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The second of three episodes recorded in partnership with Freemarket at FinTech Connect, that took place at the Excel in London from 30th November – 1st December. We recorded a series of interviews from the Freemarket booth with a number of the speakers and attendees at the event. Our guests for this second episode were:
1/ Susanne Chishti, CEO, FinTech Circle
2/ Matt Jackson, VP, Relationship Management, Freemarket
3/ Matt Bonetti, Head of DCX, Hargreaves Lansdown
4/ Robin Scher, Head of Strategic Fintech Investing, Lloyds Banking Group
5/ Hirander Misra, Chairman & CEO, GMEX Group
6/ Janusz Diemko, Co-Founder, Xelo Pay
7/ Susana Ponce-Froment, Head of Financial and Credit Risk, Tide
This is the second of three episodes recorded in partnership with Freemarket at FinTech Connect, which was held at the ExCeL in London from 30th November to 1st December 2022. We interviewed keynote speakers and attendees from the event to hear their insights into the latest trends in the FinTech space.
The guests covered topics such as payment trends for 2023, how FinTechs are working with traditional banks and how open banking is going to progress in the future.
Joining Graham Barrett on the Freemarket stand for this episode is:
Susanne Christi chaired a panel about ‘Fintech for Good’. She launched the ‘FinTech for Good’ film on the day of the podcast, a co-production between ITN Business and FinTech Circle where the emphasis was on how the fintech sector comes together to provide solutions for society and focusing on environmental, social, and governmental solutions. It was an overview globally into what the fintech sector does to service customers who are often excluded. The key theme in the film was financial inclusion.
Fintech Circle had the idea for the film and had been working on it for a while. Susanne believes in a fintech sector and financial service sector they have a responsibility to society to try and find and develop solutions which help people in need. She doesn’t only intend to help the 4 million UK citizens who have no bank accounts but also those who have got bank accounts yet remain excluded from certain financial services. She emphasises that fintech can make a difference and that’s what this film, ‘FinTech for Good’, is all about. Showcasing what the fintech sector can do to help both individual clients and corporate clients to improve their lives.
At some point, FinTech companies want more than just profitability. Any company with investors behind them will reach profitability however at the moment fintechs want a purpose to serve which is more than just profit. It’s asking the question, ‘how can we service society overall?’
Susanne explained this is what fintech for good is all about. The employees which were found to be more motivated were those who are allowed to celebrate diversity and environmental goals.
Within the investment sector, Susanne has seen a huge changing trend as investors are looking for ESG investments as green investment is seen as having a purpose. When thinking of the whole global investment space, a large piece of the whole investment volume flows into ESG-driven funds at the listed equity stage. FinTech Circle operates in the unlisted private market stage where there is greater demand for socially driven investment opportunities, to focus on good solutions for society.
Susanne thinks embedded finance will be seen in everyday life. Embedded finance solutions will become part of our lives, but they will not be visible to the end clients because it’s part of their customer journey and they will happen as a natural part of the business proposition. The second trend she is seeing is financial inclusion. One-third of the adult population globally don’t have a bank account and in the UK 4 million people do not have one. She uses the example of the UK and the Big Issue being sold by homeless people who in the past could only accept cash because the vendor has no address to open a bank account. This has now changed thanks to fintech which has changed lives because it helps encourage greater social mobility.
Matt Jackson, VP, Relationship Manager at Freemarket. He started by explaining how Freemarket have been misunderstood as the biggest secret in fintech. This year they have had a lot of award success and they want to be more present in the market now. The company feels very passionately about the product they offer which attracts a lot of customers and it’s why they’ve attended FinTech Connect, to create a noise about themselves.
Matt explains some trends in the space. Firstly, that consumer adoption and expectation that comes with faster payments is bleeding over into the B2B payment space. As companies move into 2023, the technologies and systems required to support move are going to be a focus. SWIFT are the 900 pound gorilla in the market and for the first time are starting to talk about their marketing. Another trend is in embedded payments not just as payments but financial services more broadly is going to become more important. The final trend cited was the use of blockchain technology for all different payment cases, not just crypto but Stablecoins for cross-border payments.
Regulators fulfil a key function in the payment industry and in 2023 Matt thinks we’ll see a move from them being an oversight body to more of an enabler. With so much disruption in the industry and emerging technologies they will need to move quickly in how they are generating policies around technologies and use cases. Matt thinks Fintech is in such an interesting place right now, with people calling it crypto winter, valuations have been coming down, but more technologies and systems are coming into the fore. Therefore, regulators need to move quickly in how they can understand, adopt, regulate, and oversee the whole fintech space.
Moving onto looking at the merchants’ perspective and the challenges they face, Matt doesn’t think it has changed over the past years because technology is moving at such a pace that complexity is a real issue. Consumer demand for frictionless and easy payments is on the rise and new technology is always developing and emerging. Merchants have to decide where to invest and who to partner with to take that forward. Matt goes on to explain that merchants will need to focus more on their front end and partner with great companies on the back end so they can deliver a great experience to the consumer. This is where companies like Freemarket can come in.
Matt Bonetti is Head of DCX, Hargreaves Lansdown. DCX stands for Digital Colleague Experience and what that means for Matt is that he runs a team whose job is to make sure all colleauges are having a positive working experience. The primary focus is that the more productive Matt can make them, the more they can feed their motivation and the better they can deliver to clients with greater outcomes being achieved. Matt has worked in this role for 2 years and it’s about making sure the various people in that value chain really can collaborate clearly .
They have achieved this by being heavily influenced by Daniel Pink, the author of ‘Drive’ which is all to do with intrinsic motivations of people. His book has three key focus areas:
Matt is very open in communication. He is aware some of the work he’s doing will be successful whereas some won’t be. When approaching the recruitment process and bringing people into the team Matt had a couple of hypotheses he wanted to test. The first was to build a diverse team. It’s important for people who are building the products to represent the diversity of their clients. Matt is aware that digital is a white male dominated industry, so they tried to bring in different backgrounds. The second element they wanted to try was bringing in people who hadn’t worked in digital before and didn’t have the preconceptions about the working experience. His team now is over 70% female or non-binary, he says they are neurodiverse and have only briefly worked in technology in the past.
Robin Scher is Head of Strategic Fintech Investing at Lloyds Banking Group. Lloyds Banking Group have been making great strides in the fintech investment space in the last few months. This is a new strategy although they have invested in FinTech for some time. They’ve invested in fintech like Thought Machine which usually happens when they enter a new commercial partnership. They have now developed that strategy to have a fintech team going out, hunting for new FinTech’s to drive their strategy forward. They’re looking for FinTech’s from C to Series B. Bing a minority equity investor they try to take a small part of them and help them grow whilst creating a commercial relationship with them.
Internally the reaction has been filled with excitement. Robin explained that when people talk about the big incumbent banks being culturally reticent to FinTech’s coming in he’s not seen that. His commercial banking background gives him a familiarity with a dog-eat-dog world by trying to win business from other banks. The collaboration Robin has seen has been phenomenal, he even states that the fintech’s they’re investing in want to work with banks now. A long time ago FinTech’s were trying to combat banks but now they are working together. So externally there has been a brilliant buzz as well.
A success story Robin explained was the fintech fund which is a £50 million ring-fenced money on the Lloyds’ balance sheet, which is specifically to invest in FinTech’s over the next year. They set that up six months ago which had to be set up with the process and governance around the accrual investing itself.
They made their first investment about three weeks ago in an app called Moneyhub, was a £15 million investment. Robin explained this will be the biggest ticket size that they do because generally they focus in the £1.5 million to £10 million ticket space. Within their first investment that has already been broken so that shows a great success. But it also shows and proved the model works; the investment committee, the governance, and managing to get the money out the door in a way that Lloyds felt was suitable and appropriate in a risk-adherence fashion.
Robin acknowledges they’d be foolish not to be worried about the current market conditions. Internally and externally, Robin is being told it is a great time for fintech investing due to the great deals. However, it is also a worrying time because lots of people need money. There is desperation out there. Investing in equity now is the right time in Robin’s opinion and he is glad they didn’t start investing last year.
Hirander Misra is Chairman and CEO of GMEX Group and began by explaining the convergence of traditional finance, centralized finance and decentralized finance.
Centralised finance has been around for a long time and then for digital assets centralised exchanges suddenly emerged along with the new blockchain based, decentralised finance. They’re all fragmented but there are initiatives emerging like what they are doing at GMEX which brings all these things together.
FinTech Connect SWIFT spoke about central bank digital currencies at the event. This new infrastructure has to embed itself into the current infrastructure where traditional finance, centralised finance and decentralised finance will all co-exist. Banks believe in blockchain and digital assets, artificial intelligence, but they need to do this in a way that is compatible with existing systems like risk management, governance, control and regulation.
There is an on-going crypto crisis, and it supports the fact that mainstream finance works. He points out there’s huge amounts of assets and activity that need to work more closely together with newer finance or neo finance, as he calls it.
Major banks who are into custody assets have announced they’ve got crypto offering and digital asset offerings. This offers a huge opportunity to their participants as well as the asset managers.
There is a lot to be done in sustainability whether voluntary carbon, credit markets and water, energy, climate, and food. They’re all top of the agenda and play a part in terms of the way that they’re accessed, unlocked, and linked to finance using this type of blockchain technology so they can become ESG friendly and align with the UN Sustainable Development Goals.
When thinking about the future, Hirander recognises that recent events have shown there needs to be a reset. In centralized finance, a lot of this activity was between centralised players and there’s a lack of risk management, governance, and control. What we’re going to see therefore is increased regulations which is a good opportunity because crypto as an asset class is here to stay, but it needs to improve in terms of how it conducts itself. He thinks sustainable asset classes like carbon credits or tokenised securities, central bank, digital currencies or Stablecoins will all develop to coexist and work harmoniously together in mainstream finance.
The future of GMEX Group is all about looking at hybrid finance because they believe traditional finance and decentralized finance will inter-operate and co-exist. And there need to be offerings out there, such as what they’re doing that acts as an orchestration layer in the middle which enable seamless flows between different constructs as well as enabling marketplaces and exchanges across the world.
Janusz Diemko is Co-Founder of XELO Pay and began by discussing the trends he is seeing within the payment sector and his main takeaway is that everything is going digital.
COVID has pushed this forward from KYC to reporting to fraud management, everything is digital. He also thinks there’s going to be more integration of crypto assuming that isn’t a blowout of the industry. Blockchain is being seen to move into areas where it can add more value. An overview of the trends can be seen as a general integration of payments into everything like open banking, open finance, embedded finance, embedded payments going into applications like transport, electric vehicle charging or apps. Everything is integrated through APIs into the whole ecosystem.
Janusz attended the open banking congress a month ago and what he’s witnessed are more companies in the space than just open payments. It’s not just processes integrating APIs and banking for payments, but it’s integrating that into other systems and dealing with payroll, fraud, transfers, general information, and account information in one place. It has implications if one country is more advanced than another and with Brexit, you need to license separately and integrate separately so the UK is going to go its own way and be quicker than the rest of Europe.
On open banking and open payments, Europe is pushing for real time accounts to account in Euros which will influence implementing of real-time payment schemes because of varying success in the different countries.
Janusz doesn’t see this as an existential crisis for banks. He uses the example of Chase in the US, their CEO Mr. Dimon said his idea for open banking in real-time payments is to supplant credit cards and he said anyone who is not on board with this project is out of the bank. He sees credit cards as a form of payment dying and Janusz thinks the reason is real-time payments are cheaper for merchants. Meaning his acquiring operation is probably going to mop up some money he’s losing on the interchange side. Janusz says if a big bank says ‘don’t be scared of open banking and real-time payments’ we can use that to our advantage. However, he doesn’t think this is the same in Europe as everyone is more scared of interchange revenue disappearing than they are about what that will lead to in the future in terms of new revenue streams.
Xelo Pay is an open banking start-up funded by the EU and they are going to commercialise their product next year. They focus on their niche which is payments and account information in merchant apps integrated with merchant systems. So, they want bypass acquirers and other intermediaries and allow the merchant to integrate with his own payment. They also offer lower cost to the merchant, and one click payment allows them to get a receipt, invoice and add loyalty points without a QR code. They’re launching in Poland and making sure they’ve got the UX right.
Susana is Head of Financialand Credit Risk at Tide and she spoke on a session about the impact of the metaverse for the fintech ecosystem. She explained it is an industry with millions of users and billions of pounds which are invested in the metaverse ecosystem, but the opportunities of what the metaverse means for the financial industry is what was discussed. The opportunities are endless. It depends on how fast the banks will move and the readiness of the infrastructure in the blockchain because these realities are built in a blockchain infrastructure. There’s a virtual economy happening in the metaverse and what is happening is that consumers are buying lot of land, consumers are building their homes, they are renting the homes to host events there. They have a gallery selling NFTs and companies are building their headquarters.
What Susana has seen is that there will be an interaction between the financial system, ecosystem, the fintech system ecosystem and the metaverse ecosystem because the fiat currency is held by the banks and by fintech companies. Then the consumer gets that money, fiat currency from their bank and buys cryptocurrency. Then they pay by using cryptocurrency in the metaverse. So, she states that is the future and the relationship between those three ecosystems will flow from one to another.
Her second session was about decentralised finance and the future of the fintech landscape. She doesn’t think that the established traditional banks are facing an existential crisis. She thinks these banks have developed the expertise to understand this certain type of customer. A large corporation, for example, will probably stay with them for some time. They take advantage of new technology that the decentralised finance economy is developing in terms of blockchain platforms.
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