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DISRUPTIVE FINANCE THE FUTURE OF TECHNOLOGY & FINANCE
EUROPEAN FINTECH COMPANIES
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Dear FinTech enthusiasts,
The financial world is on the move!
apid innovation now needs to be the norm, not the exception, with dazzling technological advances making it possible and more critical, and emancipated consumers demanding positive customer experiences anytime, anywhere. It is the FinTech ecosystem − from inventors to investors − that enable the financial services industry to develop (with) the needs and opportunities of tomorrow. A growing group of digitally active consumers has tested and used at least two FinTech products in the past six months, a number that will double in the coming year. A force to be reckoned with! Solutions, creativity and customer-focus are in the centre of this technological revolution − and the money follows. Investments by private equity parties and venture capitalists in FinTech worldwide has risen to record heights. Banks have stopped seeing startups and entrepreneurs as enemies or outliers and now search for partnerships with FinTech companies to kickstart their own innovation and learn from digital frontrunners.
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Trends in FinTech: “Standstill is not an option” Customer experience of the future is made in Denmark Interview N26 CEO Valentin Stalf Biometric customer authentication Art as inspiration and investment Resharing data is the new ‘apping’ Consider the risks of blockchain Interview Kreditech CEO Alexander Graubner-Müller KPMG facilitates regulatory compliance Worldwide IT spending is forecast to be flat in 2016 Bye bye banks! Will they survive FinTech? Bridging the digital divide Plutus.it Aiming High with Tap & Pay Top 20 European FinTech Oscars of European FinTech hit Brussels Retailers are missing out on higher revenue Does the Dutch pension system meet today’s needs? Banking sector faces its moment of truth Top 21 FinTech Influencers The new bank is a financial supermarket Easy Equities wins African FinTech Awards Africa: The future of FinTech
Disruptive Finance Magazine offers you the latest insights and helps you to stay up to date. The articles and interviews show that FinTech has become a mature and irreversible phenomenon. For those of you who would like to be part of the exciting and lively ecosystem of FinTech professionals, join the Dutch FinTech Awards on 21 April 2017 and the European FinTech Awards & Conference on 27 September 2017 in Brussels! The FinTech Awards recognise innovative excellence. The much-anticipated annual events bring together startups, international FinTech investors, companies, experts and board members of established European financial institutions to stimulate, upscale and accelerate innovation. For more information visit www.FinTech.nl I hope to meet you there!
Melle Eijckelhoff Director Alex van Groningen BV
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Taking FinTech to the next level? A behind the scenes look at ICS Brilliant business models in InsurTech Interview FinTech rapporteur Cora van Nieuwenhuizen Smart banking for smart cities Keeping FinTech moving while legally compliant The face of the ultimate financial sector professional Which FinTechs will survive the regulations? Selling invoices: An asset for many companies
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Trends in FinTech: “Standstill is not an option” FinTech companies accessing the financial market are springing up like mushrooms. At the beginning of the year, Forbes estimated the number of FinTech startups worldwide to be between 5,000 and 6,000. That figure is now much higher. Conclusion: FinTech is still booming. What are the trends? Experts have their say.
ccording to KPMG, investments in FinTech startups rose explosively to 19 billion dollars in 2015. An infographic from Savvybeaver and Call Levels that was published a few months earlier even talks about estimated FinTech investments of about 40 billion dollars in 2015. In Europe the figure was 4.4 billion dollars by mid 2016, and 3.5 billion in Asia in the first three quarters of 2015. Almost 14 of the 19 billion dollars mentioned above came from venture capital investors. In 2011 it involved investments of 2.1 billion dollars in 298 enterprises; in 2013 this had risen to 2.8 billion. The amount increased to 6.7 billion in 587 deals in 2014 and in 2015 total investments amounted to 13.8 billion (653 deals). Remarkably, there was a decline in the number of venture capital investments at the end of last year; the reason being that investors tightened their criteria and particularly chose FinTechs with sights on shortterm profitability.
Regions In 2015, North America was the epicentre of FinTech investments. Deal value was also the highest in that part of the world, with a record value of 2.7 billion dollars in the third quarter. The infographic shows that States has the most attractive investment climate thanks to regions like Silicon Valley and New York. FinTechs also stand a good chance of success in Israel (Tel Aviv) and the United Kingdom (London). But success is also being achieved at national level. Amsterdam has the chance to become the FinTech capital of the world in the near future. The Netherlands has a fantastic financial infrastructure. Nowhere in the world is payment traffic as digitalised as it is here, and the country has the least cash transactions in the world. The Dutch people are also quick to adopt new ideas. And don’t forget that the Netherlands has a long tradition in the field of finance; in 1602 Amsterdam already had the world’s first stock exchange.
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At number one in the top five FinTech unicorns we find the American Square Inc. (worth 6 billion dollars), followed by Stripe (3.5 billion) and Powa Technologies (2.7 billion). The Dutch Adyen is at number five with a value of 1.5 billion dollars.
Biggest disruptors According to the infographic, the largest investments are made in the world of payments (40 percent) and loans (25 percent). The crowd-funding industry is also going through the roof with at least 34 billion dollars being involved in that world in 2015. In the Netherlands, the interim position in the third quarter of 2016 stood at 95 million euro. Banks officially have competition.
for simpler products, has already caused a lot of turmoil. Insurers are being forced to simplify their products. This is something that will greatly benefit consumers, both financially and qua flexibility. Daily cancellable policies, for example, Robo-advice, a userfriendly online application with low costs, is a more recent ‘disruptor’ and appears to be successful.” The emergence of aggregators is also interesting, according to Lamers: “Particularly in the framework of PSD2 – phase two EU Payment Service Directive guidelines – whereby offering a complete financial picture over several financial institutions becomes possible.”
Risks Among the biggest disruptors, according to the KPMG research, are the bitcoin and block-chain technologies. These stimulate more transparency in financial services and the speed with which transactions take place. But don’t underestimate mobile payments either, says data centre company Equinix. According to the organisation, financial institutions have to respond to this trend properly if they are to avoid losing the competition battle. Ovum predicts that more than five billion people worldwide will be making mobile payments in 2018. Together they will be making payments of one trillion dollars, according to Statista. Michiel Eielts, Managing Director of Equinix, says: “Payment traffic is changing faster and more fundamentally than ever before because of the speed of successive technological developments. The smartphone is everywhere now, bringing with it the faster growth of mobile payments.” Erik Lamers, Director of Virtual Affairs, specialised in digital banking and insurance software, adds: “Comparison software, especially
But it is not all good news. According to Lamers, one of the risks of the rise in FinTechs is the too great a focus sometimes put on technology. “Technology is a resource, not a goal. Ultimately it’s about the service you want to offer your customer.” He talks about the ‘not invented here’ syndrome: “Large financial institutions want to custom-develop everything themselves, but there is increasingly more demand for an agile attitude − at the current speed in technological developments it is virtually impossible for IT departments to keep up.”
PSD2 Five Degrees makes existing financial institutions future-proof by means of a new generation of banking systems and successfully competes in the international arena against established major names. The company, with offices in Iceland, Serbia and the Netherlands, believes that the future of existing banks looks promising but what is certain is that their role will change. Banks will have to be more flexible if they are to offer the services that account holders expect, via the channels and platFINTECH.NL | 6
forms they favour. The new laws and regulations that govern payments are accelerating the move to open banking. Payment Services Directive 2 (PSD2) requires banks to provide safe access for third parties that are to collect information about account holders and enable new financial services. “So banks will bring together these parties and the consumer,” explains Martijn Hohmann, CEO of Five Degrees. “This makes it more attractive than ever to embrace open banking and create a unique ecosystem for financial services and service providers.”
Future If Eielts has anything to do with things, the end of FinTechs is still a very long way off: “The end-user is getting used to better user experience because of innovations and he expects the same level of service from all his applications. Financial institutions should therefore place their IT systems in eco-systems where they can interact with other suppliers. By connecting quickly and safely with other parties, transactions are carried out faster and there is better user-experience. This arms financial institutions in the battle for consumers.” Lamers adds: “Particularly now, with low consumer confidence and high demands, the financial sector must simplify existing services and develop new ones. Customers demand transparency, insight and access. Existing institutions must therefore innovate or they will be overtaken by new parties.” The role of banks will also change drastically, he predicts: “PSD2, among other things, will have an impact. Banks and insurers can still trade off their existing customers, but loyalty is decreasing and transferring is getting easier. Financial institutions that insufficiently respond to this lose their right to exist. Standstill is not an option.”
The customer experience of the future is made in Denmark Financial companies should be their customers best financial friend, with holistic advice, 24/7 availability, and recommendations based on decisions made by peer groups. To make this vision a reality, Danish company Schantz is partnering with IBM's supercomputer project, Watson, to bring a new form of robo-advice to the market.
“Robo-advice adds more value to the customer with actual recommendations.”
n today’s complex world, customers need better information that fits their situation and a better ability to shape the important financial decisions in their lives. Banks, pension providers and insurance companies should help them with this. “You need a best financial friend to be sure that your financial health is always at its best”, says Lars Sønderby, Vice President International Business Development of Schantz. The philosophy of the Scandinavian company is to provide flexible solutions that enable a personalised and unique customer experience. Schantz is also the provider of administration and communication solutions that empower the much-praised Danish pension system.
tant aspect is that advice should be available 24/7, 365 days a year. With suggestions based on choices made by customers with similar profiles. "Many people speak to their providers once a year, at best. That is not a lot. In the future, it should become normal for your provider to contact you whenever there are changes in your life.”
A 360-degree financial view
A new dimension in advice
How can a bank, pension provider or insurance company become your best financial friend? "By making relevant information available to you at any moment. Your financial services provider should be helping you and give you good advice at certain moments in your life. With a view on all financial and personal information combined.” An impor-
Sønderby sees many providers struggling to adapt a more proactive approach to their customer base. This is also why Schantz has started a collaboration with IBM's Watson Group to help provide better holistic financial advice. For Schantz, being at the forefront of providing financial optimisation models and Watson Group being the leader in
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artificial intelligence, the step makes a lot of sense, Sønderby thinks. “We are designing the customer experience of the future. There should be no limitations to the information customers have available and their options. Robo-advice, as we see it, adds more value to the customer. It is accessible, 24/7, automated, web based and with actual recommendations that are based on financial optimisation and decisions other people in your peer group. It will help financial providers to become their customers' best financial friend."
N26 CEO Valentin Stalf reveals the secrets behind one of the world’s hottest FinTech startups
Building a bank from scratch “We have debunked the myth that banking is very complex,” says Valentin Stalf, co-founder and CEO of mobile bank N26, perhaps Europe’s best new bank on the block. Joël Roerig chatted to Valentin about the practical steps an entrepreneur needs to take to turn a brilliant idea into a thriving business. Money or even licensing are never the problem, he says. “Your success depends on your business model, your team and the customer feedback you generate.”
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anking is like Formula One. Valentin Stalf’s observation comes a day after he has returned from the famous Monza race track north of Milan in Italy, where N26 was invited as the Fast Companies Series partner by British Formula One racing team, Manor Racing. “Of course it was very cool to see our logo there,” Valentin says with a broad smile. “But when you are on the grid and in the pit lane, you also realise Formula One is a big myth. Just like banking, people think it is really complex. When you get closer to the action, you realise it is a group of normal people working on cars.” Besides N26, the people behind trendsetting apps Airbnb and Shazam were also invited to the race, with the logos of the three successful startups plastered on the rear wings of the supersonic vehicles of Pascal Wehrlein and Esteban Ocon. For Valentin, it was proof that his 2013 startup, now one of the fastest growing retail banks in Germany, is among today’s best entrepreneurial ideas.
Simplicity is the key to the success of the N26 app. The N26 team spends a lot of time working on algorithms “that learn with our customers”, enabling the app to automatically classify spending into relevant categories. The app includes popular features like cash withdrawals at retailers (CASH26) and money transfers via SMS or email (MoneyBeam). In the long term, we build a smart bank to help our customers to find the right financial product or even advise you to buy a flat rather than to keep paying a landlord. “We can help people by showing them the opportunities that they have and what they’re missing out on in a complex jungle of financial products.”
Extreme customer focus Any business, whether brand new or 100 years old, will say it focusses on customers. As the Uber or Spotify of banking – and to even set them apart from other neobanks – N26 takes this to the extreme; it only takes eight minutes to open an account. “For us it is about the execution and making people really love the product. On average, people log into the app at least every second day. That engagement provides many new opportunities.” A massive game changer for N26 came on 26 July 2016, one-and-ahalf years after the product launch, when it was awarded its own banking licence by the Federal Financial Supervisory Authority (BaFin) and the European Central Bank, allowing it to operate separately from other financial institutions – across the whole of the European Union. Once again, simplicity was the secret. Valentin proudly explains how, contrary to common belief, you don’t need an army of consultants, a battery of expensive tools and decades of experience to comply with banking regulations.
Read the law “There are a lot of things that you don’t need,” says Valentin. We figured out that, when you are a
“For me personally, the approval from the traditional regulator means the world.” FINTECH.NL | 9
small business, like us, and have the right IT infrastructure in place, you don’t need most of the commonly-used, expensive software, which takes half a year to install and requires a staff of 20 people to maintain. The most important thing is to be focused on what’s needed to comply and sometimes that means to rather read the law than listen to consultants.” As a startup that challenges the old ways − even the old ways of complying with regulations − a very good relationship with the regulator is paramount, says Valentin. “To do it differently you need to be very close to the regulator. And you need to be very operational in what you are doing. Often the discussion around regulations is very abstract, which allows for so many companies and consultants to chip in. The main thing is to understand what the regulator wants.” The only way to eat an elephant is one bite at a time, which is why N26’s adventure started as an unassuming debit card for teenagers and an app for parents to control their offspring’s pocket money. “We looked at the consumer side of banking and recognised how slow the industry is in Germany and Austria,” explains Valentin, who grew up in Austria’s capital Vienna, studied in Switzerland and worked for Berlin-based Rocket Internet, which spawned many of Europe’s brightest FinTech entrepreneurs. Whereas ‘Rocket’ focussed on the B2B space, Valentin started seeing opportunities in the way banks interacted with their clients. “Those established players are just burning money and their fee structure is very complex. At the same time, five of their advisors will give you five different answers to one simple question.”
Teenagers With his friend Maximilian Tayenthal, Valentin launched Number26, as the startup was initially called, partnered with Germany-based financial services company Wirecard, and rapidly grew a base of 200,000 excited users. “In the beginning, building our own bank sounded so big,” Valentin admits. “That is why we first started with a pocket money solution for teenagers and went into a test phase with that. Teenagers received a prepaid MasterCard and both parents and kids had access to an app to have a clear overview of the spending.” As entrepreneurs often find out, a good idea runs away with you: “People were using it for themselves, not for their kids. We received many calls from customers saying they wanted to use the app and the card for themselves.” As visionaries, Valentin and Maximilian weren’t taken entirely by surprise. “Building a bank had always been on our minds. From a technological side, it is not completely different. The product we have now is very similar to what we had for teenagers: a card and an app that sends push messages. We had also already established the online signup process. It is very similar to our key selling points today.”
Banking license Once the feedback came pouring in, the next goal was their banking license, which allows N26 to widen its platform from payments to savings, credit and investments – all from the same app, but sometimes powered by partners. The banking license than changed the rules of game. “For me personally, the approval from the traditional regulator means the world,” says Valentin. “It means that we are able to be disruptive in an industry
that is a thousand years old. Existing banks assumed licensing was too big a hurdle for a startup and we proved them wrong.” It also debunked the myth that banking is too complex for new entries, says Valentin. “You have to be close to consumers, but very few traditional players understand what matters for digital natives when it comes to mobile. Bigger banks are all organised in multiple layers and a lot of unnecessary complexity is created. We saw it during the financial crisis, where no one understood what was going on. As a customer-facing business, your focus needs to be on a specific problem that the customer has – and how to solve that. It is simple. Many traditional banks use the heavy regulations as an excuse to not be innovative. For us, it is because we have the licence that we can be much more innovative and offer customers something more.”
Italy, Slovakia and Spain. While its banking licence is valid in the whole European market, associated regulations like KYC still prevent rapid expansion towards a ‘borderless bank’, says Valentin. “The vision of the EU is great and, fundamentally, the law is there that I can pay in Austria with my account registered in Germany, but some companies are still guilty of IBAN-discrimination. And underlying regulation can still be very country-specific.”
N26’s fast ascent in Germany and Austria has been made a lot easier by recent changes in the law that allow for the use of video chat in Know Your Customer (KYC) processes – enabling customers to have their identification verified without physically having to meet with an N26 employee. So far, N26 has launched in France, Greece, Ireland,
Valentin is quick to answer “yes!” when asked if a viable global bank can be started from scratch within ten years. But for now, the focus is on Europe. “We have only a little over 200,000 customers at the moment. What I have noticed is that banking needs around the world are not dependent on which country you live in, but rather what your lifestyle is. It doesn’t matter if you are in Europe, the United States or Asia. You might have different appetites for investment risks, you may use a card or app more or less, but you still want products like cashless payments, credit lines and investments. There are differences, but basic banking needs are the same. But does our management have capacity to go into the US and China now? No, not at the moment.”
“Bankers of the future will be developers, designers and risk modelling people instead of personal advisors.”
But what about security, isn’t that something big banks have to pour millions of euros into? Isn’t that difficult to match for a startup? Valentin’s simple answer is that the investment doesn’t need to be matched to reach a superior security level. “Our advantage is that our system was built in 2015 and 2016, whereas a lot of players are using systems that are 20 years old. If you bought a car 20 years ago, it will also not be as secure as a new car you buy now – no matter how well you have maintained it.”
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It brings up the classic FinTech question: are banks going to die? “Big banks have such a high market concentration. It is hard to imagine they will completely disappear, but there will be a big shift in market shares in the next ten years. Bankers of the future will be developers, designers and risk modelling people instead of personal advisors,” Valentin predicts. “It is hard to transform with 100,000 employees, but the big banks – Deutsche Bank has 27 million customers – should be able to leverage their existing customer base. If you have so many customers, you can do a lot of great things.”
Product market fit With so many FinTech entrepreneurs vying for fortune and fame, Valentin’s thoughts on the way to develop an idea into a success provide a lesson for all. “We lost most time ourselves because we started with the product for teenagers. For us that step was necessary, but it also meant our aim was lower and we were happy with ten new customers a day, while we now register over 1,000 new customers on a good day. If I could do it all over again, I would spend more time on the product market fit before starting the company.” Launching an MVP – a minimum viable product – is much more difficult in FinTech than in other industries, because there are so many regulations, says Valentin. It is hard to start collecting proper feedback on user experience if you don’t go through all the licensing steps, which requires a lot of upfront investment – of time and money. “That is often the problem,” says Valentin. “People have an idea, but no proof that others would use it. For example, if you ask anyone if it would be cool to transfer money anywhere in the world with one
“There is so much money with venture capitalists and they all search for the best teams.”
his peers that feedback from investors can be extremely useful, but your business model and the way you tackle regulatory issues, you have to figure out yourself. “As FinTech is a very complex field, only some very specific investors will be able to give input on your development. The majority of VCs don’t have insight to add to a business, whereas entrepreneurs like us spend 24 hours per day building it.”
click, everyone would say yes that is cool. But how do you get a critical mass? Where is the business model?”
Investors can contribute useful insights to market sizes, says Valentin. “It is also very important to know if they like your team. It is never bad to get feedback, but you need to be the one calling the shots and take responsibility in the end. At N26 we always had a clear vision and then reflected on feedback throughout various funding rounds. Investors bought into our vision of a disruptive mobile bank and the first investors in the teenage product were rewarded – even though our strategy changed dramatically.”
A sound business model with margins, which shows the complete picture, is a crucial start for an enterprise and one that quite often gets skipped over too quickly by overenthusiastic entrepreneurs, says Valentin. “Then it is also crucial to get honest feedback from customers. If I ask my friends, they’ll all say it is great but nobody will buy it, so you might need to develop your idea a bit further towards an MVP, without going the whole way. Once you have enough information, start immediately before everything is set up. The third crucial aspect for a FinTech firm is the regulatory side, but that you can usually manage.”
The best team But what about the money? Aren’t the investors the ones calling the shots? Not at all, says Valentin. “Money is not the problem if you have the right team that executes well. There is so much money with venture capitalists and they all search for the best teams.” N26 has raised more than $50 million to date, including a $40 million round recently. PayPal co-founder and renowned Silicon Valley investor Peter Thiel is one of the financial backers. Valentin warns
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One of the next steps is developing “cool products” for businesses, “which are charged extremely high fees and get bad products by banks”, says Valentin. “You cannot open a business account without having to pay a couple of hundred euros.” With 2016 being a year of “completing our platform and growing from a niche player into a bank”, next year will focus on internationalisation, growth and offering the full suite of banking products, including payments, financing, credit and longer loans – mostly through collaboration with FinTech firms that are successful in those niches. “We want to grow our customer base from 200,000 to 1 million and we want to work with other FinTech startups and the best products of traditional players. We are not doing this for a fast exit. We want to build something big.”
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Biometric customer authentication: A worthwhile investment? ALISTAIR NEWTON
or many years, customer authentication has been an area where the security of the bank, and the integrity and confidentiality of customer data, has been the driving force in the selection of technology. While customer experience has played a part, too often it has not had the primacy it deserves, resulting in a below-par customer experience.
relating to the risks and benefits and different levels of willingness to adopt. While biometrics brings opportunity for banks and customers alike, it also presents challenges. CIOs and digital leaders who consider investing in biometric customer authentication should be aware that, in order to implement solutions successfully, there are several issues they will need to manage.
The increasing range and suitability of biometric-based authentication solutions is encouraging many banks to rethink their authentication strategy, and in doing so, their customer experience.
Trust The main issue banks will face when rolling out biometric customer authentication is convincing their customers that the move to biometric authentication is a positive step. Focussing solely on convenience over security will not sway them. Customers don’t instinctively trust unfamiliar technologies, and there are some concerns they harbour in relation to biometrics. Some are unsure of the security behind biometrics — customers have voiced concerns that a fingerprint reading can be manipulated, face recognition abused and voice recognition bypassed by imitation. It will be important that banks clearly communicate an alternative means of accessing accounts and funds, such as the original login information,
The expanded use of fingerprint-based authentication, such as that found on Apple and Android devices, has prompted adoption and the stakes are high. As consumers increasingly use digital technologies, a bank will increasingly add differentiation by how it authenticates users of its products and services. Consumer understanding of biometrics varies hugely not only across customer segments but also across countries and regions. There are many significant misconceptions
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should the biometric solution fail. Privacy Privacy concerns are also a major hurdle. In light of so many high-profile data breaches, customers are wary of sharing their biometric data. For consumers, trusting a bank with biometrics is not the same as trusting them with your password or username. Sharing biometric information is like sharing a part of you. It’s not just a string of data − it’s an image of your face or a fingerprint. This is deeply personal information that needs to be treated with sensitivity and transparency.
Deployment best practices There are a number of things that banks can do to overcome customer concerns. Branding Interestingly, customers surveyed by Gartner had a great deal more trust in biometric solutions developed by the bank, as opposed to third-party technology companies like Apple and Samsung. This suggests that although Apple and Samsung have a big role in popularising the technology, banks may want to consider alternative solutions when developing a biometric authentication strategy.
ers extracted from the biometric samples, making it extremely difficult for a malicious third party to reconstruct the image. There is a misconception among consumers that the bank stores their data in its entirety, such as their fingerprint. In reality, banks will only keep partial information, which they can link to markers in the sample that complete the authentication. This needs to be communicated clearly and consistently with the customer in order to boost their trust in the technology. To win over customers, banks need to offer their customers clear guarantees on how and when they use their information.
“Gartner has seen a sharp rise in the number of enterprises promoting the use of blockchain.” The bottom line Alistair Newton
Proactive Demos Gartner finds that customers are generally more accepting of a technology, whatever the mode, once they’ve experienced it. For example, Gartner’s digital banking consumer survey from 2015 indicates that customers in India and Brazil are generally much more trusting of biometrics, having been exposed to them by government-led initiatives. In other countries, trust in biometrics will come at a slower pace, and will depend on how financial
services, and other industries, are offering biometrics. The more customers are exposed to biometrics, the more likely they will be to trust those services. Education Banks will need to work hard to educate their staff and customers about how they store and use their customers’ biometric data. Typically, commercial biometric systems employed by banks store only encoded data about key mark-
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For banks, authentication may be the biggest change in customer experience since the emergence of mobile banking. The success of biometrics hinges on customer trust, and banks need to earn this through understanding and effectively managing their concerns. However, banks revisiting their strategies must recognise that customers still value absolute security over convenience. Education and targeted trials will be the key to unlocking customer engagement with biometrics. Successful banks will improve customer engagement, and therefore distinguish themselves from laggard competitors.
ART & FINANCE
Art as inspiration and good alternative investment It’s a familiar sight in the financial world: wall art. Paul Lohmann of Gallery238 Amsterdam advises businesses and consumers about the different aspects of art. Banks and companies can present themselves in a positive light and make an investment at the same time.
ith 15,000 works, ING has one of the largest art collections in the Netherlands. ABN Amro also has a very solid collection, with approximately 5,000 works. It is a misconception that they have these corporate collections purely for decorative purposes. According to Lohmann art inspires and promotes creativity. “Moreover, it is a good investment, as long as you buy the right art," he says.
Good investment Gallery238 advises both companies and individuals about art; some just want to enjoy art, while others see it as an investment. “Not every painting is a good investment. But if you buy art from an artist whose future looks good, then you can be pretty sure your art will be worth more in the future.” According to Lohmann, the predictability of gain lies in a sort of ‘knowledge’. “We manage a number of successful artists. Because we know the agenda and the future of these artists, we can provide customers with even
better advice if they want to buy art for investment purposes.” When works are shown in exhibitions and hung in major museums, it has a huge effect on their value.
Gains In 2011, Lohmann advised readers of the FD to buy paintings by the Spanish artist Lita Cabellut, the Chinese artist Zhuang Hong and the Bulgarian artist Kantcho Kanev. Works by Cabellut are now widely purchased; a rise in value of at least 50 percent is the result. Zhuang was the best-selling artist in the TEFAF in 2013 and his works were on display at Art Miami and Palm Beach Art Fair. This has led to considerable gains (150 percent!). Kanev has won numerous awards and received several commissions; his work has increased less in value, but still by 20 percent. The works by these artists are expected to increase further in value over the next couple of years.
Svetlana Tartakovska Lohmann currently advises Svetlana Tartakovska (1979 Berditchev - Ukraine), 2014 winner of the TV
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show ‘Stars shine on the canvas’. He thinks very highly of her work and, based on the responses from collectors and sales during her previous exhibitions, he advises clients to buy her work while it is still affordable. Her work is exceptional in that she conveys her message in a classic, traditional art form. She uses oil paint, limits herself to just four colours and has a realistic style in line with Russian art tradition. “She has a wonderful style. Several international museums have shown interest and she will have a wonderful future.”
The power of collaboration in the digital world
Resharing data is the new ‘apping’ Ten years ago, no one had heard of ‘apping’, and now because of WhatsApp it has become indispensable. We have changed the way we communicate and, as a result, added ‘apping’ to our vocabulary as a verb. And a new word is coming already: resharing. Resharing will become the new ‘apping’ because resharing personal data will feel just as normal, easy and secure as communicating via WhatsApp. Technology makes it possible and legislation requires that consumers will be fully in charge of their personal data, regardless of where it is stored, by 2018. Banks and FinTech can play a key role in who gains access to personal (financial) data, who can use it, and who can add or reshare something. Resharing will become a new type of transaction service, this time not with money, but with personal data. SHIKKO NIJLAND AND VINCENT JANSEN Customers want more control over personal data The customer increasingly expects to be in charge of what channel and what product can be used and who can do what with his personal data. With banks and FinTech, this development is visible in the rise of ‘Open banking’ concepts. To truly empower customers, organisations need to at least develop a data resharing strategy. Within that strategy, it should be established how they can facilitate their customers to reuse data from others in a simple and safe way, which data must be additionally stored, and how the stored data can be reshared. And all this must be processed in a safe and compliant way, as is customary with financial transaction services. European legislation sets out two ‘Control centric’ frameworks, which
have major implications for the ways in which the financial sector needs to handle personal information: Payment Service Directive 2 (PSD2) and General Data Protection Regulation (GDPR). The latter goes beyond financial data. GDPR provides even more control to customers with regard to personal data by imposing obligations on organisations in the areas of access, diligence, security, and the right to be forgotten.
“To become fully ‘Control centric’, organisations need to develop a resharing strategy.” F I N T E CH . N L | 17
Innopay was one of the first to publish about the potentially disruptive impact of PSD2 in 2013. Simply put, the result of PSD2 is that from 2018 onwards, customers will have more choice and more control with regard to apps of (licensed) third parties (TTP). Bank customers can then have the TTP, which does not need to be a bank, make payments, use information from their bank account, or have themselves identified with their bank information. Of course, only if customers give those third parties explicit permission for this by means of an information transaction.
Banks can play a hub role in resharing data PSD2 and the emergence of FinTech may lead to fragmentation and uncertainty among consumers. They will probably opt for something they already know and trust: their own bank. They are accustomed to deal-
ing with sensitive data due to strict customer identification (KYC) and anti-money laundering regulations (AML) and building a digital identity of their customers around that. In our resharing vision, banks could play a hub role in society based on this digital identity in storing confidential data and facilitating resharing, which Dutch banks are already partially beginning to do with iDIN. When the hub role is enriched with FinTech solutions, with the bank as the de facto aggregator, the customer will have the opportunity to safely and simply reshare personal data, including their digital identity, and make use of the most innovative solutions on the market.
Cooperation between banks and FinTech in making resharing simpler Innopay believes in the power of collaboration, especially in the digital world. Innopay has seen that collaboration in public transport, where the company is working on innovative alternatives alongside the Dutch OV-Chipcard, collaborating with ten carriers and Translink. Also, in the logistics sector, where we are working with major logistics parties to develop a trust infrastructure and simplify data sharing between businesses. In the financial sector, we
see successful cooperation between banks in the areas of withdrawal, iDEAL, and iDIN. Mutual collaboration is still rare among FinTech companies. Structural cooperation between banks and FinTech still seems more like a forced marriage, even though there clearly are mutual benefits. Applying Application Programming Interfaces (API) at an increasing scale not only ensures that resharing can happen in a more controlled and user-friendly way, but also allows completely new (Open banking) business and service models to emerge, because product and distribution strategies can be scalable. To realise the full promise of resharing, the financial sector will have to work together on developing a joint vision on resharing. Only then can scale be achieved and can resharing data also lead to resharing (rights to) functionality in the long term. By sharing those rights, consumers can decide to have something or someone act on their behalf in the future. This opens the way to an ecosystem of smart ‘agents’ who will make the lives of consumers much easier.
Bio Vincent Jansen Vincent Jansen (1974) is principal consultant at Innopay. He is a collaborative innovator and has 15 years of experience in innovating networked products in complex, multi-stakeholder environments. Vincent is part of Innopay’s management team and heads the payments practice.
This way, sharing becomes multiplying, and resharing becomes the new ‘apping’.
Innopay: forward thinkers and innovation builders Bio Shikko Nijland Due to digitisation, everything is becoming a transaction. Technology has dramatically changed the way in which we share information and do business. Trust is the number one value in our world of digital transactions. Trust is the most reliable basis for working together, serving customers, and communicating with each other. Based on 15 years of experience in digital consultancy, we know what it takes to develop an innovation strategy. And we know how to create trust and value for organisations and their customers.
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Shikko Nijland (1971) is co-owner and the Managing Partner of Innopay. His understanding of creating trust and value is based on 20 years of experience in developing growth and innovation strategies all over the world.
Blockchain combines innovation with risk
Security professionals must consider the risks of blockchain as they innovate
KASEY PANETTA he UK government is currently considering options for its Land Registry department, the organisation that guarantees titles to registered estates and interests. While digital currency usually steals the blockchain spotlight, land registry provides another interesting application, with pilot projects happening around the world. A blockchain-enabled solution would allow people to discover who owns a particular property and ensure that the transfer of ownership does not occur without the authorisation of interested parties, including a bank holding the property as security on a loan. Gartner has seen a sharp rise in the number of enterprises promoting the use of blockchain, says Jonathan Care, research director at Gartner. The foundational distributed ledger at the heart of blockchain allows for a wide variety of assets to be tracked, including ownership, identity assertions and proofs, encryption keys or device attributes.
in functionality and many proposed solutions have not yet emerged from the conceptual stage. Unfortunately, the evangelistic marketing hype that can accompany blockchain distracts from the actual potential use cases. Note that blockchain nears the Peak of Inflated Expectations on the Gartner Hype Cycle for Emerging Technologies, 2016.
Scalability As devices, data, transactions and identities increase, so do the management and storage requirements of related artifacts. CISOs need a secure and scalable approach to ensure that they can succeed in coming years. Scalability is currently considered a risk; however, researchers are currently looking into options that would move away from traditional distributed consen-
sus mechanisms toward scalable methods. This risk may actually become a benefit in the future.
Cyberattacks/fraud A recent attack on the Distributed Autonomous Organisation exploited the weaknesses in smart contracts and raised red flags about security. Bitcoin has relatively few vulnerabilities and is lauded for its resilient nature, but the burden of security has moved from the network to the endpoints that are writing to the blockchain. Vulnerabilities typically occur in operating systems, networking protocols and some security-related areas.
Difficult risk assessment With the increasing range of blockchain offerings, it is difficult to construct a detailed threat model on which to perform a risk assessment. Blockchain is a complex technological system, and can lack the clarity of oversight and auditability that more traditional systems offer. As an additional complication, blockchain lacks common standards or regulations. “Overall, blockchain is new and people don’t understand it; it is complex, and therefore accurately assessing risk and exposure is a challenge,” says Care. “In addition, this is exacerbated because there are currently no common standards or regulations.”
However, blockchain is not without risks.
Marketing hype The definition of blockchain and its potential applications are fluid. Outside of bitcoin, implementations vary
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An interview with machine learning pioneer Alexander Graubner-Müller, founding CEO of Kreditech
Value for data Many of the most successful businesses and startups of the last decade make money with people’s data of others. Companies that can provide consumers with real value for their data in a transparent way will come out on top, says Alexander GraubnerMüller, founding CEO of online consumer finance company Kreditech, in an exclusive interview with Disruptive Finance Magazine ’s Joël Roerig.
lexander Graubner-Müller possesses a rare combination of talents: he can bash around algorithms for days at a time and build a risk assessment system for consumer lending that blows all the traditional credit bureaus out of the water. At the same time, he’s fluent in the insightful bullet-point chat of CEOs that sweeps investors off their feet with its simplicity and promise. He is also only 28. Considered a big data and machine learning pioneer, Alexander cofounded and sold the prediction market engine PredictX – before becoming the man behind the Kreditech success. As an extremely practical operator, Alexander is possibly one of the best people in Europe’s FinTech scene to comment on the future of data management and the rights of consumers. Change, he warns, is coming.
“Consumers are starting to understand the value of their data,” says Alexander. Not only corporates like Google and Facebook are building their business models on top of their users’ data; so do many FinTech firms – with a company like Kreditech leading the pack. “People are now asking: do I get value out of a service that is similar to the value of the data that I provide? Services that are able to show the benefit of sharing data, and that are transparent about it, will eventually succeed.”
“Services that are able to show the benefit of sharing data, and that are transparent about it, will eventually succeed.” F I N T E CH . N L | 2 0
This is Alexander’s core business. Kreditech’s model depends to a large extent on potential borrowers supplying the company with personal information. Of course, the information only gets used for the application and is then made anonymous for statistical use and product improvement, but many people are still uncomfortable with the model – what if the data ends up in wrong hands? Besides the obvious cybersecurity measures taken to alleviate this risk, Alexander also points to the fact that users are in control of which information they share. “Our approach is to empower the customer when it comes to sharing their. People that apply for a loan at Kreditech can share a minimal amount of information with us. But the likelihood of approval and the rate we offer will be better if more information is provided.” Besides loans, customers can use a digital wallet and a personal finance manager, which is designed to help them manage their credit score and
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plan their spending. Convenience is another massive selling point for the Hamburg-headquartered firm, with a customer applying for a shortterm or long-term loan online in a much simpler environment than any bank currently offers. “On average an application process in the traditional environment is at around 50 fields. We managed to bring it down to 12. You receive an instant credit decision, which is helpful when you have an emergency or when you are shopping online.” Kreditech does something no other company in the world can do, which has so far led to thriving lending businesses in Poland, Spain, Czech Republic, Russia and Mexico. Simultaneously, its risk assessment engine is being embedded as a credit-as-a-service solution in ewallets and point-of-sales products. “Our core competitive advantage is the way we do risk assessments for our consumer lending,” Alexander explains, adding that the firm boasts the lowest default rates in all countries it operates. “We look at a very different set of data than traditional credit bureaus and we have developed a different technology to come up with a credit rating.” Traditional credit bureaus look at past borrowing behaviour, while Kreditech slices and dices relevant information from sources like bank accounts, internet browsing behaviour and even social media. It uses 20,000 data points per paperless loan application, with a definite decision being made within 32 seconds – after which immediate payout follows. So far Kreditech has received more than three million applications and granted over one million loans. “Some people have never had any credit and in most countries credit bureaus work well for the upper segment of the population, but the majority of people have
“We learned that many traditional credit risk hypotheses were invalid.” – for various reasons – difficulty in accessing credit. Our approach uses information directly sourced from the customer, with artificial intelligence looking for correlation in the data. It leads to a new type of credit rating, which works far better.” Like many German-speaking FinTech-wizards, Alexander – who studied in Switzerland – moved to Berlin to work for startup builder Rocket Internet. “I worked on setting up international companies and noticed that access to money was often a big problem for people. We spoke to banks about pre-financing, but it always came back to the problem of having no means to assess credit risk. To me it was quite paradoxical that there is not enough data to assess credit risk, while every person creates so much data every day.” Alexander took the idea and set out to build a technology company that “solves the problem of credit rating”, developing the first version of the system and building on it with a team of data scientists. There was one problem though: where would he find the data to start building a prototype for his credit rating engine? “Every algorithm needs to be validated on real-live data. When we started, we thought a lot about how to test our technology on a real data set of credit transactions. We tried to find the right institutional partners. We asked banks.” When no one
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wanted to collaborate, Alexander decided to go the entrepreneurial route: he started lending money himself and before he knew it he had started a consumer business that employs 300 people at seven offices worldwide – and counting. “Our initial purpose was to issue loans to various customers with different characteristics, almost on an unselected basis,” Alexander explains. “This process which we call random seeding allowed us to start capturing their behaviour and discover new relationships – and ensured that our scoring is not biased. People that had always been rejected for credit, for example because they did not have a full-time job, or they were too young or too old, managed to repay their loans. We learned that many traditional credit risk hypotheses were invalid.” Initially Alexander led the tech side of the business, though in November 2015, he took over as CEO, soon reporting a 2015 revenue of 41.3 million euro (double that of 2014). After the Financial Times headlined an article ‘Kreditech: A credit check by social media’, a lot of attention for the company focused on the company’s use of Facebook, Twitter and their many cousins, but Alexander doesn’t shy away from the less spectacular answer and frankly admits that the role social media plays in the creditworthy decision is relatively small. “This is just one small example out of the 20,000 data points used in the scoring process. We use social media mainly around ID verification; knowing who is on the other side.” There are many better ways to estimate the likelihood of loan repayment than checking someone’s Instagram photos, says Alexander. “Far more predictive is browsing
behaviour and the API provided by subsidiary Kontomatik, allowing us access to 180 or 360 days of banking history. The algorithm can also look at micro-geographies and micro-economics, mapping the credit behaviour of people in neighbourhoods and how it changes. One of the best aspects of machine learning is the detection of inconsistencies.” Kreditech’s core business has been rolled out in five countries, with one common denominator, Alexander explains: “These countries have big inefficiencies in their systems and the established financial institutions focus on a small group. Spain was our second market. That country has two challenges. First of all, the credit rating system is not well-developed and only looks at negative data. Secondly, the banks have been traumatised by the financial crisis and even people that qualified for loans previously don’t anymore. Poland is much the same, while Russia and Mexico are emerging economies and many people are only starting to use banking services for the first time.” Alexander says that all over the world “digital natives” are “leapfrogging from cash to cashless without ever having a bank account”. For Kreditech that means there are many other interesting markets. “The challenge is to balance the opportunities with the resources. We could go in a lot of different directions, but if we do too much, we will overstretch. First we want to move to scale and next year we’ll have the discussion about expansion elsewhere, for example to India, Indonesia or Brazil.” A first-world country like Germany is less likely to be a short-term target, Alexander adds. “In a country like Germany our value-add is not as big as the market is already over satisfied. However, in Brazil for instance we could unlock
a borrowing population of 100 million people.” That doesn’t mean Kreditech isn’t taking over the world. It has developed an API-based version of its engine and is starting to partner with other companies, offering an end-to-end credit solution to
be integrated into other products. “That can be interesting for pointof-sale finance, for example. In Poland, we work with Naspers’ division PayU Global, but we are also already working with one of the biggest ewallet companies from the US and we are speaking to a couple of challenger banks.”
What investors want: six tips from Alexander Graubner-Müller Kreditech has been extremely successful in getting investors on board, with 125 million euro equity and 190 million euro debt raised since 2012, allowing the company to grow from a promising idea to a money-making corporation quickly. Financial backers include J.C. Flowers, Peter Thiel and the World Bank’s International Finance Corporation, which appreciates the fact that Kreditech improves financial freedom for the underbanked. Alexander is happy to share some tips. 1. “When you start your company, investors are interested in your idea but even more in your team. If your team makes a strong impression, they are confident that they can also sail a ship through a difficult sea. In our case, we were initially a technology business and then transformed into a consumer finance business.” 2. “You need to be clear to investors about how much capital you need and how you plan to make money. The worst thing that you invest into a product without a proper business model. Always keep in mind that investors need clarity around expenses.” 3. “To impress investors, you don’t need to be as visionary or crazy as sometimes seems to be expected. It is not about creating the next Facebook or flying car. You need smart innovation in areas where people don’t expect that you can innovate.” 4. “The worst investors are the ones that think they know better. If they really do, they would have done it themselves. It is important to check references of an investor, just as they check yours. Talk to some entrepreneurs from their portfolio companies. Getting an investor on board is the start of a long relationship – almost like a marriage – so you need to do due diligence.” 5. “Early investors should give you positive spirit and guidance about what is important, especially as most of them have been entrepreneurs themselves. When you are larger, investors can help you in different areas, such as with regulators or with building trust. When investors with a good reputation back you, it makes it easier to attract the right talent.” 6. “Besides all the promised value-add, don’t forget: The most important role of investors is still providing money to help you grow your business and this is where you should spend most of your time. Don’t optimise too much during your fundraising.”
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RegTech KPMG facilitates regulatory compliance “Greater scope for innovation and product development” Not only are profits in the financial sector under pressure, but the sector is also faced with changing and new industry and government regulations. It’s a challenging mix. KPMG helps financial institutions with an up-to-date overview of new regulations and with cognitive systems that take over a considerable portion of the work normally done by staff. This creates greater scope for new insights and more innovation. “And this, in turn, leads to new products that benefit the consumer as well the sector.”
he financial sector is still struggling. Profits have been down for a long time, partly because of low interest rates. Banks are supposed to focus on customers and the business, but greater pressure from stricter regulation also demands attention. Moreover it is becoming more and more costly to implement new rules and regulations as well as any amendments to existing ones. One reason is that regulations can be very complex. MiFID 2 alone consists of thousands of pages of text and there may be overlap between what’s new and what already exists. Once implemented, compliance with the new regulatory environment requires considerable manpower, tying up time and money. The latest changes have to be studied and compared with company manuals, generally resulting in a huge Excel sheet that is supposed
to give a clear summary of all the necessary changes. “Unfortunately there is often no other way simply because the regulatory environment is so complex and often ambiguous”, according to Rens Rozekrans, partner at KPMG and responsible for regulatory and compliance services. In addition to increasing regulatory pressure, there is another trend, namely the rise of robotization and cognitive applications. Banks and insurers are working hard on ro-
botization in their administrative processes. The next step is the use of cognitive systems, not only to manage processes even further, but also to service customers. RegTech brings together complex regulation and cognitive solutions. And there are more and more solutions available such as the automatic identification and evaluation of regulations, identification and determination of market abuses, monitoring of behavioural codes, KYC checks and gamification for regulatory issues.
Biography Rens Rozekrans Rens Rozekrans set up the KPMG forensic practice in 1993. As an investigator he has frequently been involved in regulatory investigations in the financial sector on behalf of Dutch and overseas supervisory bodies. At KPMG he now holds final accountability for all advisory services relating to regulatory issues. In addition, as a Global Lead Partner, he is responsible for all KPMG services to Aegon and acts as an expert witness.
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“Ready for RegTech.”
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Regulatory horizon KPMG uses technological developments to address the combined impact of these trends. First, they offered the Regulatory Horizon, an insightful dashboard for anyone in the financial sector wanting to know what regulations are coming and when. Rozekrans says: “We have had many favourable responses to the first overview on our website (blog.kpmg.nl/regulatory-horizon). There really does seem to be a demand for a simple summary. We now supply our clients with a regular, customised Regulatory Horizon. And of course it doesn’t end there for KPMG.” The company is currently experimenting with IBM Watson technology to develop a tool that, with the aid of a cognitive system, will answer regulatory and other questions, such as which regulations are applicable in a given situation. The idea is that the system truly “understands” the question even though different countries and professions use different terms for the same concept. Rozekrans cites the term “execution venues” as a regulatory example. “These are called MTF, OTF, SI or regulated market. But in practice people usually speak
of ‘exchanges’. It is important that the system understands natural language. We try to match the language of the business community with the language of the regulators.” But it goes well beyond a list of synonyms. Rozekrans adds: “The application also selects more and less relevant answers. We train the system to generate increasingly accurate results, partly by optimising feedback loops. In this way the system can quickly process millions of pages covering legislation and regulation.” In short: KPMG supports the financial world with technical applications that take care of many questions and this keeps in check the costs incurred by banks and insurers as they implement and comply with new regulations. In the course of 2017, the first version of the program is expected to be launched, for the financial market in the first instance but subsequently for other markets too. “The system replaces a considerable portion of costly labour. In this way financial organisations will free up resources that can be used to acquire a better understanding of new regulations, thus allowing
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KPMG profile KPMG is a professional firm providing audit, tax and advisory services. The company has a broad range of clients ranging from large national and international companies to medium-sized enterprises, non-profit organisations and governments. The complex problems facing clients demand a multi-disciplinary approach that adds structure to any complexity. KPMG professionals stand out in their own areas of expertise but, at the same time, work together closely so they can offer clients the added value they need to excel. In doing so the company can draw on a rich base of knowledge and experience acquired in a wide range of organisations and markets.
them to anticipate and get ready for any changes. It contributes to better insights and greater innovation,” says Rozekrans. “As a result new products will be created that benefit customers and banks alike and comply with all existing and new regulations.”
Analysts to Discuss Latest IT Spending Outlook During Gartner Webinar
Gartner says worldwide IT spending is forecast to be flat in 2016
orldwide IT spending is forecast to be flat in 2016, totaling 3.41 trillion, according to Gartner, Inc. (see Table 1). This is up from last quarter's forecast of negative 0.5 percent growth. The change in the forecast is mainly due to currency fluctuations. "The current Gartner Worldwide IT Spending Forecast assumes that the UK would not exit the European Union. With the UK's exit, there will likely be an erosion in business confidence and price increases which will impact UK, Western Europe and worldwide IT spending," said John-David Lovelock, research vice president at Gartner. While the UK has embarked on a
process to change, that change is yet to be defined. The "leave" vote will quickly affect IT spending in the UK and in Europe, while other changes will take longer. Staff may be the largest immediate issue. The longterm uncertainty in work status will make the UK less attractive to new foreign workers. Retaining current non-UK staff and having less access to qualified new hires from abroad will impair UK.IT departments.
New Options Are Disrupting Established Markets
algorithmic business. To fund these new initiatives, many businesses are turning to cost optimisation efforts centering around the new digital alternatives (for example, SaaS instead of software licences, voice over LTE [VoLTE] instead of cellular and digital personal assistants instead of people) to save money, simplify operations and speed time to value. It is precisely this new breadth of alternatives to traditional IT that will fundamentally reshape what is bought, who buys it and how much will be spent."
"2016 marked the start of an amazing dichotomy. The pace of change in IT will never again be as slow as it is now, but global IT spending growth is best described as lackluster," said Lovelock. "2016 is the year that business focus turns to digital business, the Internet of Things and even
The Gartner Worldwide IT Spending Forecast is the leading indicator of major technology trends across the hardware, software, IT services and telecom markets. Global IT and business executives use these highly anticipated quarterly reports to rec-
Table 1. Worldwide IT Spending Forecast (Millions of US Dollars) 2015 Spending
Data Center Systems
Source: Gartner (July 2016)
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ognise market opportunities and challenges, and base their critical business decisions on proven methodologies rather than guesswork. Data center systems' spending is projected to reach 174 billion dollars in 2016, a two percent increase from 2015. The market is driven by strong growth in the server markets in Greater China and Western Europe, and a strong refresh cycle in the North American enterprise network equipment market. Global enterprise software spending is on pace to total 332 billion dollars, a 5.8 percent increase from 2015. North America is the dominant regional driving force behind the growth. It is responsible for 11.6 billion dollars of the 24-billion-dollar increase in 2016. At a segment level, the fastest-growing market continues to be customer relationship management software. Devices spending is projected to total 627 billion dollars by the end of 2016. The lackluster economic issues surrounding Russia, Japan and Brazil will hold back demand and worldwide PC recovery in 2016. Additionally, Windows 10 upgrades have further led to PC buying being delayed âˆ’ consumers are willing to use older PCs longer, once they are upgraded to Windows 10. Spending in the IT services market is expected to increase 3.7 percent, totaling 898 billion dollars. Japan is the fastest-growing region for IT services spending, with 8.9 percent growth. With an increase in digital business projects, Japanese companies are starting to better understand that they need consulting support to transform their business and advice around new technologies from consultancy companies. Critically, they now see real value in those services and
About Gartner Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. The company delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the valuable partner to clients in approximately 10,000 distinct enterprises worldwide. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, USA, and has 8,300 associates, including more than 1,800 research analysts and consultants, and clients in more than 90 countries. For more information, visit www.gartner.com
consequently are willing to pay for the services. Communications services spending is projected to total 1.38 trillion dollars in 2016, down 1.4 percent from 2015. Japan leads the growth in communications services, with 8.3 percent growth, while Greater China adds the most dollars to spend, with just more than 8.3 billion dollars. Eastern Europe, Western Europe and North Amer-
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ica all are forecast to decrease as price wars and declining usage affect virtually all communications services markets. More detailed analysis on the outlook for the IT industry will be presented in the complimentary webinar "IT Spending Forecast, 2Q16 Update: New Options Are Disrupting Established Markets" taking place on 12 July at 11 am EDT. During the webinar, Gartner analysts will walk through three different examples of digital alternatives and demonstrate the effects that they are having on the markets in which they play, as well as the deleterious effects they can have on adjacent markets. Gartner's IT spending forecast methodology relies heavily on rigorous analysis of sales by thousands of vendors across the entire range of IT products and services. Gartner uses primary research techniques, complemented by secondary research sources, to build a comprehensive database of market size data on which to base its forecast. The Gartner quarterly IT spending forecast delivers a unique perspective on IT spending across hardware, software, IT services and telecommunications segments. These reports help Gartner clients understand market opportunities and challenges. The most recent IT spending forecast research is available at http://www.gartner. com/technology/research/it-spending-forecast/. This Quarterly IT Spending Forecast page includes links to the latest IT spending reports, webinars, blog posts and press releases. Gartner clients can read more on the Brexit impact on IT spending in "Brexit Will Disrupt CIO and Vendor Plans Through 2018."
Bye bye banks! Will they survive FinTech? The leading position of banks in the financial landscape was undisputed for a very long time, though this has since changed. Agile startups and technology companies are attacking banks from all sides, taking away their most valuable business. Can incumbent banks survive this wave of FinTech, or is it already too late? KOOS PLEGT
ide scale disruption is happening everywhere. Many industries have already undergone radical changes. For example, if consumers want to plan a vacation, they surf to booking.com or use AirBnB instead of going to the local travel agency. If they want to take a cab, it’s Uber. Their travel photos? They became digital years ago. And even at home, almost all aspects of their lives are dominated by (relatively) new technology, developed by tech giants such as Apple, Samsung and Google or smaller niche or local players. What often hasn’t changed are the banks they rely on. Not yet. It’s a matter of time before finance becomes completely ‘uberized’. And even now, FinTech companies are already taking away more and more business from incumbent banks. The pressure is on. Maybe a holistic, cheap and user-centric banking solution will finally emerge, making incumbent banks obsolete. Or it’s a scenario of ‘death by a thousand cuts’, where numerous smaller, agile and innovative companies attack the banking portfolio and their reve-
nues bit by bit. Either way, incumbent banks are in trouble. Will they be able to cope?
Lean and mean First of all, banks are totally aware of the threat of being replaced or marginalised. New research by PwC points out that more than 80 percent of the CEOs, CIOs and innovation managers of financial services expect to lose substantial amounts of business as a result of technological developments. This is even higher among banks: 95 percent. Loss of market share is a big threat, but even more are the lower margins caused by the pressure of lean-and-mean FinTech challengers. These new companies are often online only and smaller, with new technology, so they can offer their services cheaper to customers and also develop new services at a higher rate and lower cost than banks. Secondly, many banks have already started to join the digitisation game and are trying to meet their customer base online. Since these organisations were often founded in a time when there was no internet, this is not an easy task. The approach almost every big bank
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chooses in challenging FinTech can be described as ‘if you can’t beat them, join them’. As it is very difficult to challenge agile startups with big, traditional organisations, a popular approach is to set up programmes to support innovative new companies in their growth. Examples of Dutch banks setting up these ‘startup incubators’ include ABN Amro and Rabobank. In other countries, banks such as Barclays, Commerzbank and Crédit Agricole have done the same thing. But there is more than one road that leads to Rome, as the saying goes. For example, setting up venture funds for investments in FinTech (Citi, Santander, HSBC), buying FinTech companies (Barclays and BBVA) or partnering FinTech companies (HSBC, Santander). Another possibility is to initiate FinTech subsidiaries. In the Netherlands, Aegon has done this successfully with the launch of the online bank, Knab.
No two banks are alike Is it enough? That’s the big question here. Can banks survive the ‘FinTech hype’? “First of all, not all banks are the same”, says Tony de Bree, who had 25 years’ experience at ABN Amro before leaving the bank in
2011 and pursuing a career as an advisor and online entrepreneur. As an expert on FinTech and banking, he has written several books on digital transformation in banking and is advising, training and mentoring FinTech startups. “Smaller banks can adapt. But the traditional big players, with big organisations, legacy IT systems and lots of management layers, are in trouble.” However, even here there are exceptions. “ING is also a large bank, but their CEO Ralph Hamers is doing a very good job of changing the organisation and introducing new forms of collaboration with partners and introducing a culture of entrepreneurship everywhere in the organisation. This is a fundamentally different approach than that of ABN Amro and Rabobank. The problem there is that these banks say that they are innovative, but from a customer perspective, keep working in their old ways.” What’s clear is that big banks have a huge disadvantage compared to FinTech companies and smaller banks. In these organisations there are a great many people who were hired on personality traits and skills other than those that banks currently need. Smaller banks have fewer management layers and are faster in their decision-making processes. De Bree is currently a customer at Knab and has even visited several sessions the bank organised to gather input from its customer base. “The difference is noticeable. There are fewer overheads and more service. The people who help you often have a background in hospitality rather than banking. And the IT program is based on customer input. The company really chooses its priorities together with us. And that’s the best way to save money: by doing things that customers are willing to pay for. That’s something incumbent banks just don’t get.
They invent new stuff all the time, but their projects are terribly expensive, take a lot of time and they do it without any input from customers.”
Why are we innovating? Are banks responding appropriately to FinTech? That was the central question that also occupied the minds of Ian Webster and Jeremy Pizzala, authors of an EY report that was issued last year. Banks don’t just need to improve the customer experience, they also need to stay ahead of the innovation game. “Incubators are good for customer and shareholder PR, but will they deliver actual innovation or just more apps?”, Webster and Pizzala wrote. Their remarks about banks echo the words of De Bree: “Banks are hiring world-class marketing consultants, but are incumbents backing up the messaging with real change and product innovation?” Merely jumping on the FinTech bandwagon – or even building a successful FinTech company – will not create a successful institution.” The authors point to the ‘why’ of innovation. What is really driving the innovation agenda? Is it a defensive strategy, an answer to the demands of customers or shareholders? Or an offensive strategy, taking advantage of clear market opportunities?
“What drives innovation?” FinTech players are clearly in the last group. They don’t worry about disruption at all. They are on the hunt. The rise of internet and mobile is empowering even the smallest players, leading to a situation where new threats to banks can emerge from anywhere. During his FinTech course
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at MIT in the US in 2016, De Bree led a Capstone project where he was asked to launch a startup together with his fellow students, within a month. “This is entirely possible, with the right people, a good idea and investors. There are many startups that grow fast and they all jump at the ‘white spots’ where they deliver services better and cheaper than traditional banks.” A lack of entrepreneurship, lots of overheads and a culture that is not customer-centric makes it difficult for many large banks to compete. Working in corporate IT strategy for ABN Amro, De Bree experienced this himself. “At one point, you simply become ‘detached’. You are talking on a high, abstract level, but lose contact with customers. You think you are doing smart things for them, but you’re completely out of touch with what’s really happening out there.” Are banks lost? Maybe. Large incumbent banks in particular have a lot of people who lack the entrepreneurial skills that are needed right now. De Bree “The main problem is that they often work in high-level positions and aren’t going to replace themselves.” But there are also examples of big financial organisations that are responding adequately. “I am impressed by Santander, BNP Paribas and AXA, an insurance company. What they have in common is that they involve internal entrepreneurs − or ‘intrapreneurs’ − in departments that involve startups. The winning model here is to couple entrepreneurs with entrepreneurs.” In any case, there are lots of tough decisions for banks to make if they want to compete – and survive – in the FinTech age. This is also the conclusion of Webster and Pizzala. “Success in the digital era depends on a bank’s ability to respond logically to the threats and opportunities of FinTech innovation. Executives must ask themselves why, what and how they are innovating.”
Nine questions for UnifiedPost CEO Hans Leybaert
Bridging the digital divide UnifiedPost CEO Hans Leybaert discusses how the Belgian business solution firm went from zero to hero in the FinTech sector
Can you explain the background of UnifiedPost? UnifiedPost was founded in 2000 in Belgium as a platform for document management and over the years, has acquired several companies to become the group we are today. We now have 200 people working across Europe on a BPaaS platform based on basic components: document, payment, identity and APPs to support our customers in upgrading their business processes. We help small and large corporates to focus on what they do best and expand their business. For example, we are responsible for the transmission of Thomson Reuters' invoices to 137 countries, along with archiving and placing the documents at the client’s disposal online. It comes out of their billing engine and we do the rest. Like the name UnifiedPost suggests, in the beginning, we sent printed documents by post. We are not a printing company ourselves, but have many print partners in various countries. Over the past 16 years, we have moved to combine paper and electronic documents. We have built the model from the bottom up, acquir-
ing new clients to see revenue grow from nothing to 10 million euros in our first decade of operating. Together with my management team, I am responsible for the further growth of the FinTech communities we support with custom-built software components.
What does the FinTech ecosystem in the Benelux region look like? There are a lot of initiatives and smaller players who push innovative services around financing models. However, it is hard for new firms to obtain the required reach, because their disruptive models need a wide customer base. The technology ideas are innovative, but getting the required base is something else. This isn’t so easy. The Netherlands is more open to change than Belgium. Changing the habits of consumers is not that easy and of course, banks are trying to keep their customers on their side. It is a promising market, but the big breakthrough is still to come.
Can you tell more about your business optimisation and digital document solutions. We realised that we had to go
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beyond documents, so we created a platform for corporates and SMEs, serving even the smallest companies. Invoices and contracts are only elements in a wider flow, so we invested in payments, making several acquisitions. We are now an approved payment institute and can now acquire cards and offer collection services for the SME market. UnifiedPost has been marketing its digital document solutions since the start of the millennium. They are being used by more than 250 large corporate customers worldwide as a powerful multi-channel out- and in-bound document solution. Unified Post delivers invoices and receivables documents efficiently and legally all over Europe, on paper and electronically. Since we have integrated these solutions with strong payment and identity services, customers can also pay invoices. The solution can be integrated with credit control products in order to further support optimisation of cash collection processes. The electronic aspects introduce quality improvements, which benefit both sender and receiver. Electronic documents and pay-
ments are delivered and handled faster, they can internally be accessed by all involved staff at once and remain accessible for their defined lifecycle. Moreover, electronic delivery can support the combination of human-readable and machine-readable formats within a single delivery, allowing larger receivers to automate the processing of documents. All functions are fully automated and seamlessly integrated with the current business processes. UnifiedPost upgrades these processes and changes the way our customers work.
What makes your solutions unique? We do not have a single product range. We offer a comprehensive range of services in the space of document, payment and identity and servicing communities and act as a one-stop shop and service provider. Based on the components and the specific big data we have available, we are able to create different solutions. You can imagine that based upon the information within the communities, the variation of solutions we can offer are tremendous, from a reminder including a pay button, based on accurate and up-to-date information from your own statement information to automated dynamic financing based on accurate invoice information. Last but not least, we are a full-service FinTech company, not a startup. All our solutions are industry-proven – customers use our products daily and the company has a stabile financial base. We don’t operate under own brand, choosing instead to position ourselves as provider of a platform to clients who have a strong brand and client base. We go into partnerships with large corporates, instead of competing with them.
What has been key to the company realising incredible yearly growth of 40 to 50 percent over more than a decade? The most important part of growth is focus on service delivery, attracting new customers and building revenue. We don’t just want to be innovative, but also create practical products for our customers. We are very focused on our job, customers and software. Of course, due to changing market conditions, our product offering interests many users. Due to our cloud philosophy and community approach, our services appeal to a broad range of customers. This unique combination of products, cloud and communities has helped us grow rapidly.
What are the challenges of operating in different regulatory environments? Different countries have different countries. FinTechs and firms active in the digital companies have to go beyond their own domains and adapt to local conditions and regulations. We have a team of dedicated product managers who closely follow regulatory changes and legal frameworks. In some cases, our products managers are members of the regulatory bodies and together with other stakeholders, create improved frameworks. In Belgium, we have been involved with a number of new digital products for consumers that have caused legislation to be adjusted. We want to create a pan-European platform.
What is “Tech for Fin”? Everybody talks about FinTech and fancy new products created by disruptors, but I believe traditional companies need to digitalise too. More and more, if you can create innovate tech in combination with existing players, you have an all-in-one, existing customer base combined with innovative tech. This is why we say we are a “tech for fin” player. F I N T E CH . N L | 3 3
What does it mean to UnifiedPost to be named among the top 100 European FinTech firms? We are very pleased to work in this space. Since our launch, we have operated in a “sheltered” environment. Branding and marketing were not that important for us, as we operated on behalf of our community owners and focused on building our products. Last year, however, we began focussing on our own branding. We are proud of what we have achieved. Being named among the top 100 European FinTech firms is the proof that we are on track. It is a positive stimulus for all those who have supported us over the years. We are not a small FinTech player. We have a revenue of 25 million euros and a history that stretches back 25 years, which is unusual in the sector. These factors combined with our sustainable customer base mean that we will be around for a long time, while other FinTech players come and go.
What are UnifiedPost’s plans for 2017? Currently, we are mainly a Benelux player, although we have global clients. We want to expand rapidly in Europe and are looking for opportunities across the globe. We want to support community owners’ customers with simplifying business processes and create specific enriched data from a mass of big data.
The Blockchain Goes Contactless
Plutus.it Aiming High with Tap & Pay Bitcoin and other blockchain consensus-based digital currencies have now long enjoyed the focussed interest of both software and finance industries − often as experiments, tools for trade, as well as promises for a seamless banking future. But like personal computing, eventually it is time for the blockchain to end up in your pocket.
t is well known that the freedom and borderless nature of blockchain technology can benefit individuals more than corporations, but despite deep interest by specialists and speculators, Bitcoin and the blockchain has still not yet broken into the ‘real world’ of the average consumer. This was the crux of the problem − merchants have been slow to get on board, which has made spending digital currencies (such as Bitcoin and Ethereum) on daily expenses borderline impossible.
Innovate contacless payments In 2015, FinTech entrepreneur Danial Daychopan recognised and set out to resolve this practical issue. Along with his co-founders, he developed his concept into what would become London-based start-up Plutus.it, which now has the backing of over a thousand participants in a successful crowdfunding round earlier this year to create a bridge between the rising world of contactless payments and blockchain technology. “It is very difficult to spend Bitcoin at a shop that only accepts a fiat currency, for example GBP. The process suffers from significant friction, it can easily take 3-4 days or longer to convert bitcoin on an
exchange, withdraw to your bank account and then use your card. This cumbersome and vexatious process is one reason Bitcoin has not been able to attract merchants and day-to-day consumers.”, Daychopan told Disruptive Finance Magazine . The pitch is simple with Plutus Tap & Pay, which offers an efficient way to make contactless payments at any NFC-enabled merchant in the world. The concept is unique, especially because Plutus itself doesn’t hold any digital currencies. Tap & Pay users make a Bitcoin deposit directly to traders, while traders supply the fiat currency to be forwarded to merchants by escrowing it in advance with Plutus.it. The transaction is then verified on the blockchain and the user’s virtual debit card balance is funded. On one hand the PlutusDEX is essentially the same as trading faceto-face but on a global, digital scale. On the other hand Plutus Tap & Pay leverages this feature to let you use digital currencies in your daily life, wherever and whenever you want. “By relying on blockchain for immutable truth and verification, Plutus reduces the friction of up one week down to a few seconds," Daychopan added.
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Traction and potential Plutus has since managed to secure a wide audience of pre-registrations, and crossed a million dollars in a nine-day flash crowdfunding round. But the attention didn’t stop there – EU Startups recently named Plutus Europe’s Hottest FinTech start-up of 2016 and has received several other accolades. In fact, Plutus has also attracted former executives from banking, VISA and Braintree to get on board. Plutus Tap & Pay has captured the spotlight because of one very simple reason. Since 2014, the number of NFC-enabled phones in the world has almost doubled and is expected to reach over an incredible one billion in 2016 with no slowdown in sight. The digital currencies, Bitcoin and Ethereum have experienced similar
astronomical increases in both value, traction, and technical development.
Decentralised reward program An interesting feature of Plutus Tap &
Pay is that it rewards users with tokens called “Plutons” (PLU) that can be used for any in-store purchases. Plutons in circulation currently have a total value of over one million dol-
lars and are set to scale to a potential market cap of 100 million dollars if they achieve the widespread usage that Danial and his team at Plutus.it envision for the future.
Interview with the Founder of Plutus.it Tap & Pay What is your background and that of your team? I have a strong background in payments with a focus on creative innovation and have been developing next generation blockchain solutions since 2013. Our founding team is experienced in traditional finance and software engineering at the highest level. The rest of the team handles marketing, support, and most importantly our remote engineering team is working with us full-time on all critical infrastructure. Being surrounded by experts from such a diverse background with an interest for blockchain has motivated us to excel towards our goals. In fact, we are still hiring and are set to scale our team even further as we enter 2017. What are the major challenges you have faced when developing Plutus? Dealing with misconceptions! Usually this is never a concern, but in our case we are merging digital currencies and blockchain with traditional payments. There is enough red tape in the payments industry as is, but this becomes even more challenging when “Bitcoin” is mentioned. As a result we have had to work closely with our strategic partners to overcome these challenges until we explained the secure structure of our peer-to-peer model, and how the source of previous transactions is always visible on the distributed ledger. This hallmark attribute of the blockchain
is impressive to any compliance team if understood correctly.
costs which can be passed on to end users.
Which technologies and frameworks are being used for the Plutus App and PlutusDEX back-ends? Currently the app is native Android only because Apple has blocked NFC support for developers. We will look for a work-around unless this restriction is lifted. The PlutusDEX is being developed in nodeJS, React, and Redux. The initial build will run on our internal servers, migrating to the Ethereum blockchain step by step only as the technology evolves further.
What do you envision as the future of Plutons and other autonomous reward systems? Native tokenisation is another reason the blockchain works well for Plutus. You’ll find that major retail outlets and credit cards already each have their own centralised reward program. This forces the consumer to limited choices in-store. We aim to increase spending habits by giving consumers the freedom to be able to spend their earned points at any store of their choice.
What advantages do blockchain-based peer-to-peer systems have over using centralised servers and services? Are they cost-effective? Plutus removes the need for a centralised point of exchange by utilising the blockchain technology to settle trades between users. This means we can operate without actually holding any of the user funds. This is absolutely the most preferable method to run a peer-topeer digital trading floor because all transactions are transparent and the ledger is verifiably immutable.
Anyone who holds Plutons will always be able to use them on the Plutus app to make contactless payments and in the future online payments as well. Because Plutons are decentralised, you can create new uses − send them to your friends, barter or simply donate them to charity, with your good deed permanently recorded on the ledger of blockchain.
Once developed, an autonomous application running on the blockchain has a life of its own. This is why it’s always better to migrate to decentralisation in small increments. Although this can be expensive at first, in the long run it can have a huge impact on system operation and maintenance
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TOP 20 FINTECH
Meet the FinTech companies that are having the greatest impact on the continent and beyond
The European FinTech Spurred on by technological developments, the world is changing at a faster rate than ever before, and the financial services sector is no different. Consumers are looking for personal attention from their banks and insurers and digital financial products are helping meet this demand. Billions of dollars are being poured into FinTech companies and investment in the sector is growing exponentially. With these developments in mind, the European FinTech Awards 2016, held in April in Amsterdam, sought to celebrate the most influential FinTechs on the continent. After a day of pitches, demos and panel discussions exploring innovation and disruption, the nine category winners were revealed, along with 41 other promising FinTech firms.
BEHAVIOSEC CEO Neil Costigan Founded 2007 Category Risk, Intelligence & Security Country Sweden Founded in 2007, BehavioSec cleaned up at the 2016 European FinTech Awards, scooping the Best European FinTech Company and Best Risk, Intelligence & Security
honours. The Swedish startup’s model for strong, mult-ilayered customer security helps businesses stop fraud, prevent attacks, and verify their customers. Harnessing the power of continuous machine learning and behavioral biometrics, BehavioSec’s user authentication and verification system is second to none, allowing banks to tell who their clients are by the way they type or move their mouse. Quote Judge: “Adaptive approach to risk using great biometric solutions.”
BACKBASE CEO Jouk Pleiter Founded 2003 Category Banking Software Country The Netherlands The winner of the Innovative Banking Software category of the European FinTech Awards 2016, Backbase’s software systems give enterprises the tools and functionality
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they need to transform uninspired online and mobile channels into engaging customer experiences, holistically managed from a single platform. The firm has received recognition from Gartner, Forrester and Ovum, recognising it for being a leader in customer experience, mobile and omni-channel focus, innovation and time-tovalue. Quote Judge: “They help customers to transform bank channels into a better customer experience which is easy to use.”
TOP 20 FINTECH
MONESE CEO Norris Koppel Founded 2013 Category Challenger Banks Country United Kingdom In a post-Brexit world, Monese is enabling immigrants and expats, who might otherwise find it difficult to open a bank account outside of their home country, to access core banking services without financial penalties. It provides a current account interface, low-cost international money transfers, and a Visa debit card. Users are also able to store money in multiple currencies. Monese was named the number one Challenger Bank on the continent at the 2016 European FinTech Awards. Quote Judge: “Early, but close to full service. Mobile banking only, but a very good customer target.”
KREDITECH Alexander Graubner-Müller Founded 2012 Category Financial Inclusion Country Germany CEO
Operating in five highvalue markets with headquarters in Hamburg, Kreditech aims to provide access to credit for people with little or no credit history and who have been neglected by mainstream bankers. The socially conscious firm, which came up trumps in the Financial Inclusion segment of the European FinTech Awards 2016, uses proprietary credit scoring technology incorporating artificial intelligence and machine learning to process up to 20,000 data points per application and make credit decisions in real time. Quote Judge: “Very impressive level of granularity in customer evaluation and scoring model.”
KNIP CEO Founded Category Country
Dennis Just 2013 InsurTech Switzerland
Knip produces an innovative mobile insurance manager that makes it easy for users to track insurance policies, premiums and benefits. The product saw the firm emerge with the InsurTech gong at the European FinTech Awards 2016. With a team of more than 100 knowledgeable
staff members on hand in Zurich, Belgrade and Berlin to provide unbiased advice, users are able to painlessly electronically adjust premiums, execute new policies or cancel old ones. Quote Judge: “Easy to understand overview that allows customers to compare tariffs and services.”
WIKIFOLIO CEO Founded Category Country
Andreas Kern 2011 PFM Austria
An Austrian-based online platform for investment strategies of traders and asset managers, Wikifolio enables traders to turn their portfolios into fully fledged financial products called wikifolios, listed on Europe’s leading exchange for structured products. Investors are able to put their money into a strategy of their choice and view all relevant figures and trader comments in real time at a reasonable fee. Xpenditure was named the leading PFM robo-advisory on the continent at the European FinTech Awards 2016. Quote Judge: “Very impressive level of granularity in customer evaluation and scoring model.”
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EBURY CEO Founded Category Country
Salvador Garcia 2009 Payments United Kingdom
A deserved winner of the Payments category at the European FinTech Awards 2016, Ebury assists small and medium-sized businesses to expand into and operate in foreign markets by offering bespoke solutions usually only accessible to big multinationals with a turnover of over one billion pounds. It presents a comprehensive suit of solutions, ranging from currency hedging and payments to loans, and is expected to continue on its upward trajectory as traditional financial institutions rally to meet the changing needs of the market. Quote Judge: “Great technology for providing payment solutions for SME.”
David teaming up with Goliath. What opportunities does FinTech provide banks? How can these opposites collaborate? The make, buy or ally moment of big banks in FinTech unveiled. FinTech.nl
TOP 20 FINTECH
EVERLEDGER CEO Leanne Kemp Founded 2015 Category Blockchain & Bitcoin Country United Kingdom They say diamonds are forever, but these precious gemstones are vulnerable to fraudsters and thieves. London-based Everledger is using blockchain to thwart fraud and theft in an industry that hasn't developed a system for theft detection. Everledger’s tamper-proof digital diamond ledger is driving a shift from the outdated paper-based proof of ownership employed by most luxury goods. The sector-altering product saw Everledger romp to victory in the Bitcoin and Blockchain category of the European FinTech Awards 2016. Quote Judge: “Proven concept with a well-defined market. Also a very interesting and powerful value proposition.”
FUNDING CIRCLE CEO Samir Desai Founded 2010 Category Alternative Finance Country United Kingdom
Funding Circle is a pioneer in the peer-to-peer lending space, providing loans of between five thousand and one million pounds, on terms of up to five years typically accessible within a week. There is also no early repayment fee. Working with leading disruptors, corporate titans and financiers, Funding Circle has played a major role in stimulating the European FinTech sector and was recognised at the European FinTech Awards 2016, beating its rival to the honours in the Alternative Finance category. Quote Judge: “Becoming the category leader across Europe. Smart partnerships."
XPENDITURE CEO Boris Bogaert Founded 2011 Category PFM Country Belgium Brussels-based Xpenditure offers an expense management platform aimed at enterprises, SMEs and sole traders, and is on a mission to “kill” manually filed monthly expense reports. Its mobile and web apps allow data to be scanned on the go, rather than at the end of the month, and categorised online. It be integrated with most major accounting packages.
Quote Judge: “Good lineage to the existing ecosystem. Potentially partnerships with incumbents.
smartphone app to more than 190 countries in over 80 different currencies, with each transaction taking an hour or less. It has half a million customers connected to its platform and offers more than 270,000 cash pick-up locations globally.
ADYEN Pieter van der Does Founded 2006 Category Payments Country The Netherlands CEO
Adyen is a technology company that provides businesses with a single solution to accept payments anywhere in the world. The only provider of a modern end-to-end infrastructure connecting merchants directly to Visa, MasterCard, and 250 other payment methods globally, Adyen delivers frictionless payments across online, mobile and in-store.
AZIMO CEO Michael Kent Founded 2012 Category Financial Inclusion Country United Kingdom Customers of online remittance system, Azimo, customers are able to transfer money via the company’s website or
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BUNQ CEO Ali Niknam Founded 2013 Category Challenger Banks Country The Netherlands Four years in the making, Bunq is a consumer-orientated and socially conscious bank that braved regulatory challenges to become truly independent and able to offer clients peace of mind through a deposit guarantee system. Mindful of money laundering and loopholes in the traditional banking system, it stores money primarily in the European Central Bank and eschews investments in environmentally harmful firms or weapons manufacturers.
FIDOR BANK CEO Matthias Kröner Founded 2009
TOP 20 FINTECH
Category Alternative Finance Country Germany Founded in Germany in the aftermath of the sub-prime crisis with the aim of restoring trust in banks, Fidor Bank’s digital, customer-focused services allow clients to have a say in its decision-making processes. Offering a range of retail and business banking solutions accessible from a single account, Fidor has grown from strength to strength and currently has around 100,000 clients in Germany.
FIGO CEO André M. Bajorat Founded 2012 Category Innovatibe Banking Software Country Germany German-based startup Figo (short for “finance on the go”) was founded on the idea of a user-friendly banking app allowing clients to access several accounts via a central platform and has since extended its services to allow for transaction and account checks, as well as transfers. There are plans underway to extend these services beyond German borders and globalise these services.
to help analyse customers' spending habits and use that to market to businesses. Its solutions are used by many top Nordic banks, ING Direct and Germany's Commerzbank.
iZETTLE CEO Founded Category Country
Jacob de Geer 2010 Payments Sweden
iZettle builds game-changing payment tools that empower small businesses to play on the same turf as the big players. They do it with simple and easy-to-use tools, like their intuitive point-of-sale app and handsome card reader. There are no startup costs, no contracts, and no monthly fees to worry about. Instead, they offer a powerful set of tools that help entrepreneurs start, run and grow their businesses.
MENIGA Georg Ludviksson Founded 2009 Category PFM Robo Advisory Country United Kingdom CEO
Meniga's white label software gives banks the building blocks to speed up development of online banking platforms. As well as offering personal finance apps, Meniga offers banks tools
MONZO CEO Tom Blomfield Founded 2015 Category Challenger Banks Country United Kingdom It’s time for a bank that makes life easier not more difficult. A bank that belongs on our smartphone, not on the high street. A bank that keeps us informed and in control, rather than trying to catch us out with fees and charges. Monzo, a bank as smart as your phone. Built for your smartphone, this is banking like never before. One that updates your balance instantly, gives intelligent notifications and is easy to use.
NETGUARDIANS CEO Joel Winteregg Founded 2007 Category Risk, Intelligence & Security Country Switzerland
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Founded in 2007 and operating in Europe, the Middle East, Africa and Asia, NetGuardians provides mitigation and risk assurance solutions by using big data, user behavior and transaction analytics. They include RiskGuardian, a compliance automation solution, and FraudGuardian, which enables banking institutions to address fraud challenges. NetGuardians aims to bring “Swiss-quality” FinTech software to the world and is set to continue its global expansion drive.
NUMBER26 CEO Valentin Stalf Founded 2015 Category PFM Robo Advisory Country Germany N26, a German FinTech startup that's backed by heavyweights Peter Thiel and Li Ka-shing, is focussed on building the pan-European bank of tomorrow. The first bank designed exclusively for the smartphone, its userfriendly services offer many innovative features, including real-time transactions, automated and personalised statistics and the ability to send money via text or email, which has seen it attract more than 200,000 customers since its inception.
EUROPEAN FINTECH AWARDS
European FinTech Awards 2017 bring together FinTechs, investors, banks and innovation leaders
Oscars of European FinTech hit Brussels With its cutting-edge company pitches, live demos and thought-provoking panel discussions, the annual European FinTech Awards have quickly become THE event that all FinTech entrepreneurs, CEOs and investors block their diaries for. Don’t miss out and register now for #EFTA in Brusssels on 27 september 2017.
“In next to no time the European FinTech Awards have become the Oscars of European FinTech,” says Melle Eijckelhoff, director at Alex van Groningen BV, the Dutch company that has inspired the news and event hub for the FinTech community in Europe and Africa. “Not only do the prizes recognise the best and most exciting companies out there, the event also acts as the annual get-together of an entire ecosystem of startups, international investors, companies, experts, executives and board members of established financial institutions from across Europe.” Ahead of the conference, a shortlist of potential award winners – the European FinTech 100 – will be created from a selection of more than
400 promising European FinTech companies. In 2016, more than 60,000 online voters assisted in this process, along with an impressive group of judges, basically comprising the who-is-who of FinTech Europe. Many of them will return for another judging stint in 2017.
receiving the prizes. Other category winners were Monese (Challenger Banks), Funding Circle (Alternative Finance), Ebury (Payments), Wikifolio (PFM), Everledger (Blockchain), Kreditech (Financial Inclusion), Knip (InsurTech) and Backbase (Innovative Banking Sofware).
Glorious winner of the 2016 European FinTech Awards, which took place in Amsterdam on 14 April 2016, was BehavioSec, a Swedish company that uses the way customers type, swipe, and hold their devices, and enables them to authenticate themselves through their own behavior patterns. The company also grabbed the honours in the category Risk, Intelligence & Security, with a delighted CEO Neil Costigan
“We were taken by surprise by the enormous success of the European FinTech Awards. The talent is immense and the impact of these entrepreneurs on our day-to-day life is mindboggling,” says Melle. “It has confirmed our suspicion that there is a great need to these high-level FinTech gatherings. The amazing African FinTech Awards, which took place in Johannesburg on 13 October 2016, were further evidence.”
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EUROPEAN FINTECH AWARDS
EUROPEAN FINTECH AWARDS 2017 The 2nd European FinTech Awards & Conference will take place on 27 September 2017 in Brussels. All domains of financial innovation are discussed via pitches, demos and panel discussions. Tens of thousands of finance jobs are vanishing. Google, Apple, Facebook and countless FinTech startups are disrupting the financial sector. Innovative companies are eager to please millions of frustrated banking customers. Investors are fascinated by the phenomenal profits made by banks struggling with outdated technology. Today, more and more money is being invested in FinTech. The Uber of the banking sector has not yet emerged, but this is only a matter of time. Stay ahead of the game and witness the future of finance. A key element of the European FinTech Awards is announcement of the FinTech 100 - the top 100 innovative companies with ground-breaking ideas and technologies. Visit FinTech.nl to see all of 2016's videos and to reserve your seat at the 2017 Awards. Donâ€™t miss out and get your tickets for the European FinTech Awards now. www.FinTech.nl
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Leading corporate finance advisors to the European financial technology sector Mergers & Acquisitions | Capital Raising Advisory
Advised the shareholders of Neonet on its sale to KCG
Advised the shareholders of Risk Intelligence Ireland on its sale to Verisk Analytics
Advised the shareholders of AlgoSpan on its sale to Pico
Advised Credit Mutuel ArkĂŠa on its acquisition of Leetchi and Mangopay
Equity brokerage (Sweden/US)
Insurance data and analytics (Ireland/US)
Market infrastructure and data (UK/US)
Online payments (France/France)
Advised the shareholders of SmartCo on its sale to NeoXam (backed by BlackFin Capital Partners)
Advised the shareholders of Pirum on the transaction with Five Arrows Principal Investments and Camwell Management
Advised Silverfinch (MoneyMate) on their partnership with FundSquare
Advised NetGuardians on its Series B funding
Advised the shareholders of IDâ€™S (RFQ-hub) on its sale to ITG
Advised the shareholders of Equipos on its sale to SimCorp
Market infrastructure (Ireland/Luxembourg)
Anti-fraud and risk software (Switzerland)
Trading platform and software (France/US)
Reporting software (UK/Denmark)
Securities finance automation (UK/UK)
Data management software (France/France)
Amsterdam | London | Luxembourg Managing Partners: Alexis Thieriet (Amsterdam | London) E: email@example.com
John Gilligan (London) E: firstname.lastname@example.org www.novitasftcl.com
Payvision’s new vision for the payment industry
Retailers are missing out on higher revenue An international payment provider with over a decade’s presence at the forefront of the industry, Payvision recently launched its new omnichannel payment platform, Acapture. Today, the Group is transforming the payments landscape by adding a key element to its service, considered to be the future of the sector: the scientific analysis of payment data. This ultimately means getting the best transaction process for consumers and the highest number of successful transactions for merchants, both in-store and online. But what exactly is meant by that? And how is it achieved? Gijs op de Weegh, Chief Operations Officer (COO) at Payvision, explains the company’s strategy in seven themes. FINTECH.NL | 43
Omnichannel: combining in-store and online payment information The modern retailer must take an active role in all relevant channels: online, in-store, mobile and social. That’s what it means to be omnichannel. In the online environment, this is usually simple for the retailer. The difficult part is keeping track of what’s happening in-store. Op de Weegh says: “While 92 percent of all transactions are still carried out in the shop, retailers know very little about their in-store customers. In contrast, they know everything about the eight percent who shop online.” That’s where Payvision and Acapture come into the picture. By merging online and offline payments, the company can quantify and unlock customer data. They then pass on their information about the online customer to the shop. This is the first step in leveraging data in order to offer the consumer a tailor-made product or service.
In-store data science: using payment data to tailor retail offers Retailers can use payment information to better understand their in-store customers. Because customers often use the same card, it is easy to link payment information to their shopping history. This reveals buying patterns, providing insight into what certain types of people will purchase in future. One good example is the anonymous Albert Heijn Bonuskaart. The next step is linking this information to online data, which allows you to build a customer profile with key demographic characteristics. By grouping the information, a retailer can predict what people in each group are likely to buy and match offers to the needs of the various demographics. Another option is to introduce a loyalty card, like those issued by H&M, Zara and Bijenkorf. This card allows you to build an individual customer profile so you
Who is Gijs op de Weegh? As the COO of the Payvision Group, Gijs has been the driving force behind the innovative payment solutions provided by Payvision and Acapture, ensuring consistent business growth and increased profit. In a progressively complex and global business environment, Gijs oversees the ongoing business operations within the company and the development and implementation of Payvision’s overall corporate strategy, including business development, joint ventures and strategic investments. Through extensive insight into global payment services, Gijs understands the dynamics behind current trends and can anticipate the future developments of the industry. Gijs joined Payvision in 2002 as the Head of Legal and Financial Operations, after previously working in the financial industry. He later became responsible for Payvision’s global operations.
can tailor a specific offer to that person. “Zara often knows what a consumer wants better than the consumer knows themselves,” explains Op de Weegh.
Cross-border ecommerce: no unpleasant surprises It seems so straightforward: we shop online, so surely it’s easy to pay in any currency and buy from any country? The reality is not so simple. First off, the PSP must provide the customer’s preferred, local payment method. Then there are the import duties, the transportation costs and the various laws and regulations of each region. Payvision has years of experience with what is today dubbed "cross-border ecommerce" and so can secure against these issues spoiling a transaction for both merchant and buyer. Op de Weegh adds: “You don’t want to buy something online and find out later that the price is twice as high and your order will arrive a week late.”
Fraud: fraud reduction without unnecessary revenue loss When handling payments, the platform aims to minimise the number of fraudulent transactions while preserving as many legitimate transactions as possible. Sometimes, payments that appear fraudulent are actually genuine. These are the so-called ”false positives”. For example, by blocking the IP address of an entire country, you also block legitimate payments and you lose all the customers from that country. So, while you have successfully limited your fraud risk, you have damaged your turnover in the process. Op de Weegh explains: “Our goal is to make as many good transactions succeed as possible. We collect historical data on transactions and see whether or not they were ultimately fraudulent. With
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this data we can build predictive models that reduce fraud to an acceptable level without needlessly decreasing turnover. It may be better to accept a few fraudulent transactions if it results in the acceptance of authentic transactions that would otherwise have been blocked.”
Authorisation rates: achieving the maximum volume of successful transactions The authorisation rate refers to the number of transactions that have been successfully made from the total number that have been attempted. Banks don’t trust one another and so often block each other’s transactions, which in turn lowers the authorisation rate. “This happens all the time in the international network of payments,” says Op de Weegh. “It might be because the bank is located in a particular country or because of some past events or stringent security measures, such as asking for a password for payments above a certain amount. Banks incorporate security measures into transactions with certain characteristics. If you don’t comply with these measures, the transaction is cancelled. So it’s easy to lose transactions unnecessarily.” Payvision has built models to predict which bank will most probably accept which transaction, avoiding one of the chief pitfalls that damages authorisation rates.
Consumer behavior: maximising the amount of data in a minimum number of steps What number of payment steps will a consumer accept before pulling out of the transaction, given that the retailer wants to collect as much data as possible? Op de Weegh says: “At Uber, paying takes no more than the push of a button, while a plane ticket requires around five steps. Yet the consumer consider those five
steps acceptable and even necessary for that product.” Every retailer has its own optimised process. Payvision and Acapture continuously evaluate this to work out the optimal number of steps for each client. Of course, the more you know about the customer, the better the buying process can be tailored to them. Most importantly, the customer should not be frustrated into dropping out before paying. “The trick is to find the right balance,” Op de Weegh explains.
Privacy: what does the consumer get in return for a violation? How much violation of privacy will a customer accept? Op de Weegh says, “That depends a lot on what is expected in return. When a Dutch
bank announced in 2014 that they were going to use the payment data of their customers for commercial purposes, the Dutch were outraged. Why? Because the bank was doing this mainly for its own benefit: money. In contrast, Google gathers much more information from you and also uses it commercially. Not many people find this a problem because Google uses the information to predict such things as the time you will arrive at a destination in Google Maps.” Consumers only want to give up their privacy if they receive something useful in return. A payment provider can do this, offering the customer a better payment process and a bespoke product offering.
About PAYVISION Awarded with “Best Acquirer” at MPE Berlin 2016 and ‘Best Merchant Acquirer/ Processor’ at the 2015 Payments Awards, Payvision is one of the fastest-growing global acquiring networks in the world. With over a decade’s presence in the global payments market, Payvision has accrued vast knowledge of global acquiring and payments processing for the ecommerce market. Payvision simplifies the complexity of cross-border ecommerce through a highly effective and secure transaction processing platform. By offering banks, PSPs, ISOs and merchants one global acquiring platform, 24/7 support, 150+ transaction currencies, a high-end reporting interface and a solid risk management solution, Payvision strives to support its customers in expanding their geographical footprints and growing their business. Together with its subsidiary company, Acapture – a new, scalable, data-driven PSP, Payvision combines the experience of an industry leader and the flexibility and speed of a startup, supplying everything a merchant needs to support their growth ambitions. Next to that, by leveraging the innovative POS/mPOS technology, Payvision’s clients now have access to a full suite of omnichannel tools behind one central interface, with unified reporting. Payvision Group is headquartered in Amsterdam, with offices in New York, Utah, San Francisco, Madrid, London, Toronto, Singapore, Tokyo, Hong Kong, and Macau.
For further information, please contact: Floriana Cristea Global Communications Manager E-mail: email@example.com; Web: www.payvision.com
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Does the Dutch pension system still meet today’s needs? As a population, we Dutch are generally negative about the Dutch pension system. Rapidly rising life expectancy, this century’s financial crises and prolonged low returns have ensured that pension funds – and therefore us as premium payers and pensioners – are having it tough. Yet, in an international comparison of national pension systems carried out by consultancy firm Mercur, the Dutch pension system came in a strong second just after the Danish system, which consistently finishes first. But how does the Dutch pension system really stand at the moment? Are we keeping up with the times? Does it tie in with the changing labour market and our economic situation? And how innovative is it? KATRIEN BAARENDSE
ctually, there are many good points about our pension system. We are in a group of just a handful of countries where poverty among pensioners is the least in the world. We organise it together and in solidarity, which is ultimately how everyone benefits. We must be careful with these achievements. How can we reform and still keep the good, with respect for accrued rights and a fair distribution of the costs of a transition?
What do the Danes do? Firstly: what do the Danes actually do better? In Denmark you can build up your pension individually, with a collective pension scheme. Their basic pension consists of two parts, the largest being the Folkepension (comparable with the Dutch AOW –
state pension), the amount of which depends on your salary and assets. And whereas the AOW is built up from workforce contributions, the Folkepension is completely funded by tax revenues. The other part of the Danish basic pension is the ‘arbeidsmarktpensioen’ ATP (‘occupational pension’), which is compulsory for every employee who works more than eight hours a week. In addition to this basic pension, more than two million Danes (90 percent of the working population) also have a personal pension. With this supplementary pension, risks (such as the differences between economic peaks and troughs and individual risks) are shared.
Improvement points for the Dutch pension system We also work with individual pension accrual in the Netherlands. In May, the SER presented research
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into the personal pension capital with collective risk sharing. That concept means that every employee has his own pension pot, but financial risks − longevity, mortality and disability, for example − are covered collectively. Investment risks can be covered via a buffer, says the SER, providing that this buffer is solvent. The personal pension capital is only one of the potential improvement points in the Dutch pension system. In broader terms, the discussion is about reforming the pension system so that it not only offers a good pension income, but also better meets the requirements of a changing society. To that aim, the government began the National Pension Dialogue in 2015. People were able to contribute during meetings in the country and on the website in order to reach concrete improvement points for our pension system.
Based on the results of this Pension Dialogue and other developments in society, State Secretary Jette Klijnsma presented the Perspective Amendment for the Future of Pension Schemes on 8 July 2016. It contains a series of measures designed to make our pension system future-proof. The new pension system will have to better handle the way we work. Job-hoppers, flexi-workers and people who work on a temporary contract basis will have to be able to build up sufficient pension, and a solution must be found for the self-employed. Currently, less than half of the self-employed make provision for their retirement. There will also have to be opportunities for them to build up a pension. The new system must bring an end to the average system that caused undesirable redistribution between younger and older employees and the lower and higher educated. And the new measures will have to make the pension
less sensitive to a low interest rate. Everyone who works must be able to build up an adequate pension and keep abreast of their personal pension accrual. Finally, there must be more room for customisation and freedom of choice. More improvements will have to come, but the Perspective Amendment has got the ball rolling.
Do we know what’s happening with our pension? When it comes to keeping updated on our pensions, we automatically think of pension communication. Do employees actually know what’s happening with their pension? Pension awareness among the Dutch is traditionally low, a great many of us have no idea how much contribution we pay or what we will receive when we retire. The Pension Communications Act of 2015 should bring an end to that. By being well informed, pension
participants should be able to make a proper financial plan for their retirement. Every participant must know how much pension they can expect, work out if it will be enough and be aware of the risks of retirement provision. In addition, pension communication must let the participant see what his options are. The www.mijnpensioenoverzicht.nl website helps as anyone can log in via their DigiD and find out how much they would be entitled to monthly if they stopped working.
Trailing behind in innovation What remains is innovation, a field in which the pension sector has traditionally never shone. According to research carried out annually by KPMG among Dutch pension funds, the pension sector is giving insufficient consideration to new FinTech developments. Compared to Dutch banks and insurance companies, the pension sector pays hardly any attention to technological innovation. Currently, more than half of the funds have no contact with startups or FinTech parties. And yet, innovation could be hugely important in the pension sector. Adopting new technologies could increase participant satisfaction. Pension funds have access to information about the future financial situations of clients, which could be combined with their other financial information. They could unlock that data and help clients gain more insight into their pension accrual. Data visualisations and games can help clients understand how pensions work and enable them to make choices for their retirement. By combining and analysing data and offering personal customisation, clients get real insight into their financial situations, and that in itself is an important step in a good and future-proof pension system.
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Banking sector faces its moment of truth Dutch banks are facing important strategic decisions. If they fail to make choices or make the wrong ones, they will stay in their current downward spiral of costcutting and layoffs. However, making the right choices in the current challenged financial landscape is not easy. How should the Dutch banks prepare for the future, regaining the hearts of their customers? IRINE GAASBEEK, MANAGING DIRECTOR, FINANCIAL SERVICES, ACCENTURE NETHERLANDS
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number of trends are testing banks' willingness and ability to come up with the right strategies. Some key trends are the strong rise of the FinTech industry, unexpected competitors (would you have guessed ten years ago that Google would be involved in banking?), European legislation and consumer trust – or rather, the lack of it. Bank managers won’t find it easy to make the right decisions.
FinTech sector is growing up The FinTech sector has largely outgrown the pioneering phase. From trendy startups, FinTechs are growing into mature competitors to the established financial sector. However, will the sector turn out to be as disruptive as they say? Moreover, many FinTechs are looking to cooperate rather than compete with banks.
Unexpected competition Competition from an unexpected source is coming from companies like Google, Apple, Facebook and Amazon, which are increasingly offering their customers 'banking-related services'. These companies have a very clear picture of their customers: ‘Big data’ is their strength. They each offer their own financial services. Amazon provides loans to small businesses through Amazon Lending. Google Wallet enables customers to make online purchases via email. Apple has integrated payments into its iPhone 6 and iPad Air 2. And Facebook launched its free Friend-to-Friend payment system to transfer money. Banks should work together with these companies, especially to properly map the needs of their customers and to better interact with them. By building up an accurate picture of
their clients, they can make their financial products and services better suit customer needs.
New players and technologies New players are entering the market not just for the front office but also for the back office, taking over core banking processes such as payment processing and customer identity checks. Apart from this, technology itself poses a potential threat to banks. When paying with bitcoins via blockchain technology, people can transfer money without the intervention of a bank. The big question is what impact this will have on banks; some of which are already implementing blockchain technology themselves.
European legislation Banks are also noticing the influence of changing European regulation. For example, the Directive on Payment Services 2 (PSD 2) is strengthening competition further by opening up the European payments market to Third Party Providers (TPPs). They provide payment and account information services. New legislation is also putting pressure on the costs and earnings of banks.
Consumer trust still low Since it was lost during the banking crisis, consumer trust has not recovered too much. The Trust Monitor, a study by Dutch banking trade association NVB, shows that confidence in the banking sector is scoring 2.8 on a scale from 1 to 5. Anything less than 3 is considered inadequate, according to the NVB. If they are to improve this, banks still have some way to go.
Four alternative strategies What strategy should banks adhere to in order to deal with innovation? They have four alternatives: cooperation, investment, acquisition or in-house develop-
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ment. Each of these options might be the right one in any given situation. Cooperation is the easiest way to involve startups. They can do joint research or develop products together. Investing in startups might be a way to penetrate deeply into the emerging disruptive parties but also requires deep pockets and is therefore only appropriate for the richest banks. Taking over FinTechs and making them part of the bank may be attractive but involves the risk that legacy systems and culture will flow into the acquired company. In-house development of innovative products can perhaps compete with the best FinTech solutions, but banks usually need more time-tomarket to develop and introduce new products. The conclusion is crystal clear. If banks do not stay current with innovative and cost-saving trends like the cloud, robo-consulting, data analysis and the strong rise of mobile and blockchains, then eventually it will be the end of the road for them. The right mix of these four strategies, evaluating each situation on its own merits, is the preferred solution. My advice to bank managers? Put digital developments at the top of your agenda. Adopt new technologies aggressively. Change your way of working so you can innovate quickly. Start with easily applicable technologies, but also develop a long-term plan to discover, invest in and implement new technologies. Dive deeper into the digital lives of your customers. Invest in your staff so they will develop the skills needed for the new digital environment. Re-examine your business models. And invest in good cybersecurity. Then you will undoubtedly regain the hearts of your customers!
Meet FinTech’s leading lady, the marvellous maverick, the political promoter and 17 other influencers
Who are the most important people on the European FinTech scene? There is an evergrowing group of influencers that is changing the very nature of financial services in the world, using the tech of the future, focussing on customers and funding the most promising initiatives. Disruptive Finance Magazine lists the 21 most important ones.
Driving force: Vladislav Solodkiy
Incisive thinker: David Brear
Shaping tomorrow: Chris Skinner
CEO of Life.SREDA | Singapore Russian visionary Vladislav has been the driving force behind venture capital firm Life.SREDA’s 40-million-dollar investment in 13 FinTech startups, with five exits having already been successfully negotiated and a second fund on the way. In demand as a speaker, the internationally recognised FinTech expert has featured on the podium at some of the industry’s biggest events, including Money 20/20, European FinTech Awards, Innofin and Finnovasia. This all-rounder, who began his career in advertising and holds postgraduate qualifications in state and business administration and political science, is also the publisher of the well-known annual research report Money of the Future.
CEO of 11:FS | UK David is an industry leader in digital and next-generation financial services. He is one of the brains behind the Think Different Group, an international firm dedicated to advising business leaders on digital banking services. With extensive experience and qualifications across a number of digital disciplines, gained from years working on agency, consultancy and client relationships for a number of top financial services global brands, David has a truly unique vantage point on the FinTech and banking industry and doesn’t mind sharing it. This incisive thinker and thought-provoking speaker regularly features on the rosters of the Money20/20, European FinTech Awards and Next Money events.
CEO of The Finanser | UK Chris is a man for all seasons in banking and technology, penning a daily blog about the present, consulting on future trends and co-founding the Shaping Tomorrow research and analysis service. He leads one of the most highly regarded networking groups for financial services in all of Europe, the Financial Services Club, and can be seen sharing his revolutionary ideas at various conferences. Having been described as “one of the most authoritative voices on FinTech anywhere”, the bestselling author has worked with companies such as Innovate Finance, Moven and Meniga, and is renowned for his blockchain expertise.
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FinTechâ€™s leading lady: Nicole Anderson CEO of FinTech Circle Innovate | UK Nicole heads up FinTech Circle Innovate, a services and solutions provider that is helping established financial services firms and FinTech companies to collaborate and exploit joint opportunities. She is an inspirational mentor to global startups, with an unparalleled knowledge of FinTech, InsurTech, RegTech and WealthTech, among other value chain elements. She is also deeply involved in both the European and African FinTech Awards. Boasting more than 20 years of experience in customer engagement and acquisition, business model implementation, product development and innovation management, she has put her heart and soul into developing the FinTech ecosystem and deserves her status as arguably the most influential woman in the industry today.
FinTech Resident Expert: Huy Nguyen Trieu CEO of The Disruptive Group | UK Huy is the author of the Disruptive Finance blog, the FinTech Resident
Expert at Oxford Said Business School, and a board member of Millenial LTD. An engineering graduate of MIT, before entering the banking sector, he raised 15 million dollars and developed a tech startup into a global concern with 50 staff members and offices in New York and Paris. After having built new businesses within large investment banks for more than a decade, he launched the Disruptive Group consultancy and builds innovative businesses with a strong focus on technology and finance. Huy has also served on the FinTech Advisory Board of the World Economic Forum.
Marvellous maverick: Pascal Bouvier Venture Partner of Santander Innovations | USA Pascal is an investor and a FinTech expert who has been active as a venture capitalist in the financial services industry for the past six years. He built the FinTech investment arm of Route 66 Ventures and positioned it as a top 10 global venture capital firm. He is now hard at work growing Santander InnoVentures into a global leader in the segment. A maverick who is known for his large risk appetite, Pascal is a sought-after speaker and a leading innovative thinker within banking, financial services and software services. He is a regular at global industry events such as Money20/20 and the European FinTech Awards.
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Frontline evangelist: Mircea Mihaescu COO of Moven | Canada Mircea heads operations at banking disruptor Moven and former general partner and FinTech investor at SBT Venture Capital. He has extensive experience with startups and the development and deployment of large-scale software systems and has served in executive positions at the likes of Sberbank, IBM and the BMO Bank of Montreal. This FinTech evangelist pens the influential Thoughts from the FinTech Frontline blog and is a highly regarded speaker at events such as Money 20/20, Finovate, NextMoney and the European FinTech Awards.
Banking disruptor: Jason Bates Co-founder of 11:FS & Monzo | UK Jason is a co-founder of one of the hottest of the new breed of challenger banks, Monzo, which raised one million pounds in only 96 seconds. This seasoned FinTech expert has launched Starling (another banking disruptor), consulted for Google, taught at Facebook, partitioned billion-dollar companies and
founded a successful social enterprise that helps thousands of young people develop digital skills. Currently advising with 11:FS, he will be delivering benchmarking, research, consultancy and startup investment services with Life.SREDA to banks, insurers, governments, regulators and startups. The University of Liverpool graduate is the go-to man for mission critical technology programmes for large companies.
FemTech revolutionary: Cristina Cordovez de Villeneuve Chief Digital Officer at BNP | France The Chief Digital Officer of BNP Paribas and global head of Hello Bank!, a digital bank launched in 2013, Cristina is passionate about the digital revolution and the business transformation it fosters. Her responsibilities include the acceleration of digital transformation of BNP Paribas worldwide. This includes implementing digitisation in all group functions, starting with IT and HR, in order to enable digital capabilities for clients. One of the most influential women in the European financial services industry, she is a leading proponent of the FemTech movement.
Political promoter: Cora van Nieuwenhuizen FinTech rapporteur at European Parliament | The Netherlands Cora is a Dutch politician and has been a Member of the European Parliament since 2014. She is the author of a FinTech report which is set to have a profound impact on the continentâ€™s sector, with her recommendations encouraging governments to embrace FinTech. She is also a member of the European Parliament Intergroup on Long Term Investment and Reindustrialisation and the European Parliament Intergroup on LGBT Rights. When you consider that her role entails meeting all the key players in the European market, coupled with her political influence, it is little wonder that she is among the most influential FinTech stakeholders in Europe.
Banking futurist: Chris Gledhill CEO of Secco | UK Chris was lead mobile architect and led the disruptive innovation labs at Lloyds Banking Group before co-founding British challenger bank Secco. The futurist has both a technical and business background, with expertise spanning a wide range of disruptive technologies, including blockchain, AI, API, Big Data and cryptocurrencies. Changing the scale of the bank meant he had insight into clear problems within the financial system, but it also meant he lacked any ability to change them. At Secco, his goal is "to disrupt banking from the outside in, rather than the inside out". Chris regularly tops lists of FinTech influencers due to his extensive experience and pioneering mind set.
Queen of UK VC: Eileen Burbidge Partner at Passion Capital | UK Eileen is a partner at Passion Capital, a leading early-stage technology venture capital investment firm based in London. She brings extensive operational experience to her investment activities gleaned from business and product roles at Yahoo!, Skype and Apple. She also serves as the chair for Tech City UK and as HM Treasury's special envoy for FinTech. Eileen was made an MBE for services to UK business in June 2015 and holds a computer science degree from the University of Illinois. A Silicon Valley veteran, she has been hailed as the queen of British venture capital.
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Transformation champion: Oliver T Bussmann Global FinTech Executive | Switzerland Oliver has a worldwide reputation for and proven track record of driving large-scale digital transformation and innovation in both high-tech and financial services. He has previously been lauded for his efforts as the CIO of UBS, SAP and
Allianz. In 2015, he was named COO/ CTO of the Year by Financial News/ The Wall Street Journal and in 2016 won NASSCOM’s Global CIO Award. A champion of social media as a tool for organisational change, he is also known for his focus on innovation and is renowned for early recognition of megatrends that drive change in business models.
Leading light: Susanne Chishti CEO of FinTech Circle | UK Susanne is the CEO of Europe’s first angel network focused on FinTech opportunities. An entrepreneur and innovator, she has served as a mentor and judge at many FinTech events and competitions, such as SWIFT Innotribe, Cambridge Judge Business School Accelerator, FinTech Startup Bootcamp and Barclays Techstars Accelerators. Susanne has over 14 years’ experience in the industry, filling positions at Deutsche Bank, Lloyds Banking Group, Morgan Stanley and Accenture in London and Hong Kong. One of the leading lights in the male-dominated FinTech industry, she lectures at the ESCP Europe Business School.
Digital finance wizard: Udayan Goyal Co-founder at Apis Partners | UK Co-Founder of Apis Partners, a private equity manager focused on financial services in growth markets, Udayan was the co-founder and managing partner of Anthemis Group SA and currently serves as a director of the company. He was formerly the MD and Global Head of Financial Technology Advisory at Deutsche Bank in the Global Financial Institutions Group, based in London. Udayan is a keen proponent of technology-driven reformation in banking and financial services and has exceptional expertise in this space. A much sought-after commentator on digital finance, he curates the popular Future of Money session at Innotribe.
Powerful kingmaker: Florian Graillot Associate at AXA Strategic Ventures | France Florian is responsible for InsurTech and FinTech at AXA Strategic Ventures, a 230-million-euro venture capital fund financed by AXA Group. With this vast amount of money in hand, he is one of the most powerful men in the sector and is seen as a kingmaker. The fund will invest in insurance and financial services and on-the-ground coverage of investment opportunities across the globe on behalf of AXA Group. Florian worked at Boston Consulting Group in 2007 and later became Investment Manager at Affine, a French-listed property company. Before joining
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AXA, he worked for Paris-based VC fund Newfund. Florian is considered a guru in the InsurTech sector.
Chief Global Strategist: Spiros Margaris Founder of Margaris Advisory | Germany This FinTech mastermind supports many companies as Chief Global Strategist. Ranked top five in multiple influencer lists, Spiros has more than 20 years' experience in investment management/research for family offices, UHNWIs, HNWIs, institutional clients and innovation and technology management. With his financial industry expertise and a clear understanding of how technology and innovation can deliver profitable growth, the University of Toronto MBA graduate has serious clout in the industry, evidenced by the number of firms that employ him in a special advisory role.
Financial inclusion now. New players leapfrog old platforms to deliver mobile banking services to the disadvantaged. FinTech fullfilling its potential for the future of emerging economies. FinTech.nl
Inspirational entrepreneur: Gustavo Vinacua Director of the BBVA Innovation Centre | Spain Gustavo is a senior executive and entrepreneur with more than 15 years’ experience in wireless/telecoms, tech markets and FinTech gained from key management positions in leading multinationals and entrepreneurial activity. Currently at the helm of the BBVA Innovation Centre, he focusses on meeting clear objectives and satisfying customers to deliver a solid track record of results. His ability to manage change in highly challenging environments, motivate his people and inspire other entrepreneurs mark him out as leading light in the FinTech space.
Shepherding the banks: Andreas Kubli
the University of Law in New York, he was one of the main speakers at the Money20/20 Europe 2016 event. Andreas is shepherding Switzerland’s largest bank into the digital age. He is a FinTech savant who has mastered the trade-off between security and convenience when it comes to payments – a cornerstone of UBS’s digital strategy.
FinTech virtuoso: Oscar A Jofre CEO of KoreConX | Canada Canadian Oscar is a global thought leader in equity crowdfunding, FinTech and blockchain and a prolific speaker on related topics in the USA, Australia, UK, France, Germany, Canada, Peru, Singapore, Indonesia and China. He is a member of the Crowdfunding Intermediary Regulatory Advocates in the USA, and a contributing author to The FinTech Book, the world’s first crowdsourced book on FinTech globally. This remarkable FinTech virtuoso sees things from a wider perspective to solve global issues. His KoreConX firm offers a free all-in-one solution that helps companies navigate the process of raising equity capital and simplifies shareholder communications to reduce risk.
Portfolio management wizard: Paolo Sironi Author & IBM thought leader | Germany Paolo is the author of Modern Portfolio Management: From Markowitz to Probabilistic Scenario Optimisation, and contributing author to The FinTech Book – two books everyone with a shred of interest in FinTech should have on the book shelf. He is employed by IBM, where he fulfils the role of global thought leader for Wealth Management and Investment Analytics. Prior to IBM, Paolo founded a FinTech startup in Germany that provided GBI (Goal Based Investing) portfolios to wealth managers. This venture is now part of IBM, after Paolo’s funding partner Algorithmics was acquired. Paolo has a firm grounding in risk management and worked as head of market and counterparty risk modeling at Banca Intesa Sanpaolo in his native Italy for over a decade.
Billions for FinTech. Investments skyrocketed in 2016 and 2017 is going to be even more phenomenal. Cash keeps being pumped into financial technology businesses.
Group MD at UBS | Switzerland Andreas leads the Multichannel & Digitization division at UBS and previously headed the bank’s Strategy & Business Development department. He was a partner at McKinsey for more than 11 years. An authorised attorney with a master’s degree in corporate law from
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Fintech combines financial products and services with technology and is transforming the way the financial sector does business. Whether you are a financial institution embracing rapid changes to your business or a challenger looking to disrupt incumbents with innovation, fintech is about adapting to change and seizing new opportunities.â€? You need advisers who demonstrate leadership in both the financial and technology sectors. Clifford Chance advises national and international clients that are shaping these colliding but also integrating worlds â€“ the new financial landscape and the fintech revolution. For more information on fintech related topics, please contact Alvin Khodabaks (firstname.lastname@example.org), Bas Boris Visser (email@example.com) or Marian Scheele (firstname.lastname@example.org).
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Export product Five Degrees is expanding
”The new bank is a financial supermarket” In a highly competitive and innovative Dutch FinTech scene, Five Degrees stands out as a young IT organisation that is getting the better of major international players, not only in but also − and increasingly often − outside the Netherlands. A state-of-the-art application for the banking sector, a challenging Dutch market and a clear vision on the future of banking make Five Degrees an exceptional Dutch export product. The company assists banks to take on the challenges of a changing world. Their stateof-the-art platform offers ambitious banks the opportunity to offer their clients an innovative digital experience. No other market is so competitive as the Dutch FinTech market. No wonder that Five Degrees is in demand beyond the Netherlands.
igures produced by Eurostat show that the Netherlands ranks third in the world in terms of the adoption of online banking. With an adoption rate of 85 percent, the country is only surpassed by Norway (90 percent) and Finland (86 percent). Big Dutch banks are often dismissed as conservative and old-fashioned, yet from an international perspective this is not justified. Dutch banks are in fact very progressive. “The Netherlands is the breeding ground for new ways of banking”, according to Martijn Hohmann, CEO of Five Degrees. “It is an ideal place to be active as a vendor to banks. Here in the Netherlands we are ahead of the game because we are challenged to get the best out of ourselves all the time.” Not a single Dutch bank shuts itself
off from innovation. That is simply not an option if they want to meet the demands of their customers. Solid FinTech solutions will assist banks to adapt and change the way they operate. “You can’t be fully digital when you work with an IT platform from an era when internet did not yet exist”, says Hohmann, who at the same time observes that banks in other countries do not yet feel the same urgency as Dutch banks. “They are however on the threshold of these developments.”
International expansion Banks feel the need to become ‘future proof’. To do so they are looking for the right expertise and guidance. Hohmann’s Five Degrees was established in Breukelen in 2011 and has since supported 12 banks to optimise their digital offering. The company is the undisputed leader in the area of digital banking software. This is an F I N T E CH . N L | 5 6
exceptional feat in a world where the big international players are active and, moreover, where references play a key role. One of the best-known achievements by Five Degrees is the establishment of Knab Bank, a new bank completely set up with the aid of the Five Degrees solution known as Matrix. Rather than just helping new banks, the company offers the most value to existing, medium-sized banks. Many argue that these ‘old’ banks are doomed, but at Five Degrees they think this is nonsense. Banks such as Van Lanschot, Aruba Bank and Leaseplan Bank have reinvented themselves as banks of the future with the support of the Five Degrees team. The company also started to support banks outside the Netherlands. This
Peter-Jan van de Venn
Karmijn Kapitaal invests in Five Degrees “Karmijn Kapitaal invests substantially in FinTech company Five Degrees”, the two companies announced last month. The FinTech company provides software and other IT solutions to banks like Knab and Van Lanschot. It will use the investment to realise its goals in international growth and product development. Martijn Hohmann, CEO of Five Degrees, comments: “The funding will give us the room to invest in our international ambitions. We see the United Kingdom as an important growth market and have appointed a dedicated business development team locally already. We want our business partners to be able to implement our software even faster than today.”
is hardly surprising given its success stories have not remained unnoticed. Today, Five Degrees already is an established name and finds itself on the eve of a major international breakthrough. “This year we have our first go-live in the UK and expect at least two new clients in this market coming in 2017. Apart from this, we will expand into other European countries in the near future”, says Peter-Jan van de Venn, the company’s Chief Commercial Officer. Given its new clients and those still to come, Five Degrees needs to expand its staff. At present the company has a workforce of 120, working from three locations, but next year this is expected to rise to at least 160.
Marketplace banking Five Degrees believes that the role of banks will change. Hohmann speaks of ‘marketplace banking’: in his opin-
ion the bank of the future will act as a go-between and as an ‘orchestrating hub’ for all kinds of financial services. Each of these can be coupled or decoupled easily. “To accommodate this banks need to transform into something like an app store. With our core platform our clients can add third-party apps to effortlessly expand their service offering and hence adapt to the ever changing needs of both their existing customer base and new audiences”, says Hohmann. “Our system Matrix acts as the foundation and provides a real-time, basic banking framework that can be configured as time progresses and situations change.” Hohmann predicts that banks will morph into financial supermarkets. “They will serve as data custodians, with big responsibilities associated with security and privacy. On product level they will focus on shelf and channel management.” FINTECH.NL | 57
Better and Faster Last month, Five Degrees had the pleasure of welcoming a new investor, Karmijn Kapitaal (see insert). With this new shareholder, Five Degrees will be able to gear up and invest in both product development and market expansion. “We aim to offer a platform that can bring a banking proposition to market in as little as a fortnight. That’s the dream. We can now build a bank from scratch in six to nine months, but this period can be shortened significantly”, states Hohmann. And what does he expect will change for the Five Degrees team? “It will be easier for us to attract top talents who used to want to work only for corporates. We’ll continue to grow, especially abroad. We will, because banks all over the world face the same problem.”
Revolutionary share-trading platform elected best FinTech company in Africa
Easy Equities wins African FinTech Awards The African FinTech Awards 2016 (#AFTA16) brought together the continent’s gamechangers in the fast-developing sector. Revolutionary share-trading platform Easy Equities went home with the biggest prize.
ome of the continent’s most influential FinTech companies were on hand at the African FinTech Awards 2016, which took place on 13 October 2016 in Johannesburg, South Africa, to present pitches and participate in debates on the revolution taking place in Africa. The annual highlight on the African FinTech calendar was part of the Finance Indaba Africa, an annual two-day expo and conference for African finance professionals. The awards celebrate innovators shaping the future of finance in Africa and to acknowledge the impact these companies are having on socio-economic development on a continent beset by poverty, inequality and other social ills. To determine the Top 100 FinTech firms that either were based in Africa or which operated mainly on the continent, more than 30,000 FinTech experts and aficionados from across the globe cast their votes online, while a panel of judges comprising industry veterans, experts, high-profile innovators and entrepreneurs with a sterling record in finance or technology, then cast a critical eye over the strong field of candidates. The criteria for selection included assessing the power a firm had to
change its industry, its market traction, its unique value proposition and how it met consumer needs and engaged with its customers. Public votes constituted 25 percent of the weight in determining the African FinTech 100, while the judges were responsible for the remainder. The panel included the likes of general partner at SBT Venture Capital Matteo Rizzi, tech entrepreneur Georg Ludvikkson, Curve CEO Fred Baumhardt and Nicole Anderson of FinTech Circle Innovate. After a full day of a final round of seven-minute pitches and question-and-answer sessions with the judges from the three leading candidates in each of the six categories (lending and financing, payments and transfers, retail banking, investtech, blockchain and bitcoin and incumbent bank) EasyEquities was elected overall winner. The revolutionary share-trading platform, which allows investors to buy fractions of popular shares painlessly and at low cost, also scooped the honours in the investtech category, beating property-trading platform WealthMigrate and daily investment forecast vehicle I Know First to the award. Easy Equities CEO Charles Savage called the award overwhelming and thanked his team for “never fearing
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to fail to innovate”. “I give them one idea and they turn it into a hundred and make a success of all of them. We want to democratise stock trading and expose innovation in Africa. The continent has a big role to play in FinTech. I look forward to collaborating with all of you in the future,” he told the assembled guests. The other winners were micro-financier Baobab by Microcred (lending and financing), bitcoin-powered solar energy investment platform The Sun Exchange (bitcoin and blockchain), mobile commerce solution provider Cellulant (payments and transfers), SME funding and logistics provider Ovamba (lending and financing) and FNB (incumbent bank). The 2017 edition of the Awards promises to be a bigger and even more hotly contested affair, with arrangements already underway to ensure that the event showcases the best the continent has to offer. For more information about being part of this landmark event, please contact Niek van Geffen.
+31 (0)6 11 33 03 22 nvangeffen@@cfo.co.za FinTech-Africa.com
Africa: The future of FinTech Africa’s mushrooming FinTech enterprises hold the power to bring meaningful change to the continent, writes FinTech Africa’s senior correspondent, Ebrahim Moolla
ome 330 million adults, or 60 percent of the African population, lack access to the most basic financial services. Yet, Africa has the world’s youngest population and leads the globe in terms of mobile penetration. According to KPMG, “global investment in FinTech companies totaled $19.1 billion in 2015, with $13.8 billion invested into VC-backed FinTech companies.”
“The sheer size of the unserved market in Africa means FinTech can make a bigger difference than elsewhere in the world.” F I N T E CH . N L | 5 9
Against this backdrop, FinTech players in Africa have the opportunity to bring lasting change to this historically underserved market and raise millions out of poverty by providing financial education, access to financial services and assisting entrepreneurs from marginalised communities who are unable to meet the stringent loan criteria set by traditional financial institutions. These firms are able to play a development role in terms of increasing financial inclusion,
while satisfying shareholders’ hunger for profits. According to Jim Yong Kim, president at the World Bank, “access to financial services can serve as a bridge out of poverty. We have set a hugely ambitious goal – universal financial access by 2020 – and now we have evidence that we’re making major progress. “This effort will require many partners, but we can do it, and the payoff will be millions of people lifted out of poverty.” African startups and established companies face challenges like poor or absent infrastructure, internet penetration, funding issues, political instability and gender stereotyping, but the FinTech environment on the continent does hold advantages not seen in other parts of the world. African FinTech companies are not disrupting the sector, as in many areas, traditional financial institutions have not found it viable to serve the market in any way, which means there is great scope for collaboration, rather than direct competition. And because the financial services market has such a low base on the continent, Africa is leading the world in sector convergence, the convergence of new technologies to solve logistical challenges and the potential impact of Big Data. The sheer size of the unserved market in Africa means FinTech can make a bigger difference than elsewhere in the world. African governments have made progress by reducing red tape for entrepreneurs, increasing the level of economic governance and supporting incubators and innovation hubs, though concerns remain about whether they can in fact reach those most in need of economic upliftment. “Despite the impressive growth rates witnessed in many African coun-
“M-PESA, Entersekt, Nomanini and Wealth Migrate are African startups making waves across the globe.” tries over the past decade, inclusive and sustainable growth will only be realised if it is complemented by financial inclusion, and in practice, this means addressing the challenges of those who are most financially excluded,” says the African Foundation For Development. Adults in sub-Saharan Africa are three times more likely to use mobile money as their counterparts in Europe and North America. There are over 220 million registered mobile money accounts in Africa and mobile payment platforms have long been seen as the main driver of financial inclusion on the continent, but other solutions have also seen great strides being made. Core banking services and the remittances/ cross-border payment sectors, for so long the bane of many Africans’ lives, have become increasingly accessible to consumers through the efforts of FinTech startups. Africa has been touted as a potential hotbed of innovation because of the number of opportunities to provide local solutions to problems on the ground, and there have been a number of success stories in the FinTech sector, with firms gaining global acclaim. M-PESA, a subsidiary of Vodafone, is one of the earliest mobile-phone based money transfer and micro-fi-
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nancing services in the world and is credited with changing how these services are viewed globally, while more recently, South African startup Entersekt, which offers authentication systems for online and mobile banking services through a one-touch user experience, has quickly gone from its Stellenbosch roots to opening offices in Europe and the USA. POS startup Nomanini, which focuses on selling airtime in informal markets, has experienced exponential growth and secured over 2.3 million dollars in funding from various sources, while Snapscan, one of the most well-known FinTechs in South Africa, has revolutionised the mobile payments in the country by using QR codes to simplify virtually any purchase. Real estate investment marketplace Wealth Migrate is another FinTech that is making waves across the world by giving investors direct access to exclusive real estate investment opportunities in premier global markets. Then there are firms like icow and livestock wealth that have tapped into Africa’s cultural nuances – in this case, the great importance placed on cattle in African communities. Ultimately, though, it is not about individual companies, but the sustainable development promised by the boom of FinTech in Africa that is significant. It is a key driver for what many hope will be an African Renaissance marked by peace, prosperity and cultural rejuvenation.
Taking FinTech to the next level?
inTech: the buzz word of today. Will FinTechs become mainstream or are they yet more hype?
In our view it is inevitable that the current developments in the financial markets sector will continue. In the financial sector, FinTechs are transforming the way we think about, look at, experience and encounter financial services and their providers. Most importantly, FinTechs are causing an incredible change in our expectations, needs and wishes in relation to this sector. Regulators and supervisors are embracing FinTech. Innovation fits the main goal of the Capital Markets Union (CMU) and is being encouraged by setting up regulatory sandboxes and by developing specific rules applicable to types of FinTechs. Legal barriers are to be minimised to help FinTechs flourish. At the same time, the continuous struggle remains to find the right balance between safeguarding an appropriate level of investor protection and enabling FinTechs to test the market without being confronted with too many onerous administrative, financial and legal burdens. Despite the CMU, there is, however, no European regulatory framework available for most types of FinTech yet. The lack of specific European legislation relevant to many types
of FinTech results in a non-harmonised approach within Europe. This does not fit the intentions of policymakers at a national level, and neither nor does it concur with the technological potential of FinTechs. Alternative finance and other innovative business models explore the challenging edges of financial regulation which requires a creative perspective and willingness to go that extra mile. This is where FG Lawyers comes in. FG Lawyers is a boutique law firm that specialises in corporate law and (alternative) finance. Anne Hakvoort, a partner at FG Lawyers, enthusiastically describes her daily work as pioneering with the client: â€œWe offer unique advisory services, firmly building on our corporate roots but also constantly addressing issues that require an out-of-the-box mindset. Our firm covers the complete range of corporate and financial regulatory law; which makes us rather unique. We contribute actively to a proper legal understanding of FinTech, by participating in brainstorm sessions, responding to legislative proposals and conducting research, such as our response to the FinTech discussion paper published by the AFM and DNB, our contribution to the CrowdfundRES project initiated at the request of the European Commission and a pan-European research in respect of the liability risks associated with crowdfunding across borders.
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Prins Hendriklaan 28 1075 BD Amsterdam +31(0)20 760 31 31 email@example.com www.fglawyersamsterdam.com @fglawyers
FinTech: A behindthe-scenes look at credit card market leader ICS Innovation in the financial sector is taking place at an ever-faster pace. In the past, the big fish swallowed the little fish. But in today’s world, companies that can act fast prevail over those that move slowly. International Card Services is a major player in the Dutch payments market, with more than three million credit cards in its portfolio. It doesn’t see the rise of the FinTech industry as a threat but rather, as an opportunity. BY NICO LODEWIJK
FinTechs were not so long ago viewed primarily as disruptive and competition. More and more people are, however, now becoming convinced that we can achieve more through collaboration and co-existence. ICS processes 72 million credit card transactions a year and is consequently a technology-driven company. The greatest challenge we and other financial services providers face is how to optimally integrate our technical IT platforms, which serve large groups of customers, with innovative apps that are specifically aimed at creating customer intimacy. In other words, how do we ensure Human2Human interaction in the digital world?
Friction-free payments We put customers first at ICS. And as a financial services provider, it’s our responsibility to look not only at our customers’ needs and wishes,
but equally at what is in their best interest in the longer term. It is consequently vital that we learn to listen closely to our customers to understand what they consider important. One way we do this is by charting the customer journey, in other words the path a customer takes to purchasing a product or service. We also use an alternative method of listening based on innovation: gathering and analysing data on the buying and payment behaviour of groups of customers. As a data-driven organisation, ICS looks for anonymised patterns in the behaviour of groups of customers. This enables us to discover opportunities for developing new payment applications that are even more aligned to customer needs. Payments aren’t a sexy product, so our main focus must be on security and convenience. Our core definition of convenience is the ability to carry out a transaction friction-free and have
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real-time 24/7 contact via multiple channels. Some 1.4 million ICS credit cards currently enable contactless payments. The range of contactless payment options could in the future be expanded to include innovations such as a wearable in the form of perhaps a bracelet you can use to enter the parking garage, activate your laptop and make payments.
Learning cycle Identifying opportunities for new development might seem simple, although it is anything but. We don’t see innovation as something you ‘do on the side’ as an organisation. Our ultimate aim is to develop or help develop new applications that add value to our existing products and products under development. It’s essential in order to achieve this aim that innovative processes are managed properly and form part of a larger and integrated plan. ICS uses what is called an innovation funnel for this. It assesses potential innovations and gives them a score based on a range of different criteria. We reassess during each phase of a potential innovation whether the idea is still practicable. The first phase entails proactively exploring the opportunities and possibilities, both from the viewpoint of the business and IT, in order to subsequently translate them into applications we can roll out. Everything revolves around these applications because they enable you as a company and industry to create value. The next key step after rolling out an application is to ‘stick with it’. The data we generate after the implementation are subsequently used for the next innovative opportunity. This both creates a learning cycle and ensures that FinTech is embedded in the organisation’s culture and DNA. We sometimes also call this applied innovation.
ICS is, in association with Mastercard, the initiator of a biometric payment pilot. Biometric payment is a new method of online payment using facial recognition or fingerprints. The Netherlands is the first country and ICS is the only provider to offer this form of payment. It may even be possible to explore the potential for using heartbeats to authenticate identity in the future. The current biometric payment pilot will run through January 2017. ICS is currently looking with Mastercard at the possibilities for turning this successful pilot into a standard product feature.
Innovation in the attic FinTech calls for a change to the traditional financial sector. This is sometimes referred to as unorganised thinking and poses a real challenge to more traditional financial services providers. As a result, it is important to have an open attitude. Because if you’re really serious as an organisation about innovation, you must look outward
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Startup Bootcamp and Mastercard Start Path
ICS is a collaborating partner in Startup Bootcamp and Mastercard Start Path. We co-finance startups in the FinTech industry within these initiatives. In addition to making investments, we coach these startups in their development, primarily by offering mentorship.
and not stay in the comfort zone of your own company. This can be taken figuratively, in the sense of having an open mind, but also literally. It is simply a fact that it’s easier to innovate in a proverbial attic than in a big office building. ICS could contribute to facilitating the conditions for this in the future. We are, for example, working on redesigning our application landscape. A key premise in this regard is that we want to use so-called open APIs that make it possible to set up innovation platforms on which new applications can be developed. They operate alongside
our standard product IT systems.
Artificial intelligence ICS makes a well-considered selection from the vast offering of innovative developments and collaborations with startups. We assess, for example, whether a given FinTech is a sufficiently good fit with us before entering into collaboration. Because while daring to fail is a key prerequisite for companies focussing on FinTech, we are a relatively small player compared to the major banks and as a result can only take on a certain level of risk. The potential of the applica-
Bank as a platform
The new European payments guideline PSD2 will go into effect in 2018. Banks will as a result be required to construct an API that will give third parties access to transaction data, obviously providing that customers have granted permission for this. ICS is anticipating these new regulations by developing open APIs in cooperation with various organisations, including ABN AMRO. The safety and trusted nature of banks are being combined with the innovativeness of FinTechs and both are consequently strengthening each other.
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tion obviously plays a pivotal role when selecting innovations. The main trends we see in the payment industry right now are blockchains and artificial intelligence. The latter includes innovations such as voice recognition and a talking computer that can generate answers from the available data. This development does, however, lead to a considerable need for control. We can’t just leave something up to the computer, but have to fully understand how it reaches its conclusion.
Empowerment An added advantage of working with FinTech startups is the empowerment of employees. We see that our employees enjoy being involved in high-potential and innovative applications in the payments industry. They’re inspired by them, which in turns makes them more passionate about their work. This is crucially important for a company such as ICS. In the war for talent, the opportunities a company can offer in the field of innovation are a decisive factor.
Brilliant business models in InsurTech New ways to share, prevent and repair risks using mobile, big data, Internet of Things and blockchain.
here is a widespread feeling that new technologies will change and erode whole industries such as insurance and will make existing business models and jobs obsolete. We appear to have the luck to live in interesting times! We can make a difference for the better if we do the right thing. But of course this also works the other way around and we can also die trying. What should we do? We have to imagine how to work and be relevant and needed in the future and start acting that way today. We should not let legacy and ways of thinking from the past limit us to do the right thing because there are always new businesses and people without that legacy. On the other hand we have to understand the relevance of what we learned and build in the past and use that to our advantage. Even the feeling of rapid change itself is not new. Actually, almost all generations have had the feeling that they live in a time of unprecedented change. To see what is truly happening and what should be changed and used from the past it is good to take a step backwards and look further into the past and into the future. To quote Pitbull: “To understand the future we have to go back in time”.
sharing risks between people or businesses. If the only thing which is certain these days is uncertainty, there is certainly business for insurance. Financially sharing risks is the starting point of insurance. The eco-system in which that is conducted goes further and includes prevention and repairing. Prevention involves taking actions to reduce risks and selecting the people and businesses which whom you want to share risks. If things still go wrong, jointly organising and procuring repair-work can reduce the costs of claims and at the same time make it easier to get things back to normal.
The basics of the insurance industry are pretty solid. In essence it is about dealing with uncertainty by
Business models in health insurance: Fund Amsterdam, Kaiser Permanente and Discovery
Sharing, preventing and repairing risks are the constant factor. The way in which this is conducted changes through new technology and the resulting social innovation and changes. This creates battlefields, graveyards and fertile ground for existing and new business models. To get some understanding of the new business models in InsurTech we can investigate the changes through technologies such as mobile customer interaction, big data, the internet of things and blockchain. We can do that by looking into the past and future of insurance in health, non-life and big risks.
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The Dutch insurer Achmea is currently the largest health insurer in Europe. One of the key precedents of its healthcare division Zilveren Kruis is the General Healthcare Fund Amsterdam. This was founded in 1846 by ‘the repairmen’: the general practitioners. They offered the middle- and lower-class workers in Amsterdam the opportunity to enroll in a health insurance fund with a fixed monthly fee. This arrangement also provided a regular decent income to the doctors themselves, who in return worked exclusively for this fund. This sort of integrated care in which the providers are also the insurers is currently present in a lot of countries. The most famous one is Kaiser Permanente in the US. The healthcare fund Amsterdam has always invested a lot in information on the overall health of patients and in prevention. This is still visible in the current programs of Zilveren Kruis to support businesses and alliances to make their people more healthy. Kaiser Permanente is a front-runner in medical and health records for and with patients. Digital and mobile interaction in general changes the way in which payments can be automated and conducted faster and with greater ease. This is taken to the next level if blockchain technology is used for identification and authorisation. Front-runners in developing this are companies like M-Pesa, which is are found in countries such as Kenya, which does not have the advantage and legacy of
an existing financial infrastructure. Health data is additionally used in a lot of countries to provide feedback to healthcare providers on the quality of their healthcare and the health of their population. This data is also used to help patients choose the right hospital. Furthermore, tooling such as wearables is used to feed personal dashboards to support people to improve their vitality. The international best practice in this area is given by the South African insurance company Discovery and there are runners-up such as Oscar in New York. Discovery operates a vitality company alongside the insurance company. It encourages people to reduce their physical age compared to their passport age. To do this, Discovery has developed superior competencies in actuarial number crunching and is outstanding in seducing people to change their lifestyle based on deep insight and learning from customer behavior.
Business models in non-life retail insurance: Centraal Beheer, Interpolis, Google and Volkswagen The Achmea brand Centraal Beheer started in Amsterdam in 1909 with jointly administrating and paying risks between employers. They became the first direct-writer in the world through a focus on selling insurance to employees as part of employee benefit packages. As a car insurer they totally reshaped the car repairing industry by taking the lead in organising the service process after accidents building upon exact data on the best repair shops. This is currently taken to a new level with mobile service innovations such as RoadGuard, which also provides fee-based road assistance to people who are not insured. The Achmea brand Interpolis advocates the joint interest with customers to avoid accidents via prevention. Interpolis uses information and solutions such as sensors from the
internet of things to help people to protect their home against fire, burglars and flood. Competitors in these sort of eco-systems of mobility and safety do not only come from other insurance companies. It is also about having the relevant information on sharing, preventing and repairing risks, which is also provided by the providers of search engines and comparisons such as Google. Additionally, the competition is on providing the best integrated service package. Car manufacturers such as Volkswagen and BMW increasingly provide leasing constructions including service, repairmen and insurance. This is further stimulated by developments where the technology providers and car manufacturers merge: If the self-driving cars of Google and Tesla set new industry standards, the car manufacturers become responsible for their own driving mistakes. That does not involve individual retail car insurance. It may require insurance but then that is about re-insurance contracts in case a production failure results in a tremendous amount of claims for a car manufacturer.
Business models in specialised risk insurance: Lloyd’s of London, AIG and cat bonds Achmea started in 1811 in Achlum with 39 farmers who made the agreement to jointly pay the bill if one of their farms burnt down. Throughout history people have always sought arrangements like this to protect themselves against risks and be able to be in business. The basic understanding is that you spread the risk across a group in parts which every individual risk-taker can absorb if things go wrong. The classical example of a market to organise this is Lloyd’s of London. This started in 1687 as a coffee house and has since the start functioned as a network of people and businesses based
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on hard and soft data on risks. The fuel of the business is information and not insurance. The same principle applies to AIG, which has a lot of characteristics of a secret intelligence agency, including the number crunching business analyst and the international personal and political networks and informers. While the data has become bigger and bigger, the trick will always remain to estimate the involved risks best and to cut it into pieces, which you can still swallow. New ways to do that involve cat bonds, in which a lot of investors jointly put capital in a fund which is used as reserve for truly big risks like environmental disaster, plane crashes or terrorist attacks. Social media and blockchain offer new ways to spread huge risks across an enormous number of people. This offers truly new ways to cut out the intermediary parties, including potentially the insurance companies. Even the scary new risks due to climate change and information security will eventually be insured. What can we conclude? Insurance will not become obsolete. Sharing, preventing and repairing risks is needed. Insurance companies do, however, have to rethink and reinvent their work if they want to be a part of the future.
Jeroen Kemperman Jeroen Kemperman is responsible for Strategy and Business Development at Zilveren Kruis, the health insurance division of Achmea. He has jointly with Jeroen Geelhoed, Jennifer op ‘t Hoog and 35 case authors written four bestselling books on brilliant business models: in general, in healthcare, in food and in finance.
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A conversation with FinTech rapporteur Cora van Nieuwenhuizen
“The European financial sector cannot lean back” For some time now the Netherlands has had Fintech ambassador Willem Vermeend and Europe has had Cora van Nieuwenhuizen. Given that a Member of the European Parliament is concerned with Fintech, the subject is now also high on the agenda. If van Nieuwenhuizen has it her way European legislation should facilitate instead of frustrate innovation. On top of that, banks have to regain consumers’ trust and offer stability.
n mid-2014, Cora van Nieuwenhuizen joined the European Parliament on behalf of the VVD. As a member of the Committee on Economic and Monetary Affairs (ECON) she took up the position of FinTech rapporteur six months ago. In this role she is responsible for drawing up a so-called own-initiative report that will serve to advise the European Commission. The report, expected to be presented next year, should improve the European legislation governing FinTech. Quite a responsibility. Where does this ambition come from? “First of all it’s much needed. As a result of the crisis, a climate of fear and looking back still prevails. Meanwhile a lot of things are happening in the field of technology. That is something we should capitalise on. In Singapore, China and Australia, things are really going fast. The same goes for Africa, where legacy − like old IT systems − isn’t a burden. The FinTech market is growing very fast. We cannot lean back.
Apart from that it’s also something personal to me. My father was a banker. In the last years of his life there were a lot of scandals in the sector he had worked in for 40 years. That caused him grief. It gave me extra motivation to encourage banks to go back to their core business. Banking should be boring.”
“Banking should be boring.” So, no fancy bank if it were up to you? “This has nothing to do with ‘fancy’. Banks have to do what they are here for: taking care of a stable financial infrastructure.” As an ambassador of FinTech, you must be pleased with PSD2? “Yes, I would say this stimulates competition. Protectionism is a loser’s strategy. The way PSD2 has been set up is very progressive in my opinion. Take the name for instance: not Banking Services Directive but
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Payment Services Directive. That’s exactly what I’m aiming at because we should take the service offered rather than the servicing company as a starting point. Whether it’s a bank or FinTech that offers the service isn’t relevant.” From a European perspective, how does the Netherlands ‘score’ in terms of PSD2? Are we PSD ready? “The Netherlands is not fully prepared for PSD. It’s quite a switchover and there’s a lot that has to be done. After years of hesitating the sector finally feels a sense of urgency.” The introduction of Instant Payment also took a while. Not until 2019 will money debited from an account be immediately credited to the receiver’s account. A cynic would say banks are delaying this process on purpose… “Well, the adoption of Instant Payment could have gone faster to my mind. But then the current way of doing transactions is still part of their business model. But I do think that by now they have acknowledged the need to modernise the
payment system because otherwise they will be surpassed by competitors. At this moment it’s not possible to do a direct payment between Friday afternoon and Monday morning. That’s really outdated.” Is there enough opportunity for innovation and experimentation? “It’s the market that leads the way when it comes to testing and innovating. Governments and supervisory authorities should follow that example and create more space for experiments in a secured environment. The English Financial Conduct Authority, for example, has established a regulatory sandbox which makes this possible. In the Netherlands a joint step has been taken by the AFM and DNB with the introduction of an innovation hub. We should stimulate this kind of activity on a European level. Several international banks have joined forces as the R3 consortium to build a new infrastructure based on blockchain. Worldwide there are approximately 770 virtual currencies like bitcoin. That’s something we can’t ignore. I believe the ECB should experiment with a virtual euro and get started with blockchain. Blockchain has a promising future and it can make systems safer. To understand its threats and opportunities we should experiment with it so we can make the necessary adjustments to the law.” What challenges do market players face? “It’s really hard to always keep up now developments are in full swing. The financial sector as well as governments and authorities are both in need of quants, other analysts and technicians who can read and write algorithms. For FinTech startups the challenge lies in comprehending financial regulations and being compliant. Lastly, tradi-
Cora van Nieuwenhuizen’s agenda topics • • • • • •
Legislation that facilitates innovation A secure environment (sandbox) for experimentation An accelerated procedure for licence applications Enhanced infrastructure (fibreglass, satellite, cloud, etc.) Clarity about data ownership and liability for each moment in the chain Ethical discussion about big data and privacy.
tional players are faced with the fact they have to make a changeover in the not-too-distant future. Competitors are entering the market from all directions, from FinTech startups to big techs like Google and Amazon. Presumably different kinds of alliances will arise to address the competition. That’s not a lost battle for traditional players. The entrants lag behind when it comes to longterm client relations in financial services. But enough challenges lie ahead of us. And the beauty of it is that for consumers, everything will get better, cheaper and faster.” As for those FinTechs: there are many and investors love them. But they have to prove they’re worth the investment. Are we heading for a bubble? “A shake-out will definitely come. Some FinTechs will go out of business, others will be taken over and some will grow autonomously. That’s inevitable.” How far are pension funds with innovation? “At the moment they are not moving fast. Initiatives concentrate on advice and analysis. People with the ambition to invest to complement their pension provision used to go to their bank for advice. But these days it’s robo-advice that leads the way. I do think that there’s still a role for advisors to make the trans-
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lation though, and that people will use personal advice when it comes to financial planning. But the advisor is forced to apply more and more digital tools to optimise his services. Innovation can go fast if a personal pension pot is introduced and consumers can choose their own pension institution. Unfortunately, there are only a couple of institutions anticipating this potential development. If it gets this far, they will have to engage in a major fight with the FinTechs.”
Smart banking for smart cities In the future, banks can still have their traditional role as matchmaker between trade parties. With the arrival of a new digital layer, society is becoming ‘smart’ and innovative trade mechanisms will emerge. This will require a new financial backbone, says Pascal Huijbers, Chief Technology Officer (CTO) of Fujitsu Benelux.
hange in financial services is accelerating like never before. FinTech is on the rise and banks and insurers are changing their business models to deliver value in different ways. In which way these companies can remain successful is highlighted in a recent study of technology company Fujitsu. For the Fujitsu European Financial Services Survey 2016, over 7,000 consumers were asked how they like to interact with financial services, what their attitude is towards sharing personal data, and what are drivers for their choice of bank or insurer.
Society becomes digital One thing is clear: the way consumers interact with financial services is evolving. They are using a range of channels to interact with these services and seem ready to adopt more radical changes. “The expectations of customers have changed. They want to have a good online and mobile experience”, says Pascal Huijbers. But this should come as no surprise. “All financial transactions are moving to digital. We have gone from trading sheep, salt and gold to paper
cheques, digital payments and now it all becomes fully digital. Digital identification, digital transactions and it’s happening on all levels.” What will remain the same is the role of financial services as a matchmaker. “Smart banking will become the financial backbone of smart cities.” Huijbers envisions a future in which typical banking services will evolve and enable new trade mechanisms: “Imagine the placement of a water sensor on a small open boat in the canals of Amsterdam. These boats can become filled with water and you want someone to get the water out if the sensor detects water on a certain level. When this happens, the sensor will raise an event together with this information and market parties start to bid on the assignment.” With large-scale deployments of things with their own digital wallets and micro-transactions based on cryptocurrencies, smart cities will need a financial backbone. An open banking backbone that supports the connections between all participants. Buyers and sellers must be identified, matchmakers are F I N T E CH . N L | 7 0
needed and a system must be in place to process transactions. Financial backbone Many banks are worried about their role in the future, with the arrival of concepts like blockchain and startups that offer new payment services. “It’s certainly true that their interactions with customers are changing and their current profit model is under pressure, but this also offers the chance to introduce a new financial backbone for which they can develop new services," Huijbers argues. Collaboration between partners in an ecosystem becomes more important as well. “We are in close collaboration with leading financial institutions to make their operations run more efficiently and to create innovative services. For example, with security services that can monitor the integrity of the financial backbone. But also with our financial digital business platform with financial APIs that supports these new mechanisms and incorporate the new technologies such as blockchain. This is truly the new age of smart banking for smart cities.”
The challenge: keeping FinTech moving while legally compliant Large incumbents and FinTech-companies are competing and collaborating at the same time, while regulators are trying to keep up with developments. This raises complex issues, which the Dutch law firm Van Doorne is keen to address. “It is now all about partnerships between incumbents and FinTechs.”
ong before the hype, the Dutch law firm Van Doorne recognised the huge potential of technology for the financial services industry. Located in Amsterdam, the firm is in the middle of a large financial ecosystem, a rapidly emerging startup scene and tech-minded people. It is no secret that companies that are looking for a test market for their FinTech solution tend to launch first in the Netherlands before further expanding into Europe.
the day. One of the reasons is that FinTech is “maturing”, as Foppes a specialist in the field of corporate law − likes to point out. Banking and other incumbents are feeling the heat of new competitors and are triggered to incorporate new technologies. Foppes: “The sentiment is changing, banks see that they can benefit from FinTech. It is now all about partnerships between incumbents and FinTechs. As one of our bank clients recently mentioned: 'the way to innovate is to collaborate'.”
Realising that Van Doorne has a unique proposition by having a combination of all relevant expertise needed for FinTechs, Van Doorne in 2013 put together a dedicated team that focusses on this promising field. The rapidly changing landscape leads to all kinds of legal, strategic and commercial challenges, that were totally new and complex. Just the challenges that lawyers like Arno Voerman, Friso Foppes and Hugo Reumkens get very excited about.
One of the main challenges in the short term is the adoption of the European Payment Services Directive 2 (PSD2), which forces banks to open up payment accounts for third party payment providers, including other banks, via an API − an electronic gateway. These
Now a couple of years later, the early involvement in FinTech has lead to a solid and recognised FinTech practice, which is growing by
“Banks not only need the FinTech solutions, they need the cultural change.” F I N T E CH . N L | 7 1
APIs are under construction as we speak. “This is where many legal questions come in," tells Voerman who is thoroughly involved.
Why are these APIs such a big deal? Voerman: “Banks and other financial services now seem to increasingly focus on technology, rather than people. In Germany, for example solarisBank is on the market, a new bank that started as a pure technology company with a full banking licence. However, there is no retail proposition. It offers technology for digital service providers to build their application on top of their banking platform. It is like building with lego blocks. You can just put your own block on top of theirs. In my view banking as a platform is a major development.” “We see a turn around, banks are picking up speed and working on new services like a payment initiating service or account information service. For instance, ABN AMRO just launched Gradefix, a new product based on those new services used for credit scoring. ABN AMRO pilots with De Hypotheker. With banking as a platform anyone can connect with banks in the future because the connections are standardised. The Spanish bank BBVA
already has an API marketplace, you can simply plug into that as third party service provider. ”
This all sounds rather technical. How are you involved? What is the legal perspective? Voerman: “All large Dutch banks are working on their API strategy. The major challenge with APIs is to do it right from the start, in the design phase. You don’t want to take a wrong turn on data protection for example. Timely involvement of legal is very important. For instance, we help our clients with organising legal workshops on API strategy, in which the theme was how to stay in control. In this respect, basic ques-
disciplinary team is unique. Furthermore we are always keen on the question behind the question. For example: we helped a bank that had a problem with filing of documentation with regard to know-your-client-procedures. It turned out it was better to divest this portfolio than filing properly. They came to us just with a legal question how to be compliant, but in the end we jointly concluded that a sale of the portfolio would be in the best interest of the bank. This was strategic advice, that started with a legal issue. Within FinTech, we see the same pattern. Legal questions are predominantly driven by strategic or commercial considerations. We are well positioned to help incum-
bent banks, FinTechs and financial investors with new initiatives, either through collaboration, joint ventures or takeovers.”
All the banks have innovator programs. What is happening with these initiatives? Foppes: “Incumbents are in the process of transforming themselves. The FinTech startups are flexible and able to move quickly. Incumbents are typically large companies with less flexible governance and decision-making models, which makes it more difficult to instantly react to developments in the market. Banks are looking for collaboration not only for access to new products but also access to a
“We understand the question behind the question.” tions are always: what kind of data do I have? Can I share that with third parties? In that respect we are now facing a conflict between two sets of regulation: PSD2 and the data protection rules. PSD2 is more restrictive on the processing of payment data than the data protection rules. How do you design your API knowing that you need the explicit consent of the customer for data processing? This needs to be resolved with a multidisciplinary approach when we involve Elisabeth Thole, our data protection partner.” Reumkens: “And that is where we combine our knowledge of regulatory supervision, IT and data protection. In combination with our strong corporate practice, this multi-
Fltr. Hugo Reumkens, Friso Foppes, Arno Voerman | Photo: DigiDaan
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new culture. A culture of a more agile way of working, that helps them accelerate transformation.” “We see that banks are struggling with how to structure the collaborations optimally. How can FinTech maintain its agile and entrepreneurial vibe, where on the other hand the bank is seeking a certain level of control, commercially or even strategically, over the FinTech? It has been proven that full acquisition by an incumbent will significantly reduce the innovative character of a startup. So now there is more a tendency toward contractual collaboration than a full equity takeover. In this way the FinTech company stays entrepreneurial. Banks are willing to invest by way of collaboration in
an earlier stage than financial investors. Contrary to financial investors, they do not always require a proven product because it is not only about the product but also about the culture and change they are seeking. So, in a way, these collaborations are not only technology driven but also still people driven. A FinTech on the other hand has more chance to succeed if it has access to a large customer base, a customer base banks have to offer. That is why, from a FinTech’s perspective, non-exclusive cooperation is crucial in my view.”
And how do you view the blockchain?
to see how it will affect our clients in the financial sector, but also our own business. What will the roles of banks be in the future? Will smart contracts in the blockchain change financing and contracting? We are currently advising on an e-identity solution in the blockchain. It looks like a perfect solution for being in control of your identity. That can be a game changer for the financial sector. Banks are, for different services within their group, doing the same know-your-customer-check several times by several people. Why not relocate that to a blockchain? Much more efficient and much cheaper!”
Voerman: “It will be very Interesting
Arno Voerman | Partner
Arno is a financial services and markets lawyer with a special focus on (innovative) payments and FinTech (payments, cards, consumer credit, e-money, lending etc.). He advises Dutch and foreign FinTech companies and investors on various regulatory and commercial matters. He also assists companies that are confronted with (potential) enforcement measures of the Dutch financial supervisors DNB and AFM. Arno is furthermore active in financial litigation. Arno regularly publishes articles on FinTech in professional magazines in the Netherlands.
Friso Foppes | Partner Friso is an expert in corporate law. Friso specialises in particular in (cross-border) mergers and acquisitions, joint ventures and other forms of cooperation, private equity and corporate governance. He frequently acts for strategic and financial investors, both from the Netherlands and abroad, as well as for financial institutions and pension funds.
Hugo Reumkens | Managing partner Hugo is the managing partner at Van Doorne. He is also a highly experienced specialist in the area of company law, with particular focus on cross-border mergers and acquisitions, corporate governance, private equity and joint ventures. Inspiring. Driven. Nationally and internationally acknowledged and renowned. Committed. Several independent international surveys recommend Hugo as an expert in the area of private equity and corporate/M&A. He has extensive experience as boardroom counsel, advises directors and supervisors, and frequently acts as keynote speaker on management and supervision matters.
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These developments will affect your business in 2017 • Open banking • Partnerships • Blockchain
“The industry must show more courage”
The face of the ultimate financial sector professional In addition to knowledge of the financial sector, he also has experience in other fields and he is flexible. These are features of the ultimate financial sector professional, according to experts. What other skills do they find indispensable these days?
Banking and insurance professionals now have to meet very different requirements from a decade ago if they want to survive in this industry. We asked Peter Riedstra, founder and Director of headhunter Whyz, and Michel Strikker, director of FBD Bankmensen, to show us the ultimate modern professional in the financial sector.
think in terms of innovation. To achieve this, experience gained in other departments or even in other industries may come in useful.” Strikker: “Traditionally, professionals in the financial sector are particularly strong on figures, which they put into attractive spreadsheets. Now
What are the main features? Riedstra: “To achieve the best results, professionals in banking and insurance should think like customers rather than in processes. They should operate across departments, take initiative and show a sense of responsibility. These are key competencies in my eyes. In addition, curiosity, courage and a willingness to cross traditional lines are characteristics relevant to the ultimate banking and insurance professional. That being said, the last two characteristics might be difficult considering the strong regulation of the industry. Financial sector professionals should also
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you see that more and more of their tasks are being automated by intelligent systems. These professionals now have to be especially good at finding out what the customer really wants and the ‘question behind the question’. Good professionals always make the connection. Manoeuvrability is also an essential feature in
my view. A true professional must be able to fill various roles in the banking sector. This is important if you want to create a connection between the customer and organisation. The ideal professional thinks about development all the time. The system needs to be better − every day. No longer can you assume the same role for lengthy periods of time.”
Does the ultimate professional focus on digital? Strikker: “Sincere attention to customers improves their experience. But you can really put the focus on the customer if you have substantive knowledge of financial issues. Then you can have a helicopter view of the matter and free up time for other things. Financial institutions still think too much in terms of products, thereby threatening their own existence. What’s also important to realise is that not just ‘hard’ but also ‘soft’ skills are useful in the financial world. You have to think about how you present yourself. It comes down to attitude and behaviour as well as clothing. The professional in the financial industry dresses appropriately. His outfit should not distract from his profession. Whether this means he should wear a tie, I don’t know − there are some mixed opinions there. But a professional should definitely exude confidence. Clothing plays an important role in this.” Riedstra: “Even in our profession, IT and digital lead the way. Yet the human aspect also remains important. Just look at the banks which have once again opened local offices to better serve customers who value the personal approach. This is a good development because this is precisely where it went wrong in the past: the lack of a human element. Customers want banks and insurers to look at their personal situation, not just at target groups in general. If customers feel taken seriously because of this personal touch, they
will have more confidence in the whole financial world.”
Is the ultimate professional in the financial industry employed or self-employed? Riedstra: “It's about the skills you possess. Do I plead for financial institutions that are carried completely by flexible workforces? No, the perfect team to me consists of a solid core of employees, supplemented by a flexible layer.” Strikker: “To me it does not make much difference. It has to be said that the self-employed professional has a big advantage. He has experience with different people, cultures, organisations and activities. He is continually motivated to get the best out of himself and just go that extra mile. However, you always need to have a core organisation of employees, for the sake of stability in your business.”
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How can the industry continue to improve? Strikker: “Companies need to realise that the world is developing at breakneck speed and that new skills are required. When it comes to things like recruitment, selection and providing training, the thinking is often too traditional.” Riedstra: “In my view, these organisations too often make the mistake of playing it safe in recruitment. My advice: try choosing the less obvious candidate more often, as a big insurer did by recruiting a former Coca-Cola employee as their marketing director. This is a good example for the rest of the industry and I challenge them to show more guts. Employing professionals with experience from elsewhere will open up many new opportunities. The financial world is lagging behind some other industries. So it’s time for a change.”
Which FinTechs will survive the regulations? FinTech is hot, but FinTech companies tend to find that they quickly run up against the limits of what the regulator allows. How do young companies navigate their way through the regulations imposed by the supervisory authorities? And who are the shoo-in winners in the race to acquire FinTech companies? A conversation with Alvin Khodabaks and Marian Scheele of law firm Clifford Chance, who counts financial institutions, startups and larger FinTech companies among its clients. JORIS HEIJN
“FinTech differs from new technologies in other sectors in that it involves the introduction of new business models within one of the most heavily regulated industries,” says Alvin Khodabaks, a partner at Clifford Chance, whose areas of focus include the technology and telecom sectors. “Technological solutions and services now being developed do not always fit comfortably within the existing regulatory framework. And that creates uncertainty. Then there is the fact that many of the rules designed to eliminate or reduce risks undermine the very nature of startups. Essentially, they have to become risk averse, which gives them less room to manoeuvre.” His colleague, Marian Scheele, a senior counsel who specialises in supervision of financial services providers, such as asset management firms, banks and payment service providers, goes on to say: “We are seeing FinTech startups emerging not only in the financial world, but also in other sectors, such as IT. Initially, their view is
‘how complicated can it be to build systems that facilitate the provision of financial services, such as providing credit and payment services?’ These companies in particular are often shocked by the extent of the regulations imposed by law and the financial supervisory authorities.” The regulatory mechanisms may be strict, but, as both Clifford Chance lawyers are quick to point out, they certainly do not make it impossible to run a business, especially with the progressive harmonisation of the rules within Europe.
PSD2 At the end of 2015 the European Parliament adopted the Revised Directive on Payment Services (PSD2) to regulate services provided by payment institutions. Over the next few years EU member states will have to transpose this new directive into national law. “PSD2 differs considerably from its predecessor in that more service providers and services now fall within the scope of the directive. Many parties, including
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companies that facilitate payments without being the bank where the account is held, will be shocked to discover that their activities are now regulated,” says Scheele. Yet, according to her, there is also a potential upside in that, in the future, parties will be allowed to access bank customer data. One of the objectives of the revised directive is to level out the differences in the rules in different member states, which should make it easier for FinTech companies to operate throughout Europe. As things stand, FinTech companies often find it difficult to offer services throughout Europe, either because national regulators interpret European regulations differently, or because additional rules may be imposed at a national level. “Some countries interpret the regulations as leniently as possible, other countries are more exacting,” says Scheele.
Robo-advice While PSD2 will make it easier for payment service providers to oper-
Marian Scheele, Alvin Khodabaks
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Marian Scheele is a Senior Counsel in Clifford Chance's Amsterdam office and specializes in the regulatory and legal aspects of financial institutions such as asset managers, payment service providers and banks. She has been in the lead of large licensing and restructuring projects involving EU legislation for asset managers, payment service providers and banks, including AIFMD/MiFID/PSD/CRD. Marian frequently speaks at seminars on regulatory and other topics, such as fintech. She is a member of the public affairs committee of INREV.
Alvin Khodabaks is a Partner in Clifford Chance's Amsterdam office. Alvinhas always been fascinated by the intersection between technology, business and society which is where his focus lies. He is a Partner in the Technology Transactions Practice and heads up the Intellectual Property (IP) and Technology, Media and Telecommunications (TMT) practice group. He also co-heads Clifford Chance’s global Cyber Security Working Group and is a key member of the firm's global fintech and TMT sector focus groups. He has a wealth of experience in IP, data protection and technology-related commercial contracting and litigation.
ate throughout Europe, when it comes to FinTech solutions, in many instances it is not yet clear whether European regulations apply or, if they do, how they are interpreted by individual member states. “Take the provision of robo-advice, for example,” says Scheele. “It is governed by the European MiFID directive, which raises the issue of whether it is possible to dispense with human
involvement entirely when providing computer-generated advice. In the UK it has been decided that human involvement is always required, and similar rules are expected to be adopted in the Netherlands, in the sense that there must always be a person who is responsible for the service being provided. The Netherlands Authority for the Financial Markets (AFM) has also specified situations in which robo-advice solutions are subject to MiFID rules. The existence of different national rules may mean that suppliers have to build systems that allow for the application of different solutions, depending on the country or countries in which a service is offered.” Scheele and Khodabaks are both of the view that the attitude of the regulatory authorities is an important factor when FinTech companies are choosing the countries in which they intend to operate, but it is certainly not the only consideration. European rules will make it more difficult for national regulators to launch a race to the bottom by interpreting the regulations leniently as a means of attracting FinTechs. “Europe is now intervening far more rapidly than it did in the past,” acknowledges Scheele. Having said this, regulators can also make a positive difference by adjusting their procedures to more effectively facilitate new market entrants. “In the UK this is seen as an important priority,” says Khodabaks. The Financial Conduct Authority has proactively identified the barriers that hinder market entrants and steps that can be taken to help. AFM and DNB have also taken action and are prepared to extend assistance to new market entrants.
RegTech According to the Clifford Chance lawyer, in the Netherlands the regulators are still developing their understanding of FinTech com-
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panies. But they are making rapid progress. “We will probably find that the regime becomes more facilitative as their knowledge increases.” The emergence of so-called ‘RegTech’ (regulatory technology) will make it easier for precisely the right information to be submitted to the regulatory authorities without having to set up a whole bureaucracy. “Much of the technology now being developed includes Privacy by Design. Maybe we will also see the increasing introduction of Compliance by Design.” According to Khodabaks and Scheele, the Netherlands offers conducive conditions for FinTech companies. “Factors such as the infrastructure, the adoption of technology and the clarity of the market make the Netherlands an attractive prospect,” says Khodabaks. “And let’s not forget that the Netherlands also offers a good business climate. Given the size of the Dutch market, the Netherlands is performing relatively well. It now has a unicorn: a startup with a market valuation in excess of $1 billion. And hopefully there will be others.” Many FinTech companies do not immediately need to apply for a full banking licence, but can opt for a somewhat lighter regime. Bunq was the first company to be awarded a new banking licence in many years. Many other FinTech companies focus on the provision of credit extension and asset management services, which means that they fall under other supervisory regimes. So there are countless FinTech companies and, between them, they are offering a wide range of services. Yet, how long this will continue to be the case remains to be seen. “At the moment we are witnessing a proliferation of FinTechs, the emergence of an incredibly broad spectrum of services, and considerable potential for investment,” says Khodabaks. “The market will eventually normal-
ise and we will see consolidation. But it will be a while before we reach that point.”
Apple and Google Who will come out on top when the market starts to consolidate? According to the two Clifford Chance lawyers, that still remains to be seen. “The large banks will endeavour to protect their market and their customer and account-holder bases will be an advantage in this respect,” says Scheele. “If they are able to offer effective FinTech solutions, they will be well placed to come out on top.” She also feels that banks have another advantage in that they are familiar with the existing regulations. “Technology companies such as Apple, Amazon and Google are also in a strong position,” adds Khodabaks. “Everyone carries a smartphone, tech companies are perceived to be more innovative and consumer centric. They have the technology, consumer base and market position to move more into the financial services sector.” There are also likely to be fewer cultural issues if a FinTech company is acquired by a technology giant rather than a bank. Yet Khodabaks also sees a third category of companies that may well venture into the realms of FinTech, and that is telecom companies. “The telecoms industry started out with phone services. Over the years it has expanded to include data, internet, messaging, television, content and wireless services, and now offers ‘quad play’ deals. The telecom sector has already experienced significant consolidation and we will probably see the same thing in the FinTech industry. Who knows? Maybe the next step for telecom companies is to integrate FinTech solutions, so they become ‘quin players’ and move closer to the financial services sector. In fact, financial institutions may find that telecom companies end up being their main rivals.”
Bas Boris Visser is Clifford Chance’s Global Head of Innovation and Business Change and a Partner in its Amsterdam Finance & Capital Markets practice. He was managing partner of the Amsterdam office from 2009 until 2015. Bas Boris focuses on the financial institutions sector. Bas Boris Visser: Technological developments mean many of our clients have been going through huge transformation processes over the past decade. Take financial institutions for instance, they are slowly but surely becoming technology companies and they are increasingly offering technology based client solutions. So, as a firm we asked ourselves a number of questions; What does it actually mean that a financial institution is becoming a technology company? What kind of new issues are they confronted with, and do we have what it takes to help them with these new issues? Lawyers and technology is not necessarily a match made in heaven but we cannot just accept it in the context of a society which is increasingly dominated by technology. Lawyers just have to become more tech savvy than most of us are today. At Clifford Chance we are working on this for instance by having become a partner of Singularity University Europe. Singularity University is a Silicon Valley based university totally focused on the impact of technology on society. Another example is the partnership we started with Startupbootcamp particularly on their FinTech and cybersecurity program. A while ago we also started our global FinTech platform. A lot of our younger lawyers and professionals play a key role in it. A final example is linked to the partnership we entered into with Kira Systems. Kira is what we call second wave artificial intelligence software in the legal sector with the increasingly advanced E-discovery products being the first wave.
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Selling invoices: An asset for many companies In a context where obtaining a bank loan can become a tedious process, selling individual invoices is an interesting alternative for companies looking for one-off as well as for structural financing solutions.
elling invoices stems from business practices dating back to the Renaissance. The process is simple: a company that has invoiced one of its customers with a due date in the future transfers its claim on that customer − the debtor − to another company in exchange for an immediate payment. The buyer of the invoice pays a sum slightly lower than the total of the invoice. The difference between the purchase price of the invoice and the payment received from the debtor − called agio − will be the return earned by the buyer.
"Putting an invoice for sale takes only a few clicks."
More security, more ease Today, the FinTech wave breathes a new life into this ancient practice. For example, the Belgian startup has developed an online electronic marketplace that connects companies wishing to sell B2B invoices and companies looking for short-term investments. Putting an invoice for sale on the platform takes only a few clicks. Moreover, once an invoice has been accepted, it only takes a couple of days before it is sold and the seller receives the cash he expects. Outside its role as an intermediary, the Edebex platform also secures the transaction. On the one hand, it performs an audit of each invoice to check the solvency of the final debtor and the validity of the invoice. On the other hand, it carries out any collection formalities in the event of a late payment, and also insures all invoices against the risk of default thanks to a partnership with a credit insurer. As a result, the seller of the invoice no longer has to worry about anything after his invoice is sold, and the investment risk for the buyer is put under control.
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Edebex provides a quick, reliable and effective solution to any company wanting to streamline their cash-flow, improve their cash management or optimise their working capital. Thanks to Edebex, businesses in need of liquidities can obtain them easily by selling their outstanding invoices on our online platform. Companies with a liquidity surplus can buy these invoices at a discounted price based on the quality of the debtor and the due date of the invoice. Each receivable is insured against non-payment. At the due date, the debtor pays the full amount and the investor gets his return. This exchange allows : • cash-strapped entrepreneurs to quickly access the liquidities they need without the hassles and uncertainty of “traditional” financing solutions •
cash-rich entrepreneurs to invest directly in the real economy while earning substantial returns.
Leveraging activity to finance activity Selling invoices is a form of financing particularly adapted to the needs of many companies. Indeed, companies whose clients have imposed payment terms significantly longer than those asked by their suppliers can use the platform to ease the pressure on their treasury. Companies experiencing difficulties in securing bank financing because of their young age (starters and startups), the financial structure of their balance sheet, their excessive exposure to a single client or their sector of activity, can find the cash they lack. Indeed, only the creditworthiness of their final customer is taken into account in the financing decision.
Growing companies can sell their customer invoices to finance the increase in working capital requirement that inevitably follows the increase in their activity. Companies wishing to offload their receivables management may trans-
"This is particularly important for SMEs that are exporting or expanding into a new country."Â F I N T E CH . N L | 8 1
fer their invoices and outsource this particularly time-consuming part of their activities. Companies exporting to countries bordering Belgium or further (France, the Netherlands, Luxembourg, Germany, Italy and the UK), can both obtain financing for their transactions and outsource the management of their international claims. This is particularly important for SMEs that are exporting or expanding into a new country. As it is linked to the core activities, selling invoices is a financing solution particularly well-suited to dynamic companies: fast, efficient and based on the creditworthiness of the final customer.
Joël Roerig, Melle Eijckelhoff, Ebrahim Moolla, Dennis Mensink & Toni Muir
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© Alex van Groningen BV 2016 Amstelveen, the Netherlands
Cor Lesterhuis & Anouk Bommer
Photography Arthur van Megen
Publisher Alex van Groningen BV FinTech Europe FinTech-Africa Amstelveen, the Netherlands Tel. +31 20 57 88 900
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