It is close to impossible to predict how the future of financial services will look like in ten years. However, some scenarios are starting to stand out as inevitable. One of those is the concept of the bank as an open platform.
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In february 2015 I sat down one wednesday evening and decided to start a blog. 19 months and 200+ subscibers later I have reached my blog post #100. This has proven to be an efficient way of really understanding the opportunities and challenges I am facing in my everyday job as well as additional topics that interest me on a general basis. Without further adue, here is every single blog post I have written.
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When I was growing up, my father often told me that Andy Warhol once said that he wanted to be a machine, and that it would be a lot easier to be a machine. If something broke, you could just replace it. I am not even going to try to answer the many ethical, moral and existential questions raised by transhumanism. The only thing I know is that it is inevitable that advances in robotics, bionics, artificial intelligence and genetics will affect the next phase of human evolution, and we should not underestimate the ethical and social implications.
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After an all time high for fintech funding of USD 16 billion in 2015, followed by a strong Q1 of 2016 with global investments of USD 5,7 billion, investments suddenly dropped in Q2 2016. Despite a drop in Q2 investments, KPMG claims that 2016 is on track for another all time high for fintech investments. While some speculate that UK fintech funding could have been affected by Brexit uncertainty, another explanation could be that we are now seeing the undertow before the second wave of fintech.
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This summary concludes my blog post series on PSD2, where I have focused on the basic principles of the directive and its implications on financial institutions as well as merchants and the ecommerce market.
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If it ain’t broke, don’t fix it. This idiom has acted as a rule of thumb for core banking solution for several years. While analysts has claimed repeatedly that legacy IT is slowing incumbents down, the existing and sometime ancient core banking systems still work flawlessly. Although, even if something works an upgrade is due when the world around is moving at an increasingly rapid pace.
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Will challenger banks lead to a revolution in digital banking or are they merely digital lipstick? Banking as a platform is an inevitable scenario and clever use of technology will most likely change the face of retail banking where user experience and simplicity is integral. Challenger banks with an app-only presence are not limited to the constraints of traditional online and mobile banking interfaces in the same way direct banks benefited from not having any branches 15 years ago.
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One of the most exciting aspects of fintech is the promise of delivering financial services to the unbanked and underbanked population of the world. According to the World Bank, 2 billion people are still unbanked in the world today. Even though this is a high number, it still is a decrease of 20 percent since 2011. Of the unbanked population, 1,5 billion people are unbanked due to their inability to prove their identity through a valid birth certificate, passport, proof of residence through utility bill or some other means to fulfil traditional KYC-procedures.
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As I have described in previous posts, PSD2 will force banks to open up their infrastructure to third parties by offering APIs under the XS2A (access to account) rule. The directive has the potential to fundamentally alter the payment landscape as we know it. One of the reasons why PSD2 will have such a large impact is that it will level the playing field and increase competition by integrating the role of new and emerging payment services into the regulation. While incumbents have the most to lose, there are also opportunities ahead for banks.
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Det siste året har vært preget av et fokus på digitalisering og omstilling innen både offentlig og privat sektor. Finansbransjen opplever at digitalisering fører til nedbemanninger og behov for effektivisering, ny teknologi og digitalisering er hovedtemaer i regjeringens industrimelding, og regjeringen viser til teknologiutvikling og innovasjon som nøkkelen til å lykkes med det grønne skiftet. For å lykkes med digitalisering er det viktig å se på teknologi som et verktøy for å nå målet fremfor målet i seg selv.
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The purpose of the upcoming payment service directive PSD 2 is to create an even playing field for payments and encourage innovation. The players on this field include banks, fintechs, the PCI (Payment Card Industry) and merchants. While banks are at risk of losing up to 43 percent of retail payment revenues by 2020, the directive represents several opportunities for online merchants.
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The coming payment service directive from the European Commission marks a shift in banking regulations. Instead of prohibitions and limitations, the overall purpose of PSD 2 is to create an even playing field and encourage innovation in the payment space as a part of SEPA (Single Euro Payment Area). Although all the technical details is yet to be sorted out, the directive states that banks need to offer payment APIs to third party-providers of financial services, also known as TPPs (Third Party Provider) under the XS2A (Access to account) rule.
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While the financial industry is on the brink of disruption, the music industry has been on a steady decline as digital has replaced physical distribution the last ten years. Even though revenues in the music industry is growing for the first time since 1995, the gap between music consumption and artist revenues is growing. This is due to several factors, but one of the contributors for lesser known artists is how streaming platforms calculate royalties. The way it works, the artist’s monthly streams is divided on total monthly streams, effectively favoring whatever becomes that months huge hit, instead of dividing revenues per play. This has enraged both fans and artists, and some artists have chosen to pull their music from streaming services such as Spotify.
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Before you say that Facebook is no longer perceived as cool with today’s youth, do you know what is even less cool? Banks.
When you break down the numbers, coolness becomes less relevant. When it comes to user engagement, Facebook’s reigns supreme above all others. WhatsApp has exceeded 1 billion users, and Facebook Messenger reports 900 million users, handling 60 billion messages a day combined — three times the number of traditional text messages. The combination of chat and payments have already proven to be a great success, as exemplified by the launch of Facebook Pay, Snapcash by Snapchat, WeChats integrated payment solution and Kakao Pay in Kakao Talk in South Korea.
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That’s what I hear when I tell people that I’ve just spent the last two years building a new digital bank. And they’re right, their existing bank has had an app and a website for years!
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Like so many others, I have spent my share of time walking around like a mindless zombie hunting Pokémon with my cell phone this summer. The game was an instant hit with both gamers, being the fastest growing mobile game of all time as well as with investors as Nintendo stock leaped 25 percent at release.
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What makes the world go round — money or technology? It’s a big question, but now with the emerging sector of FinTech, you no longer have to choose one or the other. It’s both.
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I get a lot of questions about my blog, so I thought I’d give a shot at a more personal touch as I summarize the first six months of 2016 before I take a hiatus from blogging over the summer.
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Brexit refers to the possibility of Great Britain deciding to leave the European Union. The term is an abbreviation of British Exit, and originates from the term Grexit when Greece considered the same thing. The referendum will be held on June 23rd, where the voters will decide whether Britain should stay or go. The only thing that is certain is that the short term consequences will be negative. I agree that the European Union in its current state is flawed in several ways, but I do believe that the long term effects of a Brexit will be negative for both UK and the EU.
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Ten years ago I did my masters thesis on innovation capabilities in established companies. Since then I have been working with innovation the last ten years in various organizations. How naive I was when I was looking at innovation from an academic perspective. A lot of theory is focused on idea management, innovationstrategies, business models and processes. The truth is that what could have been brilliant innovations often end up as merely incremental improvements that act as artificial respiration for dying business models.
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