NextGen Banking: From Start to Finnish

Icon’s Payments team have just returned from the FinExtra’s  NextGen Banking conference in Helsinki, Finland and thought we’d share some highlights from the event.

To open the event, Erkki Poutiainen summed up the current situation in Banking by relating Nordea group to a “Supertanker in an ocean of change” – can a supertanker ever become as ‘agile’ as their speedboat Fintech competitors and avoid the PSD2 Iceberg in time?

Kudos to Kevin Poe from CGI though, for actually offering something contentious, quoting their own research for customer attitudes and demand for new fintech products. Singapore/Australia come out on top, UK/US second, Europe main as third and the Nordics last for the least likely for consumers to be ‘Early Adopters’.  True or not, raised a few eyebrows and we look forward to reading the actual research when it’s available…

Then came everyone’s favourite topic – PSD2 – although it was rather disappointing that most of the delegates and speakers we spoke to, admitted that they hadn’t actually read the full PSD2 or the EBA RTS consultation, which left our Icon team answering FAQs for most of the day.

From the PSD2 panel, which included Icon’s very own Tom Hay, SEB’s Henrik Bergman quoted some good research from the EBA on the expected impact of PSD2 on their bank – 89% of respondents think it will be ‘Significant Impact’ and 91% believe that their ‘Bank Strategy will need to change’. Estimates on post-PSD2 Payments revenue forecast 1.2Bn at risk but estimated 5bn upside opportunity.

The PSD2 panel generally agreed that bank should be looking at a Strategy realignment first, then APIs becoming a business line and then PSD2 being a part of the API business – an approach we’ve always been advocating rather than the “just enough”/compliance attitude that will likely see a bank following the way of Polaroid or Nokia by 2020.

Bjorn Hiegis from Roschier also gave good context about the new shift in the European Regulatory Regime in general – the tone used to be legal and business, but is now increasingly technological in focus.  If only someone would help the EBA to fill the PSD2 RTS with actually technology standards…

Some discussion on the protection of existing revenue streams and how PSD2 may affect – long story short is nobody knows, but it’ll be a whole new market and there will definitely be leakage if a bank doesn’t have some good economics and differentiating value-add behind their access model and services.

The audience enjoyed lively comments from Daniel Kjellen, CEO of Tink, who as a Challenger Virtual Bank is planning for their future role as an AISP/PISP in 2018 – some equally challenging questions from our very own Tom Hay about who would win in the future between Tink (or indeed any Fintech) versus Google as an AISP/PISP – more on this from us, in a future blog…

The Technology Hype v Reality session was largely not about technology at all and more of an opportunity to take a dig at Banks in general – my two favourite generalised observations: – Tomas Nystrom on the fact that Technology is never a limiting factor and especially within banks it’s more the problem with perceived compliance and risk-averse careerists that kill off good innovation (from personal experience, I know this is painfully true); and Rivi Varghese commenting on the fact that banks have perhaps one of the most rich and complete datasets for any person from their payments data which can show you a whole persons’ life and could be used in much better ways by third parties.  Aside from massive data protection and privacy issues, I think most would agree with Rivi that no bank has actually done anything of note on Data so far and they only have 14 months left to figure it out before GAFA AI programs get access…

Rounding out the day then was the panel on the Future and Who Will Win? – Julie Meyer won my prize of best speaker of the day, not only for bringing up Carlota Perez’s cyclical economics model (which I haven’t heard quoted since University) and for applying actual academic analysis to value predictions of Digital Ecosystems, but also for affirming the view we’ve had at Icon about the American tech giants (GAFA) waiting to desiccate the banks revenue lines and eat all your personal payment data, post-PSD2.  Having personally worked with each of these ‘four horsemen of PSD2’, I agreed with Julie and I’ll be writing separately to cover GAFA and PSD2 thoughts.

Overall, some great comments in the day and good to see some people getting wise to the GAFA threat, but sadly as usual, it’s those outside of the banks making the best reads and predictions; banks need to stop with soundbite platitudes and actually get on with practising what they preach!