Financial Times Live organized European Financial Forum at the Dublin Castle on January 27. It gathered hundreds of finance executives and professionals not only from Europe, but from around the world. Fintech and digital finance got a very important role in the presentations and panels. It was probably also the hottest topic to discuss during the breaks. One fintech startup speaker even predicted that half of the audience will lose their jobs in the next 5 years due to the digital disruption.
Financial Times Live organized European Financial Forum at the Dublin Castle on January 27. It gathered hundreds of finance executives and professionals not only from Europe, but from around the world. Fintech and digital finance got a very important role in the presentations and panels. It was probably also the hottest topic to discuss during the breaks. One fintech startup speaker even predicted that half of the audience will lose their jobs in the next 5 years due to the digital disruption.
The day was started by Philip Lane, the Governor of Bank of Ireland, and Andrew Bailey, the Deputy Governor of Prudential Regulation at Bank of England. The interesting coincidence was that a day earlier it was announced that Andrew Bailey will take over as the boss of the UK Financial Conduct Authority (FCA) from Tracey McDermott. Both of them spoke about the importance and complex questions regarding regulation. Mr. Bailey especially emphasized, how important is that finance companies clearly differentiate items in the their balance sheet, e.g. bank deposits from bank’s debts. And he also saw similar needs with investment instruments; investors must be able to see, what kind of assets an instrument includes. A significant difference between Mr. Lane’s and Mr. Bailey’s comments was that Mr. Lane saw EU’s role as important, when Mr. Bailey focused on national regulation.
The financial services panel discussed the most important new needs in the European finance market. One important need is to develop access to capital for small and medium size enterprises, SMEs. Bank regulation and capital requirements for banks have made it more difficult for many SMEs to get e.g. growth capital. This has an impact on the whole economy in Europe. It has also opened a need and opportunity for new players, like p2p lending services, to enter this market. The panelist saw securitization of SMEs as one of the most important factors for the European economy. Isabel Vaillant, director of regulation at European Banking Authority, also told that they have no plans to regulate p2p lending on the European level. She saw p2p lending as quite transparent business and cannot cause similar structural problems than can exist in some other finance instruments and banks. She also said that the UK is now almost the only EU country that has clear regulatory guidelines for p2p lending.
The digital disruption panel discussed, how new services change business and also about the relationship of old and new actors in the market. They saw that it is not only about technology, but it is even more important to develop new business models and instruments. The panel had slightly differing views, how new services and service providers impact banks. Some panelist saw that banks and new services could work well together, when e.g. banks already now lend money through p2p lending services. But some panelist, e.g. Zopa’s founder Giles Andrews highlighted that it will have a significant impact on banks, if they lose customer touch points to online services.
The fund panel focused especially on the issues of fund business. Importantly the panel reminded that the performance of a fund doesn’t matter alone, it is often more important that the funds fees are competitive. They also discussed, how difficult it is to scale the best performing funds. Often top performing funds have a model or assets that work until a certain scale, but then performance starts to drop. And this is a big issue for companies that manage really significant capital.
The insurance panel talked a lot about data and new technology. They mentioned that a couple of years ago less than 0.002% of VC money went to insurance startups, but in 2015 it was already 1.5 to 2.0 percent. Data and data analytics help optimize pricing of insurance, but also e.g. to fight against fraud. MetLife’s Executive Vice President Marty Lippert gave an example that they also monitor social media. For example, if a person make a disability insurance claim after an accident, it can be revealing, what kind of activities and photos the person posts, when he/she claims he/she cannot work. This caused questions about privacy in the audience and some people commented that they couldn’t accept that an insurance company follows their social media account. Mr. Lippert commented that it is to avoid fraud and get better prices for insurances for all honest customers.
The fund panel focused especially on the issues of fund business. Importantly the panel reminded that the performance of a fund doesn’t matter alone, it is often more important that the funds fees are competitive. They also discussed, how difficult it is to scale the best performing funds. Often top performing funds have a model or assets that work until a certain scale, but then performance starts to drop. And this is a big issue for companies that manage really significant capital.
The insurance panel talked a lot about data and new technology. They mentioned that a couple of years ago less than 0.002% of VC money went to insurance startups, but in 2015 it was already 1.5 to 2.0 percent. Data and data analytics help optimize pricing of insurance, but also e.g. to fight against fraud. MetLife’s Executive Vice President Marty Lippert gave an example that they also monitor social media. For example, if a person make a disability insurance claim after an accident, it can be revealing, what kind of activities and photos the person posts, when he/she claims he/she cannot work. This caused questions about privacy in the audience and some people commented that they couldn’t accept that an insurance company follows their social media account. Mr. Lippert commented that it is to avoid fraud and get better prices for insurances for all honest customers.
The fintech panel included Colm Lyon from Fintech and Payment Association of Ireland, David McHenry from Silicon Valley Bank, and Anthony Watson from Uphold. The most important topic was, how established finance companies are able to adapt to the new digital business and how much it will be dominated by new startups. They also divided fintech into two dimensions: 1) new finance services and products, and 2) access to (old or new) finance products. Mr. Watson presented bold statements, like “half of the audience will lose their job in 5 years thanks to fintech”, “corporates are not able to adapt to new business because they should cannibalize the existing business”, and “corporates are now very excited about block chain, and it is a total joke, it is just one database, but tells how limited their thinking about the changes is.” Mr. McHenry commented SVB is especially interested in fintech solutions that can really scale up, for example, trade finance is an area where he sees a lot of opportunities. They were also asked to name the leading fintech hubs in the world. They started with San Francisco, London, and New York, but then added that there are a few other places where significant development is happening, like Portland, Seattle and Atlanta in the US, Ireland and also some hubs are emerging in Asia.
In his closing remarks Irish Minister of State Simon Harris highlighted, how the finance sector has become very important for Ireland. Ireland has now 38,000 jobs in finance, 12,000 of them outside Dublin, and they are high skill, well-paid jobs. He also wanted to emphasize that the Irish finance sector is now very healthy after the serious crisis and they have also been able to develop the regulation.
The conference was an excellent summary of the finance sector in Europe. It was a privilege to participate in it and meet the finance leaders around the world. Dublin Castle offered excellent facilities for the event in the heart of Dublin. Financial Times has done excellent work to gather so many top level finance people together. It also emphasized Ireland’s growing role in European and global finance business. One speculation topic during the day was UK’s EU membership and if the UK decides to leave the EU, it can make Ireland much more significant finance center inside the EU.
In his closing remarks Irish Minister of State Simon Harris highlighted, how the finance sector has become very important for Ireland. Ireland has now 38,000 jobs in finance, 12,000 of them outside Dublin, and they are high skill, well-paid jobs. He also wanted to emphasize that the Irish finance sector is now very healthy after the serious crisis and they have also been able to develop the regulation.
The conference was an excellent summary of the finance sector in Europe. It was a privilege to participate in it and meet the finance leaders around the world. Dublin Castle offered excellent facilities for the event in the heart of Dublin. Financial Times has done excellent work to gather so many top level finance people together. It also emphasized Ireland’s growing role in European and global finance business. One speculation topic during the day was UK’s EU membership and if the UK decides to leave the EU, it can make Ireland much more significant finance center inside the EU.
About the author - Jouko Ahvenainen
Jouko Ahvenainen is a serial-entrepreneur, Crowd Valley's Chairman and Co-founder of the Grow VC Group, a pioneer in new funding solutions, including equity p2p investments. He participated in changing US finance regulation, getting the Senate and President to allow crowdfunding and has worked with EU finance regulation. Jouko started his work with crowdfunding models in 2008. Jouko is a founder, partner and board member in several innovative digital finance companies, like Crowdbaron, Kapipal, Grow Advisors and Commoditarian. Jouko is also a member in the Transatlantic Economic Forum SME Access to finance group, and has been an advisor for US, European and Asian finance programs.
Jouko Ahvenainen is a serial-entrepreneur, Crowd Valley's Chairman and Co-founder of the Grow VC Group, a pioneer in new funding solutions, including equity p2p investments. He participated in changing US finance regulation, getting the Senate and President to allow crowdfunding and has worked with EU finance regulation. Jouko started his work with crowdfunding models in 2008. Jouko is a founder, partner and board member in several innovative digital finance companies, like Crowdbaron, Kapipal, Grow Advisors and Commoditarian. Jouko is also a member in the Transatlantic Economic Forum SME Access to finance group, and has been an advisor for US, European and Asian finance programs.