Digitalisation of financial services: what are the next frontiers?

In a webinar at the Paris Fintech Forum last week, Banking Circle CEO Anders la Cour joined a panel of senior industry names to discuss how digitalisation is impacting financial services, and what the next frontiers might look like.

The panel:

  • Moderator: Elliott Gotkine, Journalist
  • Anders la Cour, CEO, Banking Circle
  • Craig Vosburg, Chief Product Officer, Mastercard
  • Simon Paris, CEO, Finastra
  • Marie Degrand-Guillaud, Executive Director, Nickel

There are several macro trends around digital technology that are heavily influencing the payments space, according to Craig Vosburg, Chief Product Officer at Mastercard. The ubiquity of connectivity means that today, virtually any device that is connected can conduct commerce – and so is capable of transacting from a payments perspective. Add to that the proliferation of other new technologies such as blockchain, and it’s clear that the payments industry has had to innovate fast in order to keep the pace.

“Where we’re seeing that innovation come to life is through delivering new consumer experiences, enabling new kinds of choices for consumers, and broadening the scope of use cases in the payments space,” Craig said.

Banking Circle CEO, Anders la Cour, explained that the COVID-19 pandemic has accelerated the digital trends that were already occurring in the payments space. Industry players have increasingly looked to partnerships as a way to enable their own digital innovation and to speed up that process, he said: “We have seen our clients realise that partnerships can be more beneficial than trying to do everything themselves.”

In today’s landscape, consumers expect more from their financial service providers and are pushing for innovation, according to Simon Paris, CEO at Finastra.

“What has been interesting is that the expectation and demands of customers is that [financial institutions] meet them on their journey, as opposed to the other way around,” Simon said. “What we’re seeing is a huge demand to facilitate seamlessly, frictionlessly and in a secure way.”

As a financial infrastructure provider to other banks and payments businesses, even without a direct relationship with consumers, Banking Circle has still felt the impact of this changing consumer demand, Anders added.

While the race for financial service providers to digitalise has opened up opportunities for newcomers and created new business possibilities, moderator Elliot Gotkine questioned whether this digital leap is, or can be, a profitable one.

Anders pointed to regulation such as PSD and PSD2, alongside the evolution of technology and the digital acceleration caused by the pandemic, as having created “a lot of open space for newcomers.”

“With that in mind, market share for us – and indeed for any newcomer – is much more important than immediate profitability,” he said, explaining that profitability will follow for those that acquire a high market share while also building a strong economic foundation.

For incumbents who have already achieved scale and profitability, how has digital innovation affected investment and the bottom line? According to Mastercard’s Craig Vosburg, it’s not just new players but all types of financial institution that are seeing their finances impacted by digitalisation.

“We look at our costs in three ways, which is people, technology and real estate – and all of those buckets are being incredibly scrutinised,” Craig said, adding that “now is the time” to bring your company into the future.

“I think the investment cycle is different,” he added. “It is more intense and it is digital-first, for sure.”