“For banks, everything is on the table”

At the 30th SICTIC Investor Day, the two keynote speeches on fintech were made by Thomas Puschmann, professor at the University of Zurich and head of the Swiss Fintech Innovation Lab, and David Shrier, Managing Director, Connection Science at the Massachusetts Institute of Technology. We talked to David Shrier on the sidelines of the event.

The 30th SICTIC Investor Day was devoted entirely to fintech. Eight start-ups from the sector made an elevator pitch, with four chosen by the audience to go into the second round and present an eight-minute pitch. The selected four start-ups were James, Nivaura, Lenditapp and Veezoo. Videos of the pitches are available, along with the keynote speeches by Thomas Puschmann and David Shrier.

Following his presentation, we asked David Shrier about his evaluation of the collaboration between fintech start-ups and established companies, and the opportunities for young Swiss companies. Shrier is Managing Director of MIT Connection Science and author of the new book Frontiers of Financial Technology; he is also an instructor on MIT’s fintech certificate online course ‘Future Commerce’.

Startupticker: Mr. Shrier, in your keynote speech, you showed that fintech innovations can increase the efficiency of banks in all areas. Why do banks find it difficult to implement such innovations? Shrier: To answer this question, I want to talk about two topics: customer experience and market share dynamics. I think we can compare the situation in the banking industry today to the situation of newspapers in the 1980s. Back then, newspapers earned their money with classified advertising. This business is today done by Google and no longer by the newspapers. This example shows that it is difficult to predict what user experience is necessary to be successful in a radically changing market environment. The second reason is market share dynamics. Usually, it needs only a handful of players to disrupt the market.

These players can be big companies as well as start-ups? Absolutely. Corporates can disrupt a market too – take the example of Amazon, which disrupted the cloud computing business with its Amazon Web Services. As for fintech, it’s possible that big companies from outside the financial industry – for example, telcos such as Swisscom – could gain a huge market share.

At the moment there is a lot of excitement around fintech. Is there a fintech hype? The sector is in some parts overfunded. However, innovation in fintech means a fundamental change for the banking industry. Everything is on the table. 

You also spoke about the collaboration of fintech start-ups with corporates, and several people in the audience were rather sceptical about that. Do you think such collaboration is possible? Yes, definitely.

What are the success factors?   The first important success factor is empowerment. The collaboration needs support from the top. The second factor is something I would call “insulation”. If a start-up works with a corporation, this triggers a kind of immune response in the big company.  It’s almost like there are white blood cells that attack the new idea. The project needs to be protected from that. However, once an idea has had an opportunity to mature, a translation layer is needed between the innovation team and the rest of the company to roll out an innovation in a big company.

And if a start-up has been acquired? My recommendation for founders is that if you’ve been bought, and plan to stay on, you have direct reporting access to the CEO of the acquiring company. If not, it would be better to start the next venture.

Do you see any specific opportunities for Swiss fintech start-ups? Yes. Switzerland has an excellent reputation with its predictable, stable business environment; it stands for discretion and reliable banking. This makes it a good place for data storage or cyber security, for example. If a Swiss company offers such services with a good user experience combined with great marketing, then it has a really good chance of succeeding globally.