Who will dominate the financial services of the future: banks, non-banks, or FinTech startups? 

Around twenty startups looking to transform how we pay, lend, borrow, manage wealth, trade etc. made their intentions clear with their pitches (7 minutes + 3 minutes for Q&A) through the day.

When we got the roundtable participants* together to bring in their perspectives on the topic, we expected a healthy debate- instead, we got fireworks!  Read on for the highlights of our 2^nd event.

Once again, thanks to all the startups who presented at our event, the roundtable panellists for that engaging debate, the press and blogger teams and all other participants who made this another successful event. We look forward to welcoming some of you at the 3^rd FinTech Forum event on 20^th Nov. 2014!

 

Keynote, deal highlights and market trends

Launched in July 2013, FinTech Forum DACH started with a 1st Study of FinTech Startups and Innovators in Germany, Austria and Switzerland, identifying 100 startups active in different areas of FinTech. Twenty of these presented to a group of banks and investors at our first event in Nov. 2013 in Frankfurt (read the event summary here).

Our 2^nd event kicked off with a keynote from Frank Schwab, CEO of FidorTecS and Co-Founder, FinTech Forum DACH, summarizing the initiative, the increasing interest and market developments around FinTech Startups in the German-speaking region, and the opportunities for startups, investors and banks.

The presentation (available here) by Samarth Shekhar, Co-Founder of FinTech Forum DACH, summarized some key FinTech deals and market trends – globally and in the DACH region. Key take-aways:

 

• Although FinTech investments tripled in the last five years, and investments into FinTech are growing four times faster than other VC investments, Germany / DACH share of these investments remains at less than 2% of the global share (compared to ~30% in the UK and ~60% in the US).
• Startups in Germany and continental Europe (and conversely, investors willing to “look beyond what they see” for FinTech hidden champions) have a window of opportunity of one to three years in which to create world-class FinTech firms that could go on to dominate their market space (à la SAP), or domestic / European market leaders that become attractive acquisition targets for bigger FinTech firms, banks and non-banks.
• If banks in the region do not wake up to these innovators and revolutionaries, somebody else will: other banks, other banks in other countries, tech giants, telcos and of course VCs!

 

Highlights from the roundtable discussion

On the role FinTech startups will play in the coming years:

• Banks are big clunky piles of stone that rarely move, with big firewalls, so for startups to fit into their systems is hard, if not impossible. If you have a web guy thinking in Python and Ruby talking to a bank programmer who thinks in Java and C# – it’s a different world altogether. (CTW *)

On who banks think of as their biggest competitors:

• Many banks consider themselves to be IT companies with a banking license. If you think of banks as a digital channel for selling financial services, it is hard to distinguish them from companies like Amazon, Google or telecom giants. (MK)

On whether FinTech startups are hyped:

• Given the speed of change in distribution channels and the speed of bringing products to market, banks are increasingly about technology, about innovation. This innovation comes from startups. So startups are now part of what a bank does rather than something that lies outside the box (MK)
• VCs investing into FinTech Startups would like to get FaceBook-type multiples, but it is unlikely that banks are going to pay those kind of multiples. (RM)
• FinTech startup hype is good! (AM)
• There is no hype – especially in Europe, FinTech is just getting started (CTW)

On the challenges for banks:

• Financial institutions are eager to talk about innovation, pilot new things etc. Number one challenge for financial institutions is their ability to scale innovation. The winners and losers will be those that are able scale new innovation versus those that get lost in internal politics, internal processes, legacy systems etc. (RM)
• For a bank CEO with billions of euros on the balance sheet, and regulators and governments breathing down his neck, where do startups and innovation figure?  Why would a bank want to do something so disruptive that 80% of their staff are unemployed? (NH)

About the bank CEO of the future:

• (S)he will be a “business technologist”…who will drive a culture of stewardship, caring for the society and community, and working together. They will probably have to do this with 80% less staff than they have now. They will collaborate more, cooperate more and employ contractors who work with two or three banks at the same time. (AM)

Thanks to the audience for some excellent questions that challenged the presenting startups and the panellists.

And finally, for some laughs:

• RM: There is something we often tend to forget: banking is an expertise – that can’t get lost even in future.
• AM: Agreed, it is hard to get formal education about banking – there is very little available.
• CTW: Don’t worry, there is plenty of it in Germany! 

* Roundtable Participants

• Adam Moulson (AM) of SWIFT, which launched Innotribe back in 2009 with the mission to bring together FinTech startups and innovators with banks, investors etc.
• Christian Thaler-Wolski (CTW) of Wellington Partners, one of the oldest pan-European Venture Capital firms, investing in technology and life sciences companies.
• Mikhail Khasin (MK) of Sberbank, one of the first banks to launch a venture fund focused on FinTech Startups.
• Nelson Holzner (NH) of BillPay, acquired last year by Wonga, and representing one potential route to dominance in financial services in 2020.
• Reinier Musters (RM) of Orange Growth Capital, one of the first funds focused on FinTech  startups in Europe.