Fintech firms and banks are now friends
Back on stage, Gary Wright, head of research at Finextra, stated that in 2023 we must address the unpredictability, high costs, low speed, lack of information and transparency associated with today’s networks to strengthen international trade and financial inclusion.
Fintech can help solve problems related to financial exclusion and make progress where the traditional financial industry has fallen short. Introducing the topic, Wright gave to Filip Versluys, Business Development Director of B2B Connect Europe, Visa, who examined how payments, especially cross-border payments, continue to be affected by challenges, due to requirements across different jurisdictions and the quality and quantity of data.
Versluys emphasized that pain points must be solved with cooperation between public and private entities, and this will result in better costs and speed, as well as ensuring that payments are made immediately and that access to money is efficient. Furthermore, “with richer data and technology, we will begin to see the benefits of the capabilities offered by technology.”
Mats Persson Bergius, Head of Lending, Lunar, added that “customer expectations are changing and changing fast. The service I expect as a finance department or as an individual is faster speed and immediate payments. The work and costs have to go down.”
Robert Pehrson, head of product management, SEB, offered a different view, saying that ISO20022 is the “fundamental basis for enabling change, but customers are struggling to adapt to it.” He went on to explore how with the digitization of society the core problem is that there are different national agendas that pervade, and different governments and central banks. Collaboration is ultimately necessary.
After summarizing the pain points, Bergius questioned the value of an incumbent bank, noting that giving challenger banks and new banks access to rails could result in an incremental increase in risk, but could also open up innovation, which, however, could also threaten the delivery of the bank’s own services.
In Pehrson’s view, an effective basis for innovation must be built. Central banks must make it easier for smaller organizations to allow customers to open accounts, but “the players must do what they do best. It is super important to enable reach, low costs and simple solutions. However, it is not that simple. Bergius, who is also chairman of the Swedish Fintech Association, stated that there are significant challenges for fintech players. “Despite licensing, there is a struggle to access infrastructure.”
He also said there is extensive AML risk for banks to take on new players because “the cost of doing business with such a player is too high and it is ‘not worth it’ for a bank to deal with such a player in their customer base.
Versluys questioned the definition of fintech and the definition of a bank – they are definitely blurred in 2023. He explored how a “newer type of license is needed, but engagement across the ecosystem is needed. What a bank is is starting to change because of new guidelines.”
Summarizing the session, Bergius said that the best way to describe the relationship between banks and fintech firms is that they are “frenemies”. Innovation will continue, and he said that while the local banking sector has worked hard to keep pace, the Nordic region as a region cannot be left behind.
To avoid this, what must be immediate business controls, not necessarily the movement of money. Versluys pointed to the importance of predictability and ensuring an element of choice when delivering services to customers. Furthermore, to minimize risk, he recommended building in fraud prevention as part of the option.
“Nothing is black and white,” Versluys concluded.
