Money 20/20 Amsterdam Highlights
Part I: Noteworthy Discussions
Couldn't make it to Amsterdam in person this year? Well, don't worry; we got you covered.
Bringing together financial innovation and FinTech enthusiasts from around the world, Money 20/20 Europe offered an intellectual treat to its participants. Let's take a look at the highlights of the 3-day event in Amsterdam.
Noteworthy Discussions
Open Banking and APIs
The headline session of Money 20/20, including Daniel Kjellén of Tink & Charlotte Hogg of Visa Europe, was kicked off with a controversial remark: "nobody cares about open banking anymore." The panelists explained in cohesion that the services and the added value matter more as "real innovation is happening in the value add, which comes from data, an essential part of financial services."
Charlotte Hogg of Visa Europe continued remarks, adding that “the core of anything in payments is the resilience towards cybersecurity and fraud." When asked whether the war in Ukraine is creating additional cybersecurity threats for payment companies, the panelists answered that "financial players must always be paranoid about cybersecurity as there are no off days." Accordingly, financial services must be alert regardless of whether it is a typical business day or whether there is an international crisis at stake."
Another considerable discussion about open banking happened the next day among Karl MacGregor (Vyne), Basak Toprak (J.P. Morgan Payments), Stefano Vaccino (Yapily), and Tom Pope (Tink) about monetization beyond APIs. Stefano Vaccino of Yapily talked about how open banking can be instrumental in improving all sorts of services banks use.
When inquired about which parts of open banking can be improved, Basak Toprak of J.P. Morgan stressed that it is cheaper to retain a customer than to acquire a new one for banks, and open banking can be used as a channel to create new revenue programs. She stated that, especially in the recent economic cycle, there is room for improvement in education and awareness, adding that "access to liquidity is becoming more important and open banking is a great tool for that as a tool for data gathering." When it was the other panelists' turn to answer the question, they added quicker payments and better consumer financing to the list.
The key takeaway of the panel was that compared to contactless adoption, open banking is faster and will be used more frequently. Stefano Vaccino of Yapily closed the discussions using BigTech as an example: "The fact that Apple is investing more and more into open banking shows that open banking is not tomorrow but today, and if you are not talking about open banking already, you should start now."
Digital Banking and Profitability
As many questions about the profitability of neobanks remain unanswered, Starling Bank from the UK, with over £9 million in deposits, stands out among its peers with a rare profitability status (18 months exactly). As we joined the crowd curious to absorb the Starling secret sauce, we learned that Starling’s no. 1 priority is being sustainable, which comes hand in hand with profitability.
Owning 3% of the retail and 8% of the small business clientele in the UK, Starling does not believe in referral and premium/subscription models as the primary acquisition channel. During her talk, Anne Boden of Starling Bank stated that instead of “buying customers,” which is a long-term drain of resources and is not profitable, Starling focuses on “main bank customers” who use Starling as their house bank. When the conversation evolved into Starling’s valuation being lower than peers (although being more profitable), Boden argued that “valuation is about the customer numbers, but not the value in the pool. We have the highest retention rates in the industry since we focus on stickiness and quality over quantity, but how this method is valued and rated is another thing.”
As the discussion matured, Amy O’Brien of Sifted wanted to learn more about Starling’s SaaS product (“Engine by Starling”). Anne Boden answered O’Brien that although they have built their proof of concept in the UK via a low-cost, resilient business, they will be using this product to sell tech to US banks. She emphasized that they don’t want the local competitors to “access the Starling magic.”
As all tech talks do, the conversation quickly sprinted toward crypto and Starling’s crypto plans. Accordingly, Starling currently has no intention of entering the crypto world due to the high scam rates of crypto wallets (connected to real-time payment schemes). Ann Boden added that her team spends more time protecting people from scammers rather than promoting digital assets as the safety of their payment schemes is in danger due to fraudulent crypto activities.” However, this is not Starling’s final word on digital assets, and the focus might change.
“Starling will be an international global tech company that just happens to be a bank,” said Anne Boden, wrapping up.
According to Boden, Starling will tackle the following headlines in addition to “doing even better lending” in the future:
• Continuing the justify their customers in the long run
• Expansion
• Helping organizations reduce their carbon footprint
• Embedded finance offering in Europe
• Improved KYC and AML as Starling’s RegTech infrastructure is “as good as the weakest link.”
Payments
Stripe’s Co-founder and President John Collison’s talk was the gathering spot for all payment devotees. Stripe is the payments poster child as it reached USD 95B valuation 11 years after the first line of code was written in 2009.
The discussion was kicked off with a question about whether the recession will slow down the internet economy. Collison answered by unfolding his expectations of offline activity to transform into online since “the broad trend is here to stay, and most consumers are using the internet to optimize costs.” Furthermore, as the real estate crisis of 2008 didn’t stay localized, similar international triggers coming from COVID-19, inflation, supply chain challenges, and energy shocks due to the war in Ukraine could be expected, according to Collison; however, the business will remain the same.
As expected, the drop in startup valuations was a significant question mark during the panel. Collison said that it was hard to sell cost-saving back in the day as aggressive expansion was the priority, and now there is a different pitch the entrepreneurs must prepare. He emphasized that the founders must consolidate their 2021 pitch decks according to the changing opportunities. He additionally advised the founders to “focus on fundamentals instead of valuations.”
The mention of the new Stripe & Wise partnership (coopetition, if you will) triggered open banking discussions, which could be summarized in one sentence: “Open banking works in idea, but we need to take it to a stage where execution works.”
Collison also mentioned that FinTechs should provide more choices for consumers, which is why Stripe is cooperating with Apple Pay, Klarna, and Affirm. Nonetheless, he added that “BNPL evolved in the first place since the consumers were not happy with the existing lending solutions,” highlighting the dangers of standing still.
Collison finished his talk by reminding the audience that Stripe is not a bank and has no intention of becoming one. However, the company leans towards being more present in the global economy and becoming the “AWS for e-commerce” by providing more products in the future.
Crypto
Judging from the many announcements and service providers at the event, the new hype in the crypto space seems to be around crypto payments.
Stripe was one of the first movers regarding Bitcoin payments; however, the company turned off this feature in 2013. Many years after the first crypto product attempt, Stripe recently launched crypto payouts (supporting 50 countries) through which businesses can send cryptocurrency payouts to sellers, freelancers, creators, and service providers worldwide. John Collison of Stripe explains the strategy with the motive of solving problems and stresses that "Stripe did not enter the crypto space for the sake of entering it." During his speech, he added that Bitcoin was not working well as a payment method back in the day, but the product experience is much better nowadays. Therefore, the crypto space is more exciting for the company.
Collison adds, "...crypto is a movement as much as a technology. And that bothers crypto skeptics."
Will crypto and payment providers choose to cooperate or compete in the long run? Judging from John Collison's speech, better infrastructure and experience will win regardless of the provider.
Digital Euro
The digital Euro has been a hot topic for a while now. Still, with China pressuring Europe, the matter seems more urgent than ever, according to the Digital Euro panel discussions, including Adam Gagen, Inge van Dijk, Marion Laboure, and Olivia Minnock.
"In Europe, we are always lagging behind the UK, US, and Asia," said Adam Gagen during the discussions, adding, "if we are not moving ahead, we are staying behind."
"I know (Christine) Lagarde aims 2025, but it will take way longer to do it right," declares Inge van Dijk. Although there is the will to do it, the greater intention to do it right, particularly involving 27 countries, will take time, according to the panelists.
Metaverse
As one of the first events with such broad crypto and metaverse coverage, Money 20/20 2022 revealed an interest in virtual experiences. Many bank representative attendees we had conversations with indicated that their innovation teams are “looking into the opportunities in the metaverse.” Why, do you ask? The metaverse panel provided an answer for us. The discussion, including Guillaume Vaslin, Steve Suarez, Jelena Zec, and Zoe Wei, explained this phenomenon using several pointers: “FOMO & the motivation to become the pioneer in the industry, branding awareness opportunities for banks, omnichannel customer service and the new payment and trading experience via digital currencies.”
Banking Customer Experience
The question, “How does a bank’s technology layer really impact their product design and overall customer experience?” triggered an extensive discussion among Emelie Magnusson, Deniz Guven, Gareth Richardson, and Joy Macknight during the event. According to the panelists, banks do not think about the customer all the way, regardless of the extreme amounts spent on tech stacks (USD 86B in the US).
“When exploring new tech, it is important to understand the purpose and try early instead of waiting too long,” said Emelie Magnusson, adding that the providers should always think about what problem the tech is solving.
Deniz Guven supported the comment, saying that, in the end, the question about how things are configured and used is more important than what is being used. He urged FinServ providers to consider whether “they can defend themselves with their existing operational model and whether this model can be used to attack any existing or new markets.”
During the closing remarks, the panelists agreed that focusing on the “heart share” (experience) is more important than the market share since the latter follows the first.
Tech Driving Change During the War
We kept the best part to last. The panel about whether FinTech can make a difference in conflict and displacement was kicked off by a speech by Mark Barnett, president of Europe at Mastercard. Barnett started his speech by explaining that two weeks after the country’s ambitions to grow the tech share of the GDP by 2025, making Ukraine a tech hub was publicized, the country was pushed towards conflict and uncertainty.
After Barnett’s talk, the audience was given access to the recorded message of Oleksandr Bornyakov, Deputy Minister of Digital Transformation of Ukraine, who seemed to stress the continuous determination of these goals. He announced the Mastercard “Start Path” initiative curated for Ukrainian fintechs and entrepreneurs. Bornyakov concluded his remarks, stating that Ukrainians are efficient, even in a crisis, with a heartwarming call to action: “Invest in Ukraine, invest in peace.”
A panel led by Don Ginsel of Holland Fintech followed Oleksandr Bornyakov’s speech, including Ukrainian Fempreneurs Anna Tigipko, Maria Kolganova, Nataliia Slieptsova, and Shevtsova Alyona. The discussions revealed that the financial markets were already quite developed and resilient in Ukraine due to COVID-19 and that the market hadn’t stopped performing even during the war.
The panelists also mentioned that the regulators have interfered after the war, allowing flexibility to financial market players, and the National Bank of Ukraine is doing everything to help. Accordingly, new (virtual) products were launched in the meantime, making onboarding and banking more accessible. Therefore, all this flexibility and cohesion eventually dissolved the long queues in front of the ATMs as people saw that they could still manage and move their money seamlessly.
The panelists seemed to be eager to go back to their homes once the war is over, but their revelations made the attendees realize that technology and female entrepreneurs were at the forefront of the economy and digital services during the war (as men are detained by the armed forces).
We must admit that just like everyone listening to the panel, we were impressed by the solidarity of the tech scene and the true power of digital services (even more critical during a crisis).
This article is an excerpt of the Money 20/20 2022 report initially published on the Fintech Istanbul blog.