Websummit 2019 came to an end on November 7th. With Facebook Calibra headlining the main stage on opening day and a dedicated Fintech-stage featuring prominent founders and investors, quite a few thoughts on the future of our industry were voiced during the event. Here’s our take on what will shape Fintech in the years to come.
#1 – Big Tech goes Fintech
The long-anticipated move of Big Tech into Fintech is now going full speed. After Apple Pay, Google Pay and the Apple Card, Facebook took it to the next level by announcing the cryptocurrency Libra this summer – something we have written about before.
Facebook’s announcement has met critical voices from both consumers and regulators. Do we want Facebook to access our financial data? Do we want Big Tech to create a global currency? Earlier this fall several companies left the Libra partnership, and Facebook is far from meeting regulatory requirements.
Libra and Calibra is a long term strategy for us, and we’re committed to doing whatever it takes to get it right´ Kevin Veil of Calibra/Facebook stated at the summit. He went on to explain how Facebook aims to build an open financial platform, and how they work to meet regulatory requirements. Other speakers questioned if Facebook or other Big Tech will ever get the licenses required to operate in the financial industry.
No matter what, finance is an attractive field where Big Tech can leverage its closeness to consumers. They also have the money to invest in development, the stamina to wait out regulatory treatment, and the position to create solid partnerships. Needless to say, Big Tech will find a way forward, so brace yourself for Big Change.
#2 – From unbundling to integration in non-finance
Fintech has traditionally been about the unbundling, fueled by open regulations and infrastructure providers. With the infrastructure now in place, a new trend emerges – the integration of financial services into non-finance brands
Plaid-founder Zach Perret shared how his company sees a surge in non-finance players using their infrastructure, the more notable ones being Airbnb and Uber (who just last month launched Uber Money). For Airbnb, it is about transactions between hosts and renters. For Uber, it is about managing the finances of their drivers. Both leverage data and closeness to users to develop financial services that will increase their stickiness. For users, financial integration could well reduce friction. For companies, it brings new revenue streams.
Integrations like these make a lot of sense, and we’re likely to see more of them coming. But keep in mind that ease of use and added revenue only happens if the integration is done right. Finance can be tricky, and authentication or KYC need proper attention to work smoothly. If it doesn’t, you might add friction and hurt your business – when you’re aiming for the exact opposite.
#3 – Compliance and security takes steps into the limelight
Compliance and security may not be sexy, but this seems to be the year when ‘boring’ infrastructure gets a front-row seat. Several panels emphasized how security, compliance and working with regulators are essential for a healthy industry.
‘The future winners will be the companies that take compliance seriously, and do the ‘dirty’ and boring work in getting the regulations right’, said Lucy Liu, CEO of Airwallex, one of the most valuable companies in Fintech. She went on to challenge investors to look beyond pure growth and value companies who are actually building defensible tech and doing it right by regulations.
These are areas where Finstart Nordic has taken a keen interest. The first company to come out of our Lab was Beaufort Solutions, a platform helping Fintechs be compliant and combat money-laundering and terror financing. The company is born from the insight that criminals are smart, and our industry must apply advanced technology to outsmart them.
In the era of deep fakes, this is not an easy task. With facial recognition and biometrics now widely used for authentication, technologies that make it hard to distinguish real from fake challenges the security of our industry. ‘We are actively looking to invest in companies with technologies that can spot deep fakes’, stated Rashmi Gopinath of Microsofts venture fund M12. Needless to say, it’s a statement we fully support.
#4 – Autonomous finance becomes the norm
In the advent of self-driving cars, we can enjoy self-driving finance. The term describes tech making automated, smart financial decisions on your behalf, and is often used to help people invest better, save more or get rid of debt.
Spearheaded by Wealthfront and Betterment, autonomous finance later moved to savings and is now entering other areas with full force – clearly on the consumer’s side. Credit card company Tally was mentioned several times. Their app consolidates your credit card debt into one single monthly payment at a lower rate and helps you become debt-free faster.
Let’s face it – humans are not rational creatures. Most of us don’t make smart financial decisions. We don’t have the knowledge or time to consider all options the way a machine can. Autonomous finance augments the human brain and increases transparency to benefit consumers. With this tech being rolled out, traditional business models such as advisory fees and high-interest rates, are under pressure.
On that note – kudos to the Norwegian neo-bank Bulder Bank for embracing this, and automatically adjusting mortgage interest in their customer’s favour. Shortly, this will be the norm and not the exception.
#5 – Social Insurtech: Fintech with a heart or a blessing in disguise?
The finance sector is often seen as greedy, and Fintech has made a point of being the responsible little sister. Financial inclusion, financial literacy and financial empowerment are just some of the areas where Fintechs take action. This year, Insurtech emerges not just as an arena for IoT and biometric sensors, but as an arena for social consciousness.
‘Millions of Indians do not have access to basic social insurance and the death of a breadwinner might very well bring the entire family into poverty – even in the middle class’, said Yashis Dahiya, the CEO of PolicyBazaar. ‘India has so much potential, and insurance stood out as a place to start’, added Munish Varna of Softbank Vision Fund.
Within Insurtech, the number of companies offering social security and benefits seems to be growing. Another example of this is Earnin, who caught our eye precisely because social security is part of the value proposition. As this trend grows, it’s worth some reflection.
Democratizing insurance and giving people the means to protect themselves is a great thing. But could it also be a blessing in disguise? Over time, we have seen tech companies starting out with (seemingly) good intentions – but ending up with taking advantage of people instead of helping them. Uber and Amazon have created numerous jobs, but are heavily criticized for the way they treat their drivers and avoid taking the full employer responsibility for workers now relying on them.
With Fintech moving into every area of people’s lives, it is important to reflect on our role in society. We must balance profit and growth with the social aspects of our services, and strive for regulations that protect people and users, as well as companies. Access to financial services can change people’s life. Let’s make sure it’s for better, not for worse.