Last week I had the privilege of moderating one of the most important events in the annual calendar of Swiss and Austrian financial institutions and UK-based leading FinTechs: the UK FinTech Mission to Switzerland and Austria 2021.
On 28 January, 2021, the UK FinTech Mission to Switzerland and Austria, organised by the British Embassy in Vienna and Berne, the UK Department for International Trade, and Scottish Development International, brought together – virtually, for the very first time – high-ranking government representatives, Swiss and Austrian financial innovators, successful UK FinTechs, and famous leaders for a thought-provoking panel discussion.
Strong numbers behind a successful platform: The driving forces that helped shaping success
Over the past few years I’ve witnessed the UK FinTech missions establishing themselves as a powerful platform and event within the European FinTech landscape, offering leading decision makers a grand stage to meet innovative UK FinTech companies. The numbers? The three previous events generated over 65 million euros in signed business and provided a strong business platform for over 600 attendees and through 300 one-to-one meetings.
High-ranking government representatives such as Leigh Turner, Her Majesty’s Ambassador to Austria, and Jane Owen, Her Majesty’s Ambassador to the Swiss Confederation and non-resident Ambassador to Liechtenstein, as well as Noel McEvoy, Director of the UK Department for International Trade and Scottish Development International for Switzerland and Liechtenstein, and senior representatives of the British Embassy of Berne and Vienna, are the driving forces behind this success. During the 2019 Mission, upon being asked why such events generate such great interest, Jos Dijsselhof – CEO of SIX and one of the Mission’s partners – stated, “Because together we are stronger. Such strong platforms stimulate new business relationships amongst participants, resulting in job and wealth creation in Austria, Switzerland, Liechtenstein, and in the United Kingdom.”
The government role
The 2021 UK FinTech Mission started with an extremely interesting update by Ambassador Turner on the status quo of both the FinTech industry in the UK and on the future opportunities in the new Brexit era.
HMA Leigh Turner, Ambassador to Austria
UK FinTech attracted $4.1bn in venture capital, second only to the US in 2020 at a global level. Worldwide FinTech investment reached $44bn – an overall increase of 14% from 2019. The UK led European FinTech investment, accounting for just under half of the total $9.3 billion, and with more deals and capital invested than Germany, Sweden, France, Switzerland and the Netherlands combined. Importantly, investment backing for female founders in UK FinTech grew to $720m in 2020, accounting for 17% of total investment – an increase from 11% of the total in 2019.
In terms of UK strategy in financial services, the country is set to invest £45m to support additional PhDs in artificial intelligence and related disciplines.
With regards to the UK-EU TCA, agreed on Christmas Eve and which entered into force on 1 January, affecting Digital Services and Financial Services, Ambassador Turner confirmed that the UK’s aim through the negotiations was to agree an FTA which promotes financial stability and provides a predictable and business-friendly environment for firms to undertake cross-border financial services. Specifically with regards to “Digital Services”, the UK and the EU have agreed on a modern digital trade chapter, whose important commitments include: maintaining zero customs duties on electronic transmissions; keeping source code safe; protecting consumers online; and providing a legal framework for common e-signature and trust services.
HMA Jane Owen, Ambassador to Switzerland and Liechtenstein
Ambassador Owen continued by confirming the active efforts to keep supporting the best of UK FinTech, despite the difficult circumstances that 2020 brought. The demand in Switzerland for collaborations with UK FinTechs has been steady. With regards to the Financial Services framework, complete continuity of the only FS arrangement that Switzerland has with the EU was secured. On 30 June, Chancellor Rishi Sunak and Federal Councillor Ueli Maurer agreed to commence work on the most ambitious commitment ever made by two countries to develop an international agreement on financial services. The Joint Statement signalled the UK’s ambition to continue to cement its role as an international financial centre; it is an agreement on the country’s vision of the world economy as open, global and free – a vision shared by Switzerland. On 8 September 2020 the 4th financial dialogue between the United Kingdom and Switzerland focused on the ambition set out in the joint statement looking to further deepening the collaboration in financial services, including sustainable finance & women in finance. Ambassador Owen confirmed the Embassy’s, the DIT’s and SDI’s willingness to provide advice on the market, on trade agreements, and on general business enquiries, working together and acting as a bridge to a common platform.
What’s on the horizon for the FinTech industry, big data and ESG?
Panel discussion with (left) Fiona Frick, Dr. Antonios Koumbarakis,, Chris Skinner, Katherine A Foster, Pietro Carnevale, Manuela Andaloro
The Mission continued with thought-provoking discussions that took place on the virtual stage, with an incredibly knowledgeable line-up of top experts in their respective fields, such as:
Chris Skinner, Author and FinTech expert
Katherine Foster, Expert Consultant on UN Dialogue on Big FinTech & SDG Impacts, and Executive Strategy Officer at the Open Earth Foundation
Pietro Carnevale, CEO of House of Insurtech Switzerland AG of Generali
Fiona Frick, CEO, Unigestion
Antonios Koumbarakis, Head of the Strategic Regulatory & Sustainability Team, PwC Switzerland
Manuela Andaloro (moderator), Senior Advisor on Macroeconomics and Social Change, SmartBizHub
The panel’s goal was to portray the latest trends shaping the world of FinTech and their adoption: in particular, intelligent automation and Big Data impacting professionals and customers, green FinTech contributing to achieving environmental goals, and the role of governments in driving progress forward.
The relevance of the link between sustainability, finance and technology has been emphasised by the COVID-19 pandemic crisis, which has urged all countries to re-think the models traditionally deployed and rely more on technology and sustainability.
BIG DATA AND INTELLIGENT AUTOMATION
Manuela (moderator): According to a recent IDC study, the global revenue for Big Data analytics is expected to hit $260 billion by 2022. However, customer protection is a very debated area which presents risks related to data protection or data inaccuracy. What solutions have been deployed and are planned to overcome the risks posed to customer protection and to avoid wrongful assessments?
Chris: Big Data is like cloud computing: a massive space, a bucket of all sorts of things, and the granularity that is underneath allows us to delve deeper and deeper into different applications and use cases. In my opinion, Big Data wraps everything up alongside data analytics. From artificial intelligence, to machine learning, to deep learning and more: we are seeing numerous uses of this now, primarily in financial services for risk and management and fraud analytics, and maybe not enough for customer intelligence services, which is quite interesting. For example, I’ve spent a lot of time working with Ant Group, and what is interesting about what they do is how they use artificial intelligence for deep analytics of customer lifestyles. Some would say it’s creepy because you are intruding into people’s lives; others would say it’s fine because the customers give them permission. So I think the real discussion is around data analytics, which I know they’re going to get into. I might be digging too deep here, but what is important is to find the balance between tracking and tracing people’s digital movements versus being creepy. You have to have a customer agreement to allow you to track and trace those digital movements, and that’s where Big Data and data analytics is getting interesting.
Pietro: I don’t see us, 10 years from now, going from the actuary and broker to deploying AI bots only. When it comes to Big Data and data protection, I would probably separate two concepts: exploration phase vs. deploying solutions for the end consumer. In the exploration phase, innovation labs and sandboxes are the keys to create a safe environment to learn what this new technology can bring. Another important aspect is combing traditional pricing optimisation with more customer lifetime value analytics. As for data protection, as a regulated industry this is very important. How do we get the data and create trust? Transparency is fundamental. Sometimes we think too much about data rather than who we get the service to: what added value are we selling? If there’s value, the customer will give access to the data.
Manuela: Beyond the sheer amount of data available today, how are the patterns in that data used, how incisive and available to investors and the industry are they?
Fiona: As asset managers, there are new sources of information to take investment decisions. During COVID, if you were looking at official data, you wouldn’t catch up on what is going on with the economy. You would be able to do that if you looked at the media, at companies announcing that they are going into lockdown, etc. So that is one aspect of Big Data we’ve been integrating into our systems. Another key aspect is ESG: the world is changing, and when it comes to firms and investment decisions, we need to look increasingly at how companies score on social matters, and on the sustainability matrix, what is their biodiversity, and so on. Big Data gives us new sources of information that we didn’t have in the past.
Antonios: ESG data will play a big role in the future. New patters regarding carbon footprint are being developed and will come into force along with EU taxonomy guidelines. Data analytics will increasingly provide information that can be applied from a risk management point of view as well as on dedicated ESG components: this will lead to further innovation and a new product-service offer.
Manuela: Let’s talk about the ethics of Big Data and intelligent automation. What are the risks for the financial landscape and its ecosystems when culture and biases are not taken into account? Can technology amplify prejudice? Will GAFAM and other big tech players increasingly play a role?
Katherine: Most of the dialogue is about the impact on individuals. There are possibilities for discrimination. But again, these focus on direct impact on clients. We need to consider inherent biases on culture. How our biases evolve in our little ecosystem. The integration of these technologies in our businesses, the way they are deployed at a large scale, also warns attention. What we’re seeing in terms of the impact of big FinTechs is that they bring financial inclusion on one hand, but they also have a broader impact that goes beyond our regulatory space and lens. It’s about ensuring diversity, ethics, and understanding the overall culture and business models we are putting in place.
Fiona: It’s not AI that creates the bias, it just tries to find a relationship between sets of data. As humans, we need to be able to add this long-term perspective. We have to be sure we have enough sources of data to put into our systems. As for ethics, there seem to be different committees now that measure these aspects and unintended consequences, and try to find solutions.
Chris: Far more worried about fake news and deepfake videos. Phishing scams are getting more and more convincing. When you amplify that into someone that looks like Manuela but is actually not you, and pretends to be working for a bank etc., that’s a lot more worrying.
SUSTAINABILITY, GREEN FINTECH, GOVERNMENT, REGULATION
Manuela: We know that the combination of sustainable financial services and digital technology (green FinTech) looks particularly promising, and in the past few months we’ve witnessed how governments have implemented new initiatives to promote and support sustainable FinTechs. What is your view on the status quo when it comes to green FinTechs, and where do you think we should be heading? Katherine, you mentioned for example the need to merge the separate tracks of FinTech, green finance, and emerging tech for SDGs and climate, could you explain in more detail? What tangible opportunities are there for FinTechs?
Katherine: I did a research on ecosystem readiness of FinTech across four countries, adopted by the UN taskforce. What we found is three avenues of innovation emerging from the finance sector: what we call FinTech, green financial products, and emerging tech for sustainable development and climate. The new methods to understand and measure impact are a really important opportunity that sometimes gets omitted or put on the sidelines of this dialogue.
Antonios: There is a lot of green washing in the market. We need clarity, transparency, and comparability. In this context, the European Union is of course leading the way with taxonomy, and moving in the right direction. What are the correct patterns when it comes to ESG? Big Data plays an important role; this data has to be interpreted. We have to create incentives, encourage companies towards more innovation.
Manuela: What will the future hold? How influential is the EU policymaking for Green FinTechs?
Chris: One of my next projects is a publication around the theme of “digital for good”. New companies are very purpose-driven, their culture is established by the founders who are often Millennials and Gen Z. That is the driving force around the next generation of finance and technology, and it is going to be strongly focused on how to do better for society, being driven by stakeholder capitalism and not by Milton Friedman economics. That’s very much the agenda that is currently being discussed in Davos, but also the one that young people buy into. There is a major movement towards purpose-driven capitalism. If companies don’t stand for something, they don’t stand for anything, and they will fall down. They have to stand for something. The whole ESG agenda and relationship between business, society, and the planet is going to be front and centre for this decade.
Manuela: Pietro, you work with many young entrepreneurs, what is your impression?
Pietro: Let me start with a quite idealistic concept about this topic: to me, economic growth must equal value creation. The foundation of these efforts must be sustainable, otherwise it’s bubbles. It’s my personal view: as a society, we are evolving, but it took a while. A few decades ago, we knew about this problem, and we thought that someone else would take care of it. I think more and more, I sit with start-ups, but also at large institutions, and we are shifting sustainability from being a side topic to being a core concept. This is a powerful element for sustainability, it is the footprint of what we do. Is it going to happen fast enough? Will it just give us a few more years? We don’t have a plan B, so whatever time gained is better than no result at all.
Katherine: I would like to echo that. I’ve been working with lots of start-ups over the past year. I agree, and I think it has to go beyond. What is interesting in the start-up space is that on one hand we are embracing sustainable development as an opportunity, but on the other we are mimicking the Silicon Valley model. That’s starting to change now, and Europe has been a leader in this. One piece of advice for FinTechs: we sometimes think of innovation as young, but it is also good to go with some incumbent knowledge here, it’s essential to understand what data barriers there are, as well as the regulatory space. It’s about having a much more holistic approach.
Fiona: One of the biggest threats and biggest opportunities for the environment is data. I would say that for FinTech in the future it will be really important to create an environment where investors like us can have a conceptual view of what good looks like and what bad looks like. It’s very difficult for investors to ensure their impact based on sustainability ratings. An MIT report from last year, for example, showed how difficult the correlation of sustainability ratings is. Take an example like Tesla: depending on how you measure the environmental footprint, it can be viewed as the best company or the worst, due to the difficulties of battery disposal. It is hard for us to find a link between what we are supposed to do with regulations and the practicality of actually implementing them.
Antonios: Indeed, how sustainable is Tesla in reality? This can be questionable, because of its overall environmental footprint. When it comes to data that helps us assess, we have several data providers, and have seen quite some consolidation lately. The problem is that all these companies have different methodologies, which brings us to the question: what kind of data should be used? In addition to this, we see that a good system relies on several data suppliers. We are now in a transition phase: how will we take this forward, for example when it comes to private equity companies where there is no data available for transparent assessments?
RETHINKING MODELS, SUSTAINABILITY, IMPACT CAPITALISM, DATA
Manuela: So, the COVID-19 crisis has urged countries to re-think models and reward systems where firms that demonstrate social and environmental integrity are more successful than those that don’t. Capitalism and democracy are being challenged, we face new social and environmental issues daily, so it seems imperative for leaders to examine the impact of their organisations and adapt it. In this changed world, can we talk about “impact capitalism” that increasingly aligns the private sector and government, harnessing capital and innovation to solve social and environmental issues? Are there new methods and approaches to understanding and measuring impact?
Pietro: Increasing the collaboration between start-ups and incumbents. We should almost go from Silicon Valley to Napa Valley. Another point: individuals, start-ups and incumbents need to come together. If we can apply the teachings of the COVID crisis now, carry such teachings to 2022 and tackle the sustainability issue, it would be good.
Katherine: How and what are we measuring? It’s also about a lot of this measurement being voluntary. What I found in my analysis is that it’s not even just about green washing {…} Amazon, Tesla, etc. are tech companies that happened to start doing finance. We are only measuring the core business they are doing. We also need to look at the invisible space of FinTech overall.
Chris: Everything is now generating data. From a sustainability viewpoint, farmers’ fields now have chips measuring the weather, the way in which the wind is blowing etc.: all of that information is creating new business models. In finance, most of the big banks were caught by surprise by the pandemic and lockdown. All their employees and customers were at home. Their model had to move from big head offices to everyone working from home. What they did was that they found agreements with cloud companies. The same is true for every company: we have to rethink the whole structure of our operations. The longer we hesitate, the fewer opportunities we have to save this planet.
Manuela: With regards to rethinking models in the name of sustainability, leveraging technology and regulation, what is your prediction for 2021 and for the next 3 years?
Pietro: Globally, we will be quite busy tackling this emergency. Let’s hope that 2021 will be the last year of this pandemic. We need to take all the teachings of this emergency and get it right in terms of sustainability from 2022 onwards.
Antonios: We will realise that this is the new normality.
Katherine: I think we’re going to see the US and European regulations align more on sustainability. I think the ecosystem approach that is more common in Europe will also be applied to start-ups. I think the philosophy we have in Europe is going to take hold; this notion of ecosystem building and supporting start-ups in a holistic manner.
Manuela: What are the next biggest challenges we see in our future (fake news etc.)? How can we stop this and gain control?
Chris: Revolution in a society with technology, where things change really quickly. Some people are really on the edge of technology, and some people are really frightened. With COVID, we can see that those that are really dependent on technology are fine, whilst some others like restaurants, aviation, etc. are not so fortunate. The more interaction via video, the more possibility there is for hacking and criminals stealing things. It used to be that people were robbing bank branches, now it’s people hacking bank websites. There have always been criminals and there always will be.
Manuela: One key takeaway for FinTechs here today?
Fiona: Huge need of coherence and finding new paths to sustainability. It would make sense for FinTechs to enter that space. There is a lot to develop in that space.
Katherine: I would echo that: the time of open platforms and open innovations is here. There is the sense of competition that we are used to with FinTechs, but there is also space for collaboration.
Pietro: Sustainability through cooperation perhaps?
Manuela: For investors out there?
Pietro: Shorter, positive, mid-term. But there is much uncertainty.
Antonios: Combining sustainability and technology is a big business opportunity. Recovery of the economy after COVID should be long-term. Perhaps there are the next Roaring 20s ahead of us when we recover?
Katherine: Look for other species rather than unicorns, and remember the importance of cooperation.
Fiona: Traceability and making sure the company is part of an ecosystem.
We have a unique opportunity to create a more sustainable world. Businesses and governments must be the driving force of excellence and innovation. Corporate social responsibility and philanthropy are very important but no longer enough, as often discussed during our panel, if you want to exist as a company in the future, you have to go beyond that and make a positive contribution. It’s time to step up to the plate.
M.
(info@smartbizhub.com)
To watch our panel discussion: https://dit.webex.com/dit/lsr.php?RCID=f20b357b51d24743a3daaa758293c1a0
Password: VpgMQEv7
UK FinTech Mission 2021: (left) Katherine A Foster, Manuela Andaloro, Pietro Carnevale, HMA Jane Owen , HMA Leigh Turner, Chris Skinner, Fiona Frick, Dr. Antonios Koumbarakis
Partners: The British-Swiss Chambers of Commerce, Disruption Banking, SkyParlour, Polymathconsulting, European Women Payments Network (EWPN) and FinTech News Switzerland