Recently I attended Money20/20 Europe – the world's largest fintech conference held in Copenhagen, Denmark. While I talked with several attendees from financial institutions and fintech innovators, I noticed some common themes from our different conversations. They're the same conversations we're having across Europe with banks and technology companies, and it shows that everyone is talking about similar topics. 1. Responsible Fintech Innovation First, everyone in the industry recognizes that responsible fintech innovation is a force for good. According to the Office of the Comptroller of Currency, responsible innovation is defined as “The use of new or improved financial products, services, and processes to meet the evolving needs of consumers, businesses, and communities in a manner that is consistent with sound risk management and is aligned with the bank’s overall business strategy.” Consumers and small to medium enterprises (SMEs) benefit by getting data-driven services that are personalized just for them. Banks benefit because they get reliable and timely data that helps them improve their product and service offerings. And lastly, the market benefits from the improved financial health and wellness of its members. 2. Fintech Innovation is Evolutionary, Not Revolutionary Second, the application of responsible fintech innovation is evolutionary, not revolutionary. Yes, certain technologies, such as block chain, are revolutionary. But the financial ecosystem, balanced by responsible innovators, banks and regulators, helps to influence it in a more evolutionary direction and ensure that fintech initiatives don’t cause systemic risk. All stakeholders benefit from this, especially consumers. 3. Increasing Consumer Protection and Regulation Third, consumer enablement and protection is another common theme, driven by fintech innovators and financial institutions with increasing input from regulators. PSD2‚ the European Parliament's Directive on Payment Services, has been a big part of conversations we’ve had at Money20/20, and it's having a major impact on our interactions with EU banks and innovators. The recognition that Account Information Service Providers are different from Payment Providers allows Envestnet® | Yodlee®, and other platforms, to better understand their legal requirements and craft appropriate solutions that serve our customers. It also supports a key principle of consumer protection, namely that a consumer owns their financial data. This principle allows consumers to choose how they use their data to improve their financial wellness by engaging with service providers they choose. 4. Financial Services Most Impacted by Fintech Lastly, fintech is still having a dramatic impact on financial services across Europe. Below are four primary use cases getting the most attention:
- Personal finance management apps, including those that use behavior-based triggers that are targeted to key segments like students, women and those nearing retirement.
- Payment providers using aggregation for account verification and risk management.
- Lenders using bank statement data for personalized underwriting and affordability checks in a streamlined application experience.
- Financial advisors using account data to provide better advice and to comply with industry requirements like RDR (Retail Distribution Review), a new set of UK regulations that provide transparency and fairness to clients of financial advisors.
In conclusion, events like Money20/20 play an important role by connecting innovators and service providers to support the continued evolution of fintech for the four primary use cases and emerging ones. Whether in Europe or the United States, it’s interesting to find the common themes in our conversations with financial institutions and fintech innovators. Responsible innovation means that all stakeholders working in service of consumers have a role to play in protecting them. We’ll see PSD2 and the new General Data Protection Regulation (GDPR) continue to inform these issues and drive standards for a balanced financial ecosystem. Also, service providers and app developers that leverage financial data to power their solutions have the critical responsibility to protect consumers. As such, financial institutions and data aggregators must do everything possible to fortify their defenses against possible threats to enable secure, aggregation-powered applications. To learn more, download this white paper on Account Aggregation and Security: What You Need to Know or visit our website for more information.
