How has Fintech transformed finance?

But what has been exactly the impact of technology in finance? Is there a real impact, is it too early to say, or is it just hype?

The impact has been industry-changing, and the result can be see in real, tangible numbers.

The result of the impact of technology in finance that we’re seeing today is these numbers that were just mentioned. Also, in terms of investment, billions have been invested over the last five years into transforming finance. This is a huge amount of money. This is a huge amount of money which has led to three very big trends, the first one being what I call the hyperscalability of finance.

What is the hyperscalability of finance? It’s really the way that finance is starting to grow in a very different way than what we’ve witnessed for a very, very long time. Let me take an analogy. In banking, you know that in general you can have very, very large organizations. You can have very large organizations, but it takes time.

For example, some banks have over 200 million clients, but it took 200 years to reach 200 million clients. You can have very large organizations, but it takes time. You can grow faster. For example, in China, ABC is a very large organization, but it still took more than 50 years to reach that amount.

You know, of course, that it is different in the internet world. In the internet world, here I had to cap at 100 years. In the internet world, I had to cap at a billion clients. If you take the example of Facebook, Facebook, two billion clients for a company which is a bit more than 10 years old.

Hyperscalability is coming into finance, which is this. This is very, very important. This is very, very important because the way we think of finance is totally transformed. We can’t just think of finance as the old-traditional finance that will take 20 or 50 years to build large companies. Today in finance you can build very, very large companies in the space of five to 10 years. The tools that we have coming from the internet, the tools that we have coming from digital are totally being applied in finance today.

A few years ago, we were talking about when, not if. Today it’s not when or if, it has happened. This is the first thing that I would like you to remember, which is hyperscalability. When you think of finance today, not like traditional finance. Finance is growing in a very, very different way.

You see that a lot of big banks started aggressively getting into Fintech, cause its necessary in todays financial business.

There are some very smart people, much smarter than me, who said that to make your digital transformation, you need three things. You need technology, you need process, but before all, you need people. We’re in an industry where it’s all about human capital. Some banks are getting it.

At the end of the day, it is a world where organizations that will have the best people will thrive the most. What is the result? The result is this. At the end of the day, it’s all about business. It’s better business. Some big banks has the most interesting strategies in Fintech. On the left-hand side is their results for digital. On the right-hand side is their results for traditional. What did we learn?

We learned something which is totally counterintuitive. When we talk about digital, a lot of people would say, “Digital will allow me to reduce cost.” This is not what we see. What we see is that digital allows them to increase revenues. The revenues are twice as much on digital. On traditional, more or less the same cost, which means that the profit are three times bigger on digital than traditional. This is the kind of experience you can only know if you start to do it. Let me talk about the tipping point. Question of when, or if, for me it’s a question of it has happened already.

Digital will not allow you to reduce cost, it will double your revenues.

The tipping point in finance has happened. This is my illustration of the tipping point, which is this mountain, which is this mountain that we know we have to climb, because after the peak, it’s gonna be much easier. If you’re a startup, the reality is that if you’re a startup, it’s much easier. If you’re a startup, you’re much smaller, you’re much nimbler. You will use technology, of course, so if you’re a startup, you know, it’s much easier to climb this mountain. But the thing is that in terms of your impact, you might have a lot of impact, sometimes, but in most other cases, you have a bit of impact.

This is the reality of startups. For incumbents, for large organizations, of course it’s much harder. You know, if you’re a large organization, you have tens of thousands of people. You’re a big, heavy organization. It is much, much harder. You have to pull, basically, the weight of your organization. What do we see at the moment? This is where we’re seeing a lot of differentiation.

We’re seeing some organizations that have made the journey, that have put the efforts for the last three, four, five years, that have invested very, very massively in there. They are starting to get the rewards out of it, that are starting to be very, very profitable because of that. At the same time, we’re seeing some organizations which have totally given up. We’re seeing some organizations that find this journey too difficult, and so are not doing anything.