We spoke with Susanne Chishti and Janos Barberis, editors of The FINTECH Book the first crowd-sourced book on FinTech globally. Representing thought leaders across 20+ countries
Jacob Bettany: Could you tell me a little bit about your backgrounds and how you came to edit The FINTECH Book? Why do you feel the book is necessary?
Susanne Chishti: I came to London 20 years ago after having worked in the Silicon Valley for a FinTech company, although the term didn’t exist at that point. In 2014 I was working for Deutsche Bank and left to set up FINTECH Circle, Europe’s first network focussing on FinTech start-up investments and the FINTECH Tours. In 2015 we also launched FINTECH Circle Innovate a company focused on helping large organizations to embrace FinTech opportunities.
When I left banking one of the first things I wanted to do was buy a book on the FinTech sector because I realised I had my sectors of special domain expertise but there were many areas I wanted to study and learn more about. I realised there was nothing available at all. Of course, FinTech is a huge sector with more than $22 billion of investments in the last year alone, how could it be there was no book available? When Janos and I met a few months later Janos explained to me that he had the same feeling. We came up with the idea to create a book on the FinTech sector and in order to do that we wanted to leverage crowdsourcing which is one of its core themes. We went out to our global community (there are more than 20,000 now in our FINTECH Circle community both on LinkedIn and Twitter) and reached out to them to see who has expertise in various areas of financial technology and who wants to write an article for this book?
In order to get started we asked people to write an abstract on a topic of their choice. This became more than 180 abstracts from 27 different countries and both the expertise and global reach of the community really surprised us. We then said, we want to let our community decide the best articles which should make it into the book. Janos and I analysed the community’s online votes and responses and we now have 71 articles in the book. So it is the first globally crowdsourced book and also the first globally crowd-voted book on FinTech.
We stipulated that inclusion in the book must be based on merit, regardless of the size of company and we have turned down well-known brand names in order to let the top start-up founders be part of the book because they have superior technologies which we think the world should see. The process was very democratic and the book is now one of the most cutting edge, thought provoking titles available. For Janos and myself when we started editing the book it was a real privilege to read these articles which came from all sectors of the community. We have articles from small scale entrepreneurs to global heads of companies who wrote articles – a wonderful well rounded book which looks at the global FinTech Sector very holistically.
Jacob Bettany: The idea of a crowdsourced book is very interesting indeed, I am sure that a lot of people will imitate it.
Susanne Chishti: Yes, I would recommend it to anybody! It’s a lot of hard work but really brings the global community together.
Jacob Bettany: Janos, what experiences did you bring to the book and why did you feel it was needed?
Janos Barberis: I don’t have the same corporate experience in banking as Susanne. When I came out of university in 2010 it was the worst time for a student to come out of university and I realised what it meant not to be able to find a job. I have since created Fintech HK, a platform in Hong Kong, and also the Supercharger FinTech Accelerator which now has 8 companies involved. I have a vision of changing finance. FinTech has created a shift that allows a reimagining of finance in a way that is better for, and more suited to, my generation. This motivated me to do The FINTECH Book because human capital development will provide the foundation to educate people and give them the tools to change finance. The future of finance should be positive and socially beneficial.
Jacob Bettany: I do feel very sympathetic to that view. How did you structure the book and did you face any particular challenges?
Susanne Chishti:When we started to crowdsource initially we decided on certain chapters for the book and each contribution had to assign itself to a certain chapter. We then made sure each was assigned correctly. A challenge we had was that each article was submitted on a standalone basis and we had to give the book structure. We gave it a structure with a good story to tell which is logical to the reader. From the introduction which introduces the reader to FinTech the book then builds up and becomes more complex until the last chapter which is about the future of FinTech and the outlook over the next ten years. We also wrote executive summaries for each chapter and wrote an overall preface summarising the book. We also wanted to thank both the authors and also all the contributors who didn’t make it into the book but who had contributed very important thoughts, so in a directory at the end we list everybody and this section represents the global system very well and is useful for anyone who wants to know who is doing work in FinTech globally.
We have a Twitter feed and a LinkedIn page for the book. In terms of the website our goal is to provide updated content there, provide interviews with our authors, share videos and book launch events long-term.
Jacob Bettany: It makes sense perhaps to talk about the history of financial technology and you must have learned a lot from putting this book together. Could you provide an overview of the financial technology space in a historical context and what you feel have been the major developments?
Susanne Chishti: The history of financial technology is a long one going back decades. But, what has changed in the last few years and since the financial crisis is that we have seen the status of FinTech companies changing from being pure technology suppliers to financial services players to become competitors to incumbents, for example in the peer to peer lending area, because banks did not provide sufficient loans to small to medium size businesses. Crowd funding platforms also didn’t exist before. New business models have created new opportunities and have to some extent cut out bureaucratic intermediaries, the old style of finance. FinTech is really about the financial technology sector growing up, maturing and providing B2B and B2C services. FinTech is the driving force behind the new business and revenue models we have seen in the last few years and the changes we will continue to see in financial services. There has been a realisation that banking is long overdue a big disruption. We as consumers have been the big beneficiaries of this change and we are just at the beginning of it.
Janos Barberis: One new area I think is particularly important is data mining, which cuts across many areas not just FinTech. Another is the regulatory aspect – there is a necessity to re-imagine regulatory architecture in a way that is more dynamic to the current velocity of innovation brought by start-ups whilst upholding classic mandates such as consumer protection and financial stability.
Jacob Bettany: Are we ready for it?
Janos Barberis: I think on the data side of it we definitely are, there are large companies in America and China who definitely know how to leverage large amounts of data and make money out of it. I think the regulators are figuring it out, and they need to do it very quickly. I love the FinTech industry and it has a lot of growth potential. However that exponential growth needs to be balanced so as to create long term add value for the sector as well as the public at large. In that respect regulation and regulators plays a key role in balancing these dynamics and hopefully avoid that burst periods of growth and then echo by a strong correction in the market.
Jacob Bettany: Going back to the regulatory aspect, we’ve got examples where technology has moved faster than regulation, for example in high-frequency trading. While financial technology does bring many benefits, what do you feel are the risks in this sector?
Susanne Chishti: I think the risks that I can see are on B2C business models where the consumer might not fully understand and appreciate the risks, for example, crowdfunding platforms where consumers invest in start-ups and I don’t know if most consumers realise that their money is at risk. When you think about the buzz across crowdfunding and the excitement it has generated, I think it is a risk that people don’t read the small print. Crowdfunding platforms do make the risk clear but I wonder how many people are really aware.
Jacob Bettany: What do you find most exciting about the prospects of financial technology? Empowerment for a generation which has become disempowered is quite an important thing, I think.
Janos Barberis: There are two levels to this. The first level is empowerment to a generation which is disempowered, what we call the lost generation. But this is a small phenomenon, its talking about maybe a 25 year old being able to create a FinTech start-up and go and work in an investment bank. This is empowering and worthy but at a societal level it remains niche. What is exciting at a societal level, is that the lifestyle change the internet has brought us is a benchmark of the lifestyle change FinTech will bring to us. This is really exciting because we really don't know where we are going to go but it will be total change and hopefully for the best. Finance is the lifeblood of the economy and exchange of mutually shared information through the internet with FinTech could allow it to function much better. It's a level of transformational change which is exciting. The only thing I can compare it to is how the internet changed my life. When we have it, we think how did we live without it? People will feel the same about FinTech.
Susanne Chishti: What I find exciting as well is changes to banking in different populations, for example, emerging markets. Everyone has a mobile phone so in order to access financial services they will use mobile banking in many emerging economies. In Africa exchanging telephone credits is a form of payment. FinTech brings advantages for people normally completely excluded from the financial services sector.
On the other end of the spectrum if we think about the large, big banks they look at what FinTech start-ups are doing but I think they are most worried about what the tech giants such as Google and Apple are planning in terms of their financial services offer to their millions of customers. The big tech companies are taking steps into FinTech and in the US five tech giants are lobbying the financial regulators in Washington to be part of the regulation in the future (“Financial Innovation Now”). Of course banks worry about it. Innovation can be acquired by partnering and working with FinTech start-ups. Some of those tech giants have set up their banking licences already so it’s just a question of time.
Jacob Bettany: What technologies do you think are going to play the biggest role in the FinTech sector looking to the future?
Susanne Chishti: Interest rates are close to zero and most people have got money they want to save but earn nothing on bank accounts. There is strong interest by savers for peer to peer lenders. I personally am a customer of one peer to peer lending platform in the UK and instead of getting 0% at my high street bank I am getting 3% at the peer to peer lender. There’s a huge motivation in this environment to try out FinTech because it just makes sense to get some interest on the money you want to save.
On the other side with the B2B business models, I see huge opportunities in the asset management space. I worked for many years in Morgan Stanley in asset management and all our portfolio managers were active fund managers. They had one goal which was to outperform the Index. An outperformance of the Index is called “generating alpha”, and nowadays there are FinTech solutions available which help you generate more alpha. Of course asset management is a £billion industry globally. Asset managers can now licence software packages which help them predict market down days, hedge or create sentiment analysis across social media. These tools are immensely valuable and over time will set new standards.
Janos Barberis: I think personal financial identity is a huge theme for the future. As in, my data is my asset and I can keep it within and share it with the financial institution I want.
The other thing I think will play a huge role in the sector is more of a trend: what does it mean to commoditise banking?
Jacob Bettany: Why do you think some technologies get hyped and built up rather than others, for example blockchain technology?
Susanne Chishti: Everyone talks about blockchain, very few people understand it but the reason this stands out among all the other very complicated technologies is that it is a big infrastructure rather than an application with potentially unlimited applications. The idea that you could record assets on a ledger form which is distributed globally and therefore can never be deleted, you know this idea that can be implemented by blockchain has got implications for many assets across financial services. A house is passed on from one owner to the next, on blockchain you would be able to go back and see who has owned your flat a hundred years ago if blockchain had existed then. It’s like an undeletable recording device controlled by the community globally and I think that’s what people get so excited about because they’re thinking about the areas of securities trading which blockchain can completely redefine and cut costs at enormous levels including significant reductions in global settlement costs. We are at an early stage, there are banks at the moment starting to pilot user cases for the technology and they need to test them. They need to pilot them to see how it works for them and how it can be standardised because it makes sense that there should be a global standard which is used.
Jacob Bettany: Exciting times ahead. Thanks so much for talking to us.