Besides our fourth Best of Show Award, which we couldn’t be more grateful for, of course! FinovateEurope 2022 was the perfect way to celebrate our first demo since we’d joined forces with BSC to create Finshape, plus our long-awaited reunion with hundreds of fellow fintech enthusiasts after two years. We also heard some truly inspiring and thought-provoking discussions on stage – here are three observations from the fintech arena that gave me the most food for thought.
1. Embedded finance is no passing fad
Embedded finance, aka financial services offered outside the realm of financial services (think Klarna or Acorns), is here to stay, no doubt. In fact, it’s forecasted to bloom into a $138-billion-market by 2026, from just $43 billion in 2021, with insurance premiums, transaction revenue, licensing costs and all. In a recent interview I read on TechCrunch, Nick Root, co-founder of embedded banking newcomer Intergiro, perfectly summed up what’s happening on this front: “If you look at how tech emerges, how Intel abstracted the chip, how Google abstracted internet links, how Facebook abstracted the social graph. A similar thing is happening right now in finance, and it’s going to pervade every consumer interaction. So you’re going to see money in products that you didn’t expect to see.”
Celent Head of Retail Banking and Analyst All Stars speaker Zilvinas Bareisis explained: “At the heart of embedded finance is the idea that customers are out there, doing their own things and, as they do those things, they realise that there might be a need for a financial services product, which is something they can acquire right there and then. [It’s] not new; you and I have probably bought car insurance at the same time we bought our car at the dealership.” What’s changing is ease of access, the number of options and the cushy experiences these services are now wrapped in. This is in no small part due to a rapidly evolving technology landscape, more specifically, the increasing availability of APIs from financial services vendors (Finshape very much included), lowering the barriers to entry.
2.Fintechs, on the other hand…
True to form, Chris Skinner was not afraid to ask fintechs the tough questions. Or anyone, for that matter. During a much talked-about roundtable, “innovation catalyst” Andrew Vorster, RBS International Head of Digital Jamie Broadbent, self-proclaimed fintech fanatic Ghela Boskovich and The Finanser blogger reflected on the scale and speed at which fintechs have disrupted the financial services industry. Which, according to them, is nothing to write home about.
The newest cohort of industry players, challenger banks especially, has vowed to shake up the status quo, liberating consumers from the clunkiness and overall uncoolness of traditional banking while pulling in profit left, right and centre. And yet, most of them are still struggling to grow beyond a low-single-digit market share and continue to throw money at loss-making business models, relying on VCs to foot the bill.
This is very similar to what Chip CEO Simon Rabin recently talked about on Financial News, lamenting fintechs’ obsession with satisfying customers with UX and their ignorance of whether or not what they’re offering could ever be profitable. “The result is they have relatively large customer bases that are using their product [and] features, but they are not generating revenues for the business, and I would question the long-term sustainability of that.”
It’s hard to disagree, but as far as my two cents go, it’s also important to be realistic about what fintechs are trying to accomplish. No industry has ever been overhauled in a couple of years, but that doesn’t mean a transformation is not underway.
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