Today, in our interview session we have Susan Marie Barton Director at EY and Business Development Leader for Financial Services in Italy. She is a licensed American attorney and has been working with the Italian market for over 15 years.
What does fintech mean?
EY defines fintech as “Organizations combining innovative business models and technology to enable, enhance and disrupt financial services.” This means that a Fintech could be a small instant payments start up, or a big bank, or a social media company- what is key is approaching traditional financial services in a new way. Fintechs are changing the speed of doing business and the expectations that customers have in managing their finances.
Consulting in the fintech era: how customers' needs are changing?
As consultants we find ourselves at the hub of a network involving innovative start-ups, traditional financial services providers (banks, insurance companies and wealth asset management companies), investors and innovations hubs formed by universities and specialized advisors. Being at the middle of that hub gives us a privileged perspective on the market. Our responsibility is to understand where the market is heading to best guide our clients in a financial services market that is going through significant disruption.
Right now customers are expecting more transparency, highly competitive pricing, ownership of their own financial data and faster response times. The impacts how financial services companies interact with their customers but also challenges the operating models that traditional financial services clients currently use as they are forced to reduce costs to be more efficient.
How the business models of banks are changing because of fintech?
The financial services companies who are leading in the market have changed their business models in very fundamental ways:
- Most importantly these companies are focusing in on customer experience which was significantly changed over the past few years. Customers still want security but they want their experience to be seamless, less expensive and faster.
- Leading companies are partnering better and building only strategically. These companies are collaborating more, leveraging information and technology from partners and working from shared ecosystem.
- Technology sets apart leading financial services companies from the rest. Companies are using AI and big data to strengthen security practices and provide their clients with real time information that can be leveraged to improve customer experience and create new products.
What are the opportunities and risks for banks in the fintech era?
Customer- Any successful business must make sure they have a marketing leading approach with their customers. In EY we see 7 key drivers of growth: Customer, People, Technology, Operations, Finance, Transactions and Risk. Any business should evaluate where they are with respect to their peers on these drivers. And while a business may be successful even if all of these drivers are not market leading- they will not be successful if their approach to customer is not market leading.
The financial services market has not made significant changes over the past 75 years. Most are still using legacy systems from the 1950’s and 1960’s and their approach to customers has remained static. For example if we look at the traditional banking system; a monthly bank statement used to be mailed to the client. In the 1990’s banks began providing the mailed bank statements online. With smart phones banks began to provide that same bank statement on the phone. The format may have been updated but the approach has not changed.
Due to Fintechs offering innovative services and distrust of financial services providers following the market fluctuations in 2008 - customers have altered their expectations. If traditional financial services providers want to have a market leading approach with regard to their customers they are going to need to align their services and products with these changing expectations. This means that to remain successful- they are going to have to rapidly adapt.
Given your international experience, what are the big differences between the European and American fintech ecosystem? And between Italy and Europe?
Fintech affects the different financial services sectors differently. If we take for example the banking ecosystem and the impact that fintech is having in the United States, we see a very powerful traditional banking system that can sometimes inhibit the change that the fintech ecosystem could bring about. But the United States also pushes innovation and investment in innovative technologies and services which challenges this dynamic. This means that in some ways the United States banking system is behind Europe and will be subject to even greater disruption as the banking sector changes. On the other hand- some of the most successful new Fintechs to date have come out of the United States.
In contrast, Europe also has a traditional banking system but it is much more fragmented across the different countries. Europe- as a whole- but particularly Italy – tend to be risk averse due to greater volatility in the market. This makes innovative fintech technology and investment in fintech lower than that of the United States. Of course- this is speaking in very broad strokes. For example the Baltic countries have been major players in some of the more successful new Fintechs. And the UK offers significant investment opportunities for innovative Fintechs.
Italy is entering into the Fintech market later than some other European countries. However, over the past two years Italy has seen a significant leap in Fintech usage. Two years ago, only 10-30% of Italians have used a Fintech (studies vary on this number). EY’s 2019 Fintech Index shows that 51% of Italians use Fintechs. This is a very rapid change in how Italian consumers are approaching their financial services.
Why did EY decide to support the Fintech Smart Village during Forum Banca this year?
EY will sponsor the Fintech Smart Village to make sure we continue to be a driver in the ecosystem connecting the Fintechs with the financial services market. Together, we will be with the ones who develop the revelations in this digital revolution.