerome Wittamer, one of the founding partners of Expon Capital, “the disruption is in place and at the 2020-2025 horizon, there will be a lot of rounds to do. As investors, we just have to be patient.” Wolfgang Krause from Seventure Partners shares the same vision: “we are at the very beginning. In Europe, we still don’t have a seamless experience in opening a bank account.”
During the next session, Thibault Chollet, Director at Deloitte Luxembourg, and his fellow panelists explored the opportunities offered by Blockchain. “We are seeing a paradigm transformation from a pyramidal structure to a distributed network type structure”, explained Richard Caetano, co-founder and CEO of Stratumn. But “we need interoperability between all these networks. Scalability is a challenge too”, added Frank Schuil, CEO & co-founder of Safello. Laurent Kratz explained that Bitcoin was “still the main use case for Blockchain, so we have to work on both in parallel”, even if the cryptocurrency “is still at the protocol stage, like SMTP or TCP-IP”, according to Jon Matonis, CEO of Globitex: “It’s a value transfer protocol, money over IP”. Anyway, “Blockchain could constitute the foundations of a major clearing system at a global level”, according to Denis Kiselev, founder of SnapSwap. As for the role of the research body, Radu State, Head of the Service and Data Management in Distributed Systems group at the University of Luxembourg, said that “researchers could bear the risks and act as a sandbox for the industry”. Furthermore, Deloitte Luxembourg has unveiled, on the occasion of ICT Spring Europe 2016, a Blockchain-based alternative to the paper trail that normally proves the provenance and movements of an artwork.
After the lunch break, Nasir Zubairi, FinTech Advisor, shared his passion for business, entrepreneurship and innovation, and told the FinTechs attending the summit what startups need to know. His intervention was followed by a Q&A session on new ways of managing payments, animated by Philippe Gelis, CEO & co-founder of Kantox, and
François Masquelier, Senior Vice President & Head of Treasury and Enterprise Risk Management at RTL Group. The last session of the summit, a discussion between Nektarios Liolios, co-founder & Managing Director of Startupbootcamp FinTech, Nigel Verdon, Partner at Digital Change, and Joachim Beckert, COO, CRO & Member of the Management Board of UniCredit, tackled the opportunities and risks of a Brexit for Luxembourg.