The webinar is available to watch on demand here.
Together with Euromoney, Banking Circle hosted a webinar to debate the challenges of the emerging post-Covid world, and how financial services providers can work together for the best results. Featuring a group of experts from incumbent and challenger banks, the live debate was hosted by author, advisor and commentator on digital financial services, David Birch.
As Valentina Kristensen, director for growth & communications at OakNorth Bank, put it: “Historically, the relationship has been pictured as challengers coming in to eat the incumbents’ lunch. But I think we can all agree that if you’ve been around 200 years or more you’re not going down without a fight, and so we have seen much more focus on collaboration. Fintechs that enable incumbents and help them service their customers more effectively will do better than those trying to challenge the banks.”
Ģirts Bērziņš, head of digital innovation and strategy, digital banking at Swedbank, agreed, identifying that the current global crisis has brought about a “human revolution” regarding growing consumerism and how we act towards each other. “Those who focus on how to steal each other’s lunch will lose, and those who ask what value they can bring to the ecosystem will be the winners. It will not be one single winner; it will be a winning mentality.”
A platform economy
With the reality of Covid-19 as the backdrop, the panel went on to discuss post-pandemic financial services. Tony McLaughlin, managing director of transaction banking at Citi, talked about what he sees as the ongoing ‘platformization’ of the economy. “There has been an acceleration because of Covid – people are now interacting more than ever on digital platforms, including big tech platforms. What is happening is that financial services are being built into platforms, and the question is who will provide those financial services – the big techs themselves, fintechs or incumbent banks?
“We are at a turning point, the big story is the platformization of the digital economy, but everything is up for grabs, and the winners and losers are yet to be decided.”
Sibylle Strack, CEO of banking services provider Kontist, described a challenge faced by many banking providers: “At Kontist, we are looking like only being a banking services provider. We want to go in a completely different direction and not be seen as a bank. However, in order to have all the data that is required to handle a customer’s financial life you have to have banking accounts.
“We want to go much deeper into the financial needs of our customers, aiming for 20% banking and 80% value-added services around taxes and accounting. These areas add so much value, we ask if we still need to offer banking services.”
Are big techs the real threat?
A question from the audience led panellists to speculate on the rise of the techfins, and whether these big tech platforms are about to “crush the fintechs”. With business models focused on earning profit through core services, tech giants can afford to offer loans or other financial services at low rates, even if that means they earn nothing from the services, or even if these services come at a cost to the business.
Kristensen was quick to confirm this reality is already evident: “Big techs have chosen to partner with the big banks because the big banks have the most customers. They’ve not gone to the challenger banks because their customer numbers are too low compared with the top banks in the market.”
McLaughlin believes big techs present an enormous opportunity for partnership, rather than competition. “The reality is that big tech engineering resource is incredibly valuable and incredibly scarce. No one big tech player will create a balance sheet big enough to support all of the potential demand. The future will be an amalgamation and an incorporation of fintech services and bank services into big tech platforms.”
Strack added that there are three types of service providers. “You have the fintechs, who usually have the idea but not the customer base; the banks, who have the customer base but no idea; and the techfins, who might have both. Technically, they are threatening to both fintechs and banks, but the techfins are much more dangerous to banks rather than innovative fintechs with good ideas. If I was a bank, only doing banking services, I would be very careful now.”
Juan Jiménez Zaballos of Santander is less concerned. “We’ve been hearing for a long time that the large techs are ones to be aware of, but the reality is they’ve had enough time to jump in to banks and kill them in one shot, but it hasn’t happened. The reason is that large techs like unregulated markets and low tax environments, and that is certainly not the case in banking. Also, they want to stay with ‘low touch’ banking services like payments and lending, rather than corporate and investment banking, asset management, insurance, private banking. They are not jumping into the whole universal banking spectrum. They stay with specific parts that are less regulated and are connected to the value chain.”
Søren Mogensen, chief growth officer at Banking Circle, concluded the discussion, reflecting that this is simply an example of evolution in the financial sector: “Evolution has been accelerated by both Covid-19 and big techs. They bring challenge, perspective and energy to the sector. We have seen the big four launch their own payment systems and that has pushed the evolution, it is keeping everybody on their toes and making sure that all of us make conscious choices on what our position is and where we need to place our bets. We can’t have 20 or 30 different strategic investment areas and try to be universally good across all agendas. Each of us must find out what’s our speciality, our platform, our position, and specialize in that. The big techs keep us on our toes, contributing to the evolution which is healthy for the financial ecosystem.”
The panellists on the webinar were:
- Ģirts Bērziņš, head of digital innovation and strategy, digital banking, Swedbank;
- Juan Jiménez Zaballos, head of financial industry transformation, Santander Digital;
- Valentina Kristensen, director for growth & communications, OakNorth;
- Tony McLaughlin, managing director, transaction banking, Citi;
- Søren Mogensen, chief growth officer, Banking Circle;
- Sibylle Strack, CEO, Kontist.
The webinar is available to watch on demand here.