March 6, 2016

FinTech is coming to Visa Mobile Day

On March 2, our Head Consultant Krzysztof Kwiecinski participated in Visa Mobile Day

of some potential consequences for the future of banking

compare cities in terms of being the most global, having the most powerful economy, the richest culture or the best quality of life. These indexes are especially important for cities, which want to strengthen their ability to compete globally as they enable for precise benchmarking against competition. We looked at the A.T. Kearney Global City Index results for Warsaw to identify the city’s gaps and opportunities for improvement on its way to becoming a truly global city, a city which could take full advantage from such phenomenon as Brexit. The metrics in business activity, human capital, information exchange, cultural experience and in political engagement place Warsaw on the 55th position in the world (out of 125). This result is rather moderate and, looking back at previous two years, shows a lack of substantial change. The report indicates that the biggest obstacle for Warsaw to become a truly global city is insufficient human capital.

Human capital is a source of creative power in science, technology, business, arts, culture and other activities. There is an ongoing competition for human talent on an international scale since many cities have realized that future prosperity depends rather on people and networks than on natural resources and tax breaks. Likewise, companies go to great lengths to attract highly educated and skilled workers. Therefore, in many cases CEOs’ decision of expansion to a new city is based upon an assessment of human capital availability.

Poland, generally, is still lagging in the area of attracting talent not only behind the most developed Western countries or China but also behind its regional partners: Czech Republic, Lithuania, Latvia and Estonia. Even though in the recent Liveability Ranking, released by The Economist Intelligence Unit (EIU), Warsaw closes the tier of cities presenting few, if any, major challenges to residents’ lifestyles, the EIU assesses that the capital of Poland is still not among ideal places to study, work and live. And indeed, such an assessment seems to be confirmed by the lack of diversity in the streets of the city and at its universities - internationalization of Polish higher education is among the lowest in the European Union and OECD countries.

Challenging at first sight, such a situation can be addressed starting with a realization that a city is in fact a combination of services (healthcare, transportation, education, entertainment, housing, etc.) delivered to a variety of users (inhabitants, workers, students, tourists, etc.). By consequence, as other services, a city can very naturally be a subject of service design.

Solving the challenge requires determining the target: which particular groups of new users, assumed to represent incremental human capital, the city would like to attract and what are the needs and challenges of these groups.

Rather than on guessing, the knowledge on these needs and challenges should be built on target user research. In this case, preferably ethnographic research, enabling to holistically understand the interaction with the target users’ environment. Not surprisingly, for research purposes most of the target groups, would have to be sought entirely in locations which are proper for such groups - in other words, not in the city at stake or in the country surrounding it, with the exception of these few international students or expats, who have already ventured into the country but have not yet settled in for good. For instance, gathering insights on senior London bankers, should take place in London, at Heathrow Airport, etc.- wherever their needs and barriers may take them.

Beyond covering the components of what means liveability for the target groups, the research, to be sufficiently comprehensive, would also have to cover potential frictions and drivers to the relocation.

Only then should the city (such as Warsaw) develop insights based target group specific prototype relocation user journeys and prototype service enhancements. Iterative user testing and improvement should enable to refine the solution prototypes until they are ready for implementation.

In parallel, the research should help the prioritization of the groups with respect to return on effort, taking into account financial and other constraints.

Given the constraints, not everything might be immediately implementable, but it is important to have a long-term strategy to strengthen the key characteristics increasing the probability of meeting the needs of the target user groups to attract and retain them.

Finally, oftentimes the research, prototyping and iterative testing enable to identify small and easily implementable changes, which lead to quick wins boosting the brand and opening a Blue Ocean of competitive advantage.

In case of Warsaw, we are convinced that the challenge of attracting human capital is perfectly addressable. It is just a matter of a right approach.

So, Warsaw – shall we start?​

News & Thoughts

conference in Warsaw, giving a presentation on how to leverage customer needs to win as a bank in a market increasingly under threat from nimble FinTech competitors. Have a look at the content here: https://lnkd.in/eKgZikP

July 26, 2016

Is there a clash between banks and fintech startups? ​– review

August 31, 2016

The addressable gap in Warsaw as a service

There are many indexes showing how cities rank worldwide - they usually

​The recent edition of MoneyConf, a sibling of the Web Summit, focusing on the future of finance, attended by some of the biggest banks and tech firms, has brought new views on the future of banking.

Front-end fintechs bet on user experience for massive adoption and use banks as a reference point  

For Valentin Stalf, CEO of Number26, a Germany based startup, representative of the trend of friendly and mobile banking, in the future, the user experience will be much more important than creating a specific financial product. This is why Number26 is centred on the customer relationship, which is defined by the mobile experience. The approach seems to pay off as the company with over 200,000 clients in 8 European countries has just raised a $40 million Series B investment for further growth and obtained a full banking license. He also pointed out that in Europe the user experience gap between fintech and banks is still widening. He also claimed that Number26’s approach, consisting of continuous data collection and adjustment, maintained the user experience of Number26 far better than that of traditional banks. The other advantages are cost reduction, agility, scalability and possibility to function as a platform for integration of other fintechs’ products. One such example is the integration of Number26 with TransferWise, an international money transfer platform.

Taavet Hinrikus, CEO of TransferWise, added that the cost competitiveness of his company relied on applying recently developed technology, which eliminated the need for supporting a branch network. He also drew attention to the paradigm shift in the transparency of transfer costs. Contrary to the typical fee maximization philosophy of the banks, which tests how much pain can the user bear before he or she stops using the service, the likes of Transferwise think how small a fee is still sustainable from the business perspective, assuming user number maximization.

The most advanced banks use fintechs as sources of innovation and of understanding of consumer needs

Neal Cross, Chief Innovation Officer at legacy Singaporean DBS Bank, the largest bank in South-East Asia, representing  the banks’ perspective, agreed that digitalization is a chance to completely reinvent how finance is done, but argued that fintech was not reinventing finance, but instead was making the experience better, taking out frictions and costs. According to him, the divergence between the fintech experience and the bank experience was closing, at least in Asia. He asked, “with similar experience and cost would you prefer to stay with your bank or use several different fintechs”? Banks still have bigger operational costs and spend a lot on new product development, therefore licensing a product or partnering with fintechs might help the bottom line.

One example of such a behaviour is that of BBVA. Carlos Torres Vila, the CEO of which, remarked that the business and technology acumen are pretty well covered by the bankers, but that to understand how humans see things and make decisions required different skills, which are not abundant at a typical bank. Hence, the importance of acquisition of external innovative startups in the transformation of the BBVA business towards better customer service.

Neal Cross, underlined that the biggest challenge of the banks was their ego. He claimed that the banks which can reduce their ego, learn, partner and execute well will survive.

The bank-fintech dichotomy will gradually disappear

In our opinion, the distinction between the legacy banks and the fintechs will gradually disappear. On the one hand, we could observe the progressive extinction of the banks which will not question their egos, and resist to build products and services around customers’ need. Other banks, to be more customer-focused, will become platforms integrating new services offered by fintechs, as exampled by BBVA’s acquisitions. Many fintechs, on the other hand, will need the infrastructure and the funds from the banks to develop themselves, an example of which is the $128 million investment of BBVA in UK’s startup Atom Bank.

Consequently, the most likely scenario is a convergence of banks and fintechs, which will inevitably leave victims among the unprepared on both sides.

The biggest winner of the convergence should be the customer, for whom the future financial services will be much closer to the job he/she expects to be done (not necessarily only cheaper and faster).