Spring is in the air. And even though Europe is in the midst of a crisis, this week I was fortunate enough to be able to attend FinovateEurope in person again and gain some semblance of normality and continuity. As I compared notes with my fellow Forrester attendees — Aurélie L’Hostis, Carine Lam, and Nicola Ostermann — five themes stood out.
1. We’ve Become Less Distracted By Shiny Objects But Perhaps Not Ambitious Enough
Finovate can easily turn into buzzword bingo. But despite lots of temptations — think the metaverse, NFTs, embedded finance — most presenters veered toward the pragmatic (perhaps too much!). One fintech commentator complained that fintech hasn’t lived up to its glorious promises: the revolution meant to disrupt financial services and bring about a better, more equitable system. Investors have become more pragmatic, too, with the Investor All Stars panel agreeing that the repricing in public markets was changing the allocation of capital in private markets, with fintechs becoming more capital efficient. No one expects 2022 fintech VC funding to reach its 2021 peak. Still, there’s a golden middle between continuous rounds of user experience improvements and buzzwords. We need more regulatory technology solutions (particularly in areas such as Web3, digital assets, etc.), a greater focus on platform interoperability (e.g., connecting different token platforms as per Nick Kerigan, head of innovation at SWIFT), simplification of B2B payments, and a lot of solutions to enable sustainable finance — more on that below.
2. Sustainable Finance Is Hot But Immature
A lot of presenters talked loftily about the need for purposeful or sustainable financial services. And yet, solutions to enable this transition were thin on the ground. While some personal financial management (PFM) and digital banking providers (ebankIT, Finshape, Meniga) added carbon trackers to their solutions, it will take a lot more to nudge customers toward more sustainable behaviors. As we’ve written in this report about the green consumer paradox, brands can do plenty to help narrow the chasm between customers’ intentions and actions. There’s a massive fintech opportunity around developing better technology to generate and verify environmental, social, and governance (ESG) data, drive inclusive finance (e.g. central bank digital currencies, digital identity, mobile payments), and facilitate green finance. Only one demo by SESAMm — one of the “Best of Show” winners — went in that direction, showcasing the use of natural language processing (NLP) for ESG risk metrics.
3. Open Banking Has Given Way To Open Finance, But We’re Still Thinking Too Narrowly About It
As we’ve outlined in our vision of open finance, open banking requires limited, policed access to retail bank accounts. Open finance goes further: extending third-party access principles across a wider set of financial products such as mortgages, loans, investments, and pensions. It also underpins embedded finance, changing where and how financial services are accessed. Embedded finance is the buzzword of 2022, but unfortunately it’s still understood too narrowly, focusing on the not-so-innovative expansion of distribution channels. And embedding financial products into customer journeys isn’t easy, a challenge that mmob — another “Best of Show” winner — tries to solve with its partnership platform. But there’s a bigger opportunity around bank-as-a-service solutions (as Crassula demoed) or embedding commercial banking into enterprise resource planning (ERP) solutions (as FISPAN demoed). Embedded finance is just one of the many open finance use cases that, if done well, should offer customers more choice, relevant products at the point of need, automated and invisible services, and more control of data for better financial outcomes. It also needs more fintech innovation in the areas of digital identity, data aggregation and analytics, and actual value-added services built on top of those (e.g., request-to-pay as demoed by CharlieIndia).
4. We’re Still Talking Too Much About The Drivers Of Digitization Rather Than Its Enablers
Forrester data shows that some 70% of banks have either implemented or are currently implementing a digital transformation. Yet so many presentations sought to illuminate us about the need to change, due to evolving customers, competitors, technologies, and regulations. Unless you’ve lived under a rock for the past decade, you probably get the need for change and are on the lookout for best practices and technologies that can help. We didn’t hear much about new core banking capabilities, personalization architecture, or cloud migration at the event — all key to digital transformation. However, Michael Anyfantakis, currently chief architect at Capital One UK, did give an impressively concise (5 minute) overview of his involvement in the building of FIBR, a new European digital small and medium-sized enterprise bank built entirely during the pandemic.
5. We Haven’t Solved The Innovation And Collaboration Dilemmas
Much has been said and written about the dilemmas of corporate innovation. Yet we haven’t found a sustainable innovation method that works. Incumbents are still leveraging a mix of methods: setting up an innovation team whose role is to enable the rest of the organization with tools and tech, a venture capital arm whose aim is to tap external sources of innovation, and accelerators and incubators to foster new ideas and startup collaboration. This is all very similar to the build, partner, or buy strategy we outlined years ago. Firms could also benefit from the risk-aware startup onboarding approach we’ve developed to overcome some of the procurement challenges.
All in all, FinovateEurope 2022 was a fantastic event — not least because it’s just so nice to connect with people face-to-face again. Big thanks to the organizers and congratulations to all the “Best of Show” winners!