Time for a new economic model in finance? Insights from the FinastraUniverse event

by Hannah Duncan

As you might expect, the Finastra event was a little different this year. Like the scores of other fintech festivals before it, it was online. However, what made it stand out was how the organisers blended the in-person benefits with the virtual ones, creating more of a hybrid event. Attendees had the option to build their own agenda, to pick and mix talks from across the regions into their own personal menu. There was also an easy and convenient way to book a meeting with attendees. It may not be as charming as an in-person natter, but definitely more convenient than trying to keep hold of thirty increasingly dog-eared business cards at the bottom of a stash bag. Perhaps best of all, there were plenty of opportunities for attendees to pick up some excellent karma for free, as Finastra donates to charity on their behalf. Nice one Finastra! Extra points there. 

But now to the juicy content. What exclusive nuggets of information could attendees glean from the myriad of fireside chats and talks? From where I was sitting (which was with my toes on the radiator at my office desk), everything seemed to point to a burgeoning new economic model. 

From a lockdown to a shake up 

To say that COVID shook things up would be too tame. COVID smashed, pulverised, and machine-blended the traditional ways of finance into a big sloppy pulp. But it didn’t break it. “Revenues will not recover for at least three years. Possibly four. Yet pockets of hope emerged. Many organisations, financial services and institutions were acutely surprised by the speed at which they could move to remote working. It took an average of just ten and a half days – much faster than anticipated”, explained keynote speaker Eli Rosner, Chief Product and Technology Officer at Finastra. “Banks and institutions significantly outperformed their expectations … Strategic priorities needed to be re-written in the wake of the pandemic”. 

Revaluating profit

As banks try to move on from the shock, and toward recovery, it’s clear that some things are changing. And one of them is the way profit is perceived. In a vibrant panel, “A new era in payments – will payments become a utility or remain a profitable line of busines?”, different opinions sparked and jostled. Eric Gover, Principal of Intrepid Ventures, maintained, “Somebody will always be paying for payment services … A price is a signal that something has value… A fee is a way to tell players that what they’re doing has value”. While others such as Payment Systems Regulator Chair, Swashbuckler and all-round legend, Dr Ruth Wandhöfer felt that the fintech style of lower or zero payment fees will become the mainstream. Banks who focus on ramping up their service, not their payment fees, she believes will be the ones who get ahead. “Profitability is increasing as services are improving”, Wandhöfer elaborates. “We need to redesign, create new solutions and an entirely new economic model”. 

Giving away previously paid-for services, like payments charges might be one of the many ways banks will need to adapt in a post-COVID world. But not all profit can be counted in a bank balance. More and more banks and customers are looking at how they can use their money for good. 

Prioritising social justice 

Toni Townes-Whitely, President of US Regulated Industries for Microsoft is one of the best public speakers I’ve ever encountered. My coffee was cold, but I didn’t get up to make a new one. My phone buzzed with notifications, but I remained unnotified. Townes-Whitely is a captivating speaker. Impossible to ignore. Even virtually. Even for fresh coffee or WhatsApps. Not many people can achieve that. 

Townes-Whitely explained more about the changing social outlook since the pandemic struck. “We’ve seen our customers really think about how they start to respond to the current situation – how they rebound from that situation forward to a new position in the market, as well as how they reimagine services”.   

Drawing upon the data collected by Microsoft, Townes-Whitely explained how social rifts have further divided over the pandemic. “If I look at the last year, it’s really been the compounding effect – and obviously, there are certain communities that have felt that disproportionately”. She continues, “It’s a tale of two cities right now, with some leaping forward and some struggling”.

Townes-Whitely advocates that brands must now use their industry muscle to redirect market benefits to those who need it most. “We’ve got to be purpose-driven in what we build and what we deliver”, explains Toni Townes- Whitley, “The free market, left to its own devices, will further the digital divide that exists. We’ve got to be intentional to bring it together”. Building bridges with purpose is now one of Microsoft’s core goals, as well as fostering a culture of curiosity to overcome prejudice. The tech giant is even offering $15 digital qualifications to help bolster the skillsets in poorer communities and prepare them for employment after COVID. 

Bridging divides with technology 

But Microsoft and Bill Gates are not the only ones who want to level the playing fields with technology. Born from the ashes of the 2008 financial crisis, fintech has always challenged authority finance. It’s always tried to offer solutions to ordinary people and small businesses, and it’s always disrupted the status quo. Aiming to bridge divides and solve problems with technology is nothing new. But according to Finastra’s Chief Product and Technology Officer, Eli Rosner, it’s about to go mainstream, as banks themselves will need to step up their tech – and shake off their old systems – to survive. 

“Technology has played and will continue to play a critical role in helping institutions mitigate the worst of the shocks”, Rosner elaborates. “Technology has acted as a buffer for the harshest economic conditions” 

According to the Finastra house view, Open Finance will be key to unlocking long-term success for financial institutions.  “The bridge across the digital divide can be covered with open technology”, explains Rosner. Townes-Whitely adds that up-skilling people from many different backgrounds will also be an important step forward.  “Digital skilling really involves full engagement across many, many demographics, and ages”, she explains. 

A Formula for success 

For freelancers like me who are reviewing events, a good tip is to end on a punchy quote which sums up the whole experience. So that’s what I was looking out for, poised with my notepad and pen, waiting to capture those perfect words. As irony would have it, the golden phrase turned out to be a re-quote. But a gorgeous one. CEO of Finastra Simon Paris repeated the sentiment of legendary Townes-Whitely in this one mike-dropping moment, “The ability to adopt tech at speed multiplied by the ability to innovate speed and the exponent of doing that in an environment of trust … What a beautiful formula!” 

You can catch up with the FinastraUniverse talks and chats here: https://www.finastra.com/news-events/past-events