By Thomas Bjornstad, PA Consulting.
Thomas, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?
I have worked with payments and the FS sector for my entire career. From 2006 to 2013, I worked for payment processing company Nets as CFO for the Norwegian business. Following a merger I was head of Corporate Development. I am now a partner in PA, where I lead Strategy in the Nordics and advise banks, FinTechs, merchants, private equity, and infrastructure players on market developments and strategy.
At the Payments Forum, you will be giving your insight regarding assessing the rapid evolution of the payments landscape and increased competition from Fintechs and digital players, why do you believe this is currently a key talking point within the industry?
I think there are three reasons:
1) Among most firms there is a battle raging for customer attention and interface, and subsequently there is a fear of losing out. Competition is coming on strong – and you need to face it, and embrace the disruption.
2) Merchant firms have a strong appetite for new payments systems and stronger payments systems deliver higher conversion rates. I spoke to large merchant recently, who more or less hated their bank connection. The bank just did not fix basic pain points related to the payments part in the customer journey. So there is clearly an opportunity to fix that relationship model.
3) And lastly, because of the access to data via payments (it’s the new gold).
In your opinion why is it so important to create a fair playing field regarding FI vs FinTech regulations?
In the past there were too many barriers to entry for FinTechs. But governments have driven through changes to remove a lot of the obstacles and allow more development, more innovation and more competition in this space.
And it’s worked. The FS industry has stepped up, and we now see a lot of development and collaboration.
What do you foresee as being some of the main challenges when trying to increase the visibility of FinTechs, challenger banks and tech giants?
There are different answers for each of these groups.
For the tech giants, many would say that they should focus on reducing their visibility and brand as ‘big tech firms’ if they move into the financial transactions space. They will be building on an already strong customer base but their challenge is to build consumer confidence around payments and find the right ways of working in an environment with very different constrains than they are used to.
For FinTechs, the challenge is finding good partners and business models. FinTechs may have great propositions but they need access to a customer base somehow, and typically they need a partner to help them get there. Which is where the banks come in.
Challenger banks so far have typically had a rather narrow focus, e.g. on consumer finance or very specialist segments. In order to grow, they will need to have the right scalability and find ways to move beyond niche offerings.
How can banks increase agility and keep up to date with the industry?
Agility is about leadership and it starts at the top. New competences are important, for example, banks need to build more knowledge about technology and marketing.
But experimentation is also core. Firms need to start embracing the philosophy of start small, think big, and scale fast. Making those changes is about culture and deployment of new methodologies such as SAFE (scaled agile framework).
How do you see the payments industry evolving over the next 6-12 months, particularly in relation to the current and upcoming political landscape?
I think we will see more collaboration, more experiment (such as platform business models) and more margin squeeze. I also think it will take 12 months before we start to see PSD2 moving from hype curve to reality.