Fintech Disruptors: Swedbank has brought its financial technologies, AI and digitisation efforts under your leadership and coordination in their Fintech Office. From your perspective in a major bank, what changes have you seen in the last year?
Jonas Lagerstedt: I think the traditional banking sector has matured remarkably, especially in its attitude to fintech, over the last three years. Fintech has moved from being seen as a threat to being a source of opportunity. Since 2014, we’ve seen growing numbers of banks partnering with fintechs, increased investment on IT and digitalisation, and a completely digital customer interface.
That said, this is still an immature market and there’s a lot of hype around which encourages banks to invest in fintech start-ups. We believe banks are better as partners, rather than investors, and that’s why we are working with the teams at Sprinklebit and MinaTjänster.
Fintech Disruptors: That answer brings us to the present – what do you see as the biggest challenges at the moment, for fintechs in general and for your bank in particular?
Jonas Lagerstedt: All banks are currently facing the challenges produced by a “low for long” interest rate environment. For as long as it’s tough to make money in some areas because of thin margins, price pressure on certain banking products is going to continue. In terms of financial technologies in banking, there’s a push on to improve the user experience. Away from Sweden, some of the bigger global players still seem to be in shock from the 2007/08 financial crisis, and are focused on internal issues. Finally, PSD2 and similar change driven by tech is going to separate the wheat from the chaff when it comes to banking. The best banks will welcome the opportunities of open banking, and engage in partnerships. The rest may struggle.
Fintech Disruptors: Our research this year focuses on “success.” What do you see as the elements that help you to identify winners in the fintech space?
Jonas Lagerstedt: Innovation is clearly a factor: but that innovation has to be linked to customer benefit in some way. The capacity to automate certain procedures has obvious benefits to a bank on the cost side, for instance; but there has to be customer benefit in evidence as well. Generally, I would encourage any fintech company to be entrepreneurial, and to try to understand the challenges faced by the traditional banking sector. For many years, the main challenge we faced was how to deal with new regulation. Today, I would suggest the key challenge facing banks is how to deal with, and integrate, new innovations and specifically so coming from fintechs and elsewhere.
Fintech Disruptors: Looking ahead, what do you see as the key trends for 2018?
Jonas Lagerstedt: I’ve mentioned regulation before. Banks are now up to speed in areas such as Anti-Money Laundering (AML) and Know Your Customer (KYC) but these regulations have been costly and inefficient to implement. So my expectation is that how banks deal with regulation will become more efficient. Thinking specifically about the fintech environment, I do see some similarities between where we are now and the dot.com period around 1998-2001: fintech is attracting a lot of investment capital, and I expect there to be a shake-out at some point when the money runs out – or when investors believe they’re not getting sufficient return on their funds. For now, though, there’s no question that it’s all about innovative technologies, and what these technologies can do for the customer, as well as the banks.