Turmoil or Not? 4 Insights from Finovate Europe 2023
Attending Finovate Europe is a decade-long habit for many banking and fintech leaders. It enables fintech startups and scaleups to demo their solutions, attract new banking customers and get fresh VC funding.
This year’s London Finovate Europe, which took place on March 14-15, was an unusual one. On the positive side – it was the first truly crowded one after Covid, and on the other – it happened days after the collapse of the Silicon Valley Bank and the settlement of Credit Suisse. Plus, the rising interest rates keep drying fintech capital investments in the past months. So I boarded my flight to London with impatience to learn if the industry was in turmoil or not.
But, before I summarize my key takeaways, here is how Finovate practically works, for those who haven’t attended it:
London’s Intercontinental O2’s ballroom was an exhibition area split in half: one had sponsor booths, and the other – TV screens for demos. Those who demo at the screens also have a 7-minute slot on the main stage inside a big audience room.
Ticket holders were usually bank leaders, who were accepted for free, service companies and VCs. You can watch the video of my initial entrance to the ballroom.
There are two smaller stages for two parallel theme tracks: banking and fintech. One designated area allowed for 1:1 meetings and another – book signings from keynote authors like Leda Glyptis from 10x Banking.
Big fintech seems to be doing well
Apart from the already mentioned $187 mln series C-funded 10x banking, which has its own core payments and card platform, other major finance and insuretech market players were also well represented as sponsors at Finovate Europe: Trulioo (Series D invested $394 mln and $67 mln revenue), Intersystems (with annual revenue of $720mln+), Swift ($157mln revenue), OakNorth ($200mln revenue), etc.
According to LinkedIn Insights, for the past year, Trulioo increased their hiring by 21%, OakNorth by 100%, while Swift, 10x banking and Intersystems kept hiring at pretty much the same pace.
So is the time turbulent for fintech at all? Maybe for those who are already struggling with their profit, but not for the bigger and more successful players. And, not for the trendiest ones either: AI/ML, embedded finance and SaaS, open banking, IoT, and blockchain, according to Sergio Tang from Forbes Technology Council.
Compliance is compliance. It will keep being the thing. Alongside ESG
Key players with an obvious upwards trend at Finovate Europe are compliance risk and ESG compliance companies. Custom Market Insight’s report from July last year stated that regtech will represent growth from $ 8.2 bln in 2021 to $ 44 bln in 2030. The industry was well-represented at Finovate Europe by various small and large companies.
Thomas Zink, Director at IDC Financial Insights, focused on PSD3 in his keynote speech. Yes, PSD3 is around the corner after we have just marked the fifth anniversary of PSD2. A European Commission survey showed 84% of the respondents find that PSD2 improved the security of payments. But only 37% found that it lowered the remittance costs and facilitated cross-border payments. So there are some improvement points that PSD3 hopes to address:
- It will likely be a regulation, not a directive, which will be directly imposed on national governments as mandatory and in this way counter the fragmentation of member states’ laws
- Separate legislation, such as the SPAA, to manage open data
- More clarity on API first or API open and an API standard
- The European Banking Authority demands clearer definitions for issuing and acquiring
Other fintech players emphasized more on ESG compliance, just like Mike Bullivant, director of Oak North’s ESG Strategy, does. He emphasized the increasing importance of data management and transparency, forward-looking scenarios for risk management objectives, decision-making framework for climate risks, etc.
Banks not shocked, brave new H2?
Despite the Silicon Valley Bank’s disaster in the previous week, there wasn’t an openly visible sense of distress. Chris Skinner from 11:FS held a keynote on the topic. He found bad management to be the actual main reason for the collapse of SVB. And the state of the global economy he labelled as post-pandemic depression, which most of us didn’t expect. We rather expected a downturn during the pandemic. His conclusion is that we should get ready for “rough waters” in the next year or two, but the good times will come back even sooner.
As for the more global economic picture and the rising interest rates, the common feeling from bankers was that it will contribute to a healthy technological transformation of the sector. Banks opening up for new product development is hence logical and visible at Finovate and other fintech forums.
The increasing importance of geopolitics
During the event, there actually was a focus on Russia’s war on Ukraine and all other pressing geopolitical challenges. It was brought by Manas Chawla, founder of London Politica, a big political risk advisory house. He raised key questions for the financial sector including, “How do we deal with the ongoing assault on democracy?”. He argued that emerging tech actually plays an increasingly important role in the contemporary geopolitical arena. To illustrate this, he stressed important economic factors such as Taiwan producing more than 90% of the global microchips, while being at the heart of the pressing rivalry between China and the US.
Conclusion
Rising interest rates and geopolitical risks pose legitimate concerns over the banking, finance and fintech sectors in Europe and globally. Still, Finovate Europe 2023 had bright indications showing that the current status quo may be a prelude to the industry’s healthy refocus and prioritization of key compliance and risk modules, which is expected to optimize the industry’s operations.
