Fintech at the crossroads: disruption, collaboration and regulation

Has fintech reached the age of reason? Banking professionals, finance experts, fintech start-up founders and students were invited to partake in the passionate debate that took place at the Second edition of HEC Paris' Fintech Fair on October 20th.

Fintech - remember that word. You’ll be hearing it more and more in the years to come. Fintech is a - booming - business based on providing financial services through software, and is currently competing with big corporations and established financial systems by disrupting them.

Are fintechs really ready to reshape financial services and to come face to face with banks? Have they matured since their creation? Wouldn’t they move away from disruption to integration and collaboration with banks? Do they need to be regulated? What’s the future of financial services such as payments?

These are the main questions that shaped the debates at the Fintech Conference organized by HEC Paris on October 20th during the Second edition of its Fintech Talent Fair. The industry conference was followed by a careers fair aimed at bringing students closer to fintech-related employers.

Banking professionals, finance experts, fintech start-up founders and students were invited to partake in the discussion: Has fintech reached the age of reason?

Fintech at the crossroads: disruption, collaboration and regulation

Banking was pointed out as being one of the biggest challenges facing the European landscape today: “the future of banking is online. Today, banks are firing people in branches“, said Pierre-Antoine Dusoulier, Founder and CEO at Ibanfirst.

Banking actors are currently talking about fintechs and that’s an interesting step forward. Nevertheless, according to the speakers, they are not doing it properly. Despite the awareness that fintechs are the way forward, Jonathan Tyce, Senior Banks Analyst at Bloomberg argued that banks were only talking about them as “a reason for cutting jobs”.

Meanwhile, according to Antoine Benoist, “we now see more and more highly professional [fintechs]”, so we can say that some of them have indeed reached the age of reason. Yet, Marc Lapostolle, Bank & Finance Project Manager at Finance Innovation, added: “there are still difficulties to filter the fintechs who are in the market only by opportunism from the ones who are really knowledgeable of the market and who might have projects that can be carried”.

“It is important to understand who the real players in the market are and assess their value proposition”, Matthieu Garnier explained. “It is not always easy to integrate a fintech solution in banks’ current systems. Banks are experimenting with different ways they can efficiently use fintechs’ solutions and tailor them to their needs.” Moderators then asked “Do banks really need fintechs?"

“Absolutely! Europe’s banking system needs changes and fintechs are the very big answer, but we need to be careful”, Jonathan Tyce told participants. “In fact, we must pay close attention to what fintechs truly are. We need to understand which part of the value chain they are addressing, which sector (banking or insurance), and which product?”

Speakers conceded that fintech products were a good opportunity for banks. What has been discussed is what they actually bring to them. With banking traditionally being a technological sector, Antoine Benoist argued that the main question to ask was whether or not fintech could “add value and bring something different” to banks.

Talking about innovation in methods of payment or within financial services in general, speakers agreed that fintechs only delivered a faster, more convenient and more useful experience to customers, but that they were using already-existing technology to do so. “This is not yet a technological breakthrough, this is really a user experience breakthrough” Matthieu Garnier told the attendees.

Has this new industry reached the age of reason? Yes, in part. But progress still needs to be made. Increasingly more ideas and try-outs led by fintechs will drive a concrete disruption in the financial services sector - that was the conclusion made by speakers at the end of the debate.

The future of payments, a view from the top

All examples of industries being disrupted by new entrants raise the same question - the future of payments? “In the current state of things, we need to constantly be listening to customers. Does this mean the end of captive customers? Markets - transport, phones, CDs, broadcast - all lost their captive audience”, explained Nicolas Kozakiewicz, Head of R&D and Innovation at Worldline. “This enables us to say that there probably is a major disruption coming in payment; the only question is what and when”.

In order to figure this out, one must first study the question of service and how it is rendered rapidly in the digital world, explained Kozakiewicz. With a strong immediacy constraint, the online service chain is as follows: “user – bridge – authentication – connectivity – security – processing – service”. The main underlying issues are open trust and the knowledge of use, which can partially be solved through the blockchain protocol.

“Today banks have a good opportunity to disrupt themselves through the usage of blockchain and bitcoins. They can also reach 100% security with the recent progress of cryptosecurity through allocated cryptographic algorithms needing 20 years of all the actual calculating capabilities to be cracked. Therefore, a disruption of banking’s core activities is possible today with more security and new ways of transferring currencies. So, the question is, with all these technologies, can we invent something that will satisfy everyone?” Nicolas Kozakiewicz concluded.

HEC Alumni Fintech Roundtable

Speakers also passed on some tips to HEC Paris students who were interested in potentially starting a career in the fintech industry.

Top qualities that were mentioned during the panel discussion included being collaborative as well as having the capacity to adapt. “You need to recognize that you’re going the wrong way”, said Matthieu Garnier, Head of Fintech & Research at BNP Paribas; meanwhile, as to why students should consider a career in Fintech, William Kunter, HEC Paris alumnus & Business Developer at the N26 online bank, concluded: “students should consider a career in Fintech for a lot of reasons actually. Firstly, fintech is probably one of the hottest and most dynamic sectors in tech today. It’s attracting a lot of interest and funding. Secondly, working in fintech gives you the opportunity to have a real impact on the day-to-day life of a very large number of people. And lastly, fintech start-ups deal with a fairly complex environment and designing simple products in that environment is a real challenge, and therefore intellectually stimulating. It requires knowledge of a broad array of topics — perfect for business students.”

17 companies representing the full spectrum of the companies involved in fintech initiatives were present at this year’s Fintech Fair: from startups to larger financial institutions such as BIPE Rating, Blockchain, Bloomberg, BNP Paribas, Finance Innovation, Fractal Labs, Globcoin, IbanFirst, Kyriba, LemonWay, N26, Oddo & Cie, Optiopay, PayinTech, Slimpay, Unilend and Worldline.

Speakers from all across Europe attended the event: 

Antoine Benoist - Corporate Development, Oddo & Cie 
Pierre-Antoine Dusoulier - Founder and CEO, Ibanfirst 
Matthieu Garnier - Head of Fintech & Research, BNP Paribas 
Jonathan Tyce - Senior Banks Analyst, Bloomberg 
Nicolas Kozakiewicz, Head of R&D and Innovation, Worldline
Sabine Fillias, Deputy CEO, Unilend 
William Kunter, Business Development, N26 (fully digital bank) 
Gabriel Gross, President Meteo, Protect
Philippe Gaborieau, President & Founder, Happy Capital
The panels were moderated by: 
Marc Lapostolle - Project Manager Bank & Finance, Finance Innovation
Jean Rémi Gratadour - Development Manager, HEC Paris Digital Centre 
Pierre Jenny - President, PJ Conseils

HEC Paris would like to thank Richmond Angan and Mathieu Solé, both students of the Digital Major, for their contribution to this piece.