In some case faster, in others - slower, but the technological change in the financial sector is happening. The emergence of fintech companies has turned into a catalyst for this dynamic. In the beginning, they denied them, but seeing the revolutionary charge of innovation, traditional financial institutions started to believe that cooperation with innovators is their chance to enter the future through the main entrance. The Innovation Forum, organized by Bank of the Year Association, focuses on this topic.
Know-how from Israel
"Financial institutions are key, they are the engine. Fintechs are acting as market leaders and their role is not just to build trust, but by expanding their capabilities, they communicate more with customers and offer them different products, "says Tal Sharon, Managing Partner at Equitech, Israel. The country has a population of nearly 9 million, but it has about 700 fintech companies. Investors are interested in startups and 75% of the investments are from abroad. That is the second largest system in the world for fintech investments. Regulators play a very important role as they move the market. According to Sharon, start-ups and financial institutions must interact, and in Israel they have found the right way to do so. "Bulgaria is also part of the global market, and if you know what is in high demand, you can develop new technologies. If the conditions here are good, the investors will also turn to your country. Education is also important, at universities in Israel fintech trainings exist, "commented Equitech's managing partner.
Traditional financial institutions have three possible choices. For the bank to return to its original form and to become a bank for entrepreneurs again. Second option, to be a powerful digital house, which will have many challenges. Third, falling into the Valley of Death, in which they are companies that no one wants to kill, but they barely survive. There are many banks in this category, where a lot is being done but nothing is carried to completion, says Philip Genov, founder and CEO of Sophia Lab. He believes the era of major transformation projects is in the past. And one of the reasons is that the number of regulations is steadily growing. In Bulgaria the pace is slow, on average it takes around a year and a half for innovations to be developed from the idea to the point when they reach the market. In general, bankers have no idea what exactly is going on in technology companies. They are not even aware that the Bulgarian fintech startups are among the most successful in Europe. The old continent is seen as a slow and inefficient place, while Israel, the United States and the UK are a suitable territory for innovation development. Having technology is nothing if you do not shorten the time to reach the market. If the organization does not have a strategy for the transformation and there are no levers for it, nothing will happen. There is a gap in the market - people are not well aware of the development of the fintech sector.
Digitization has become one of the driving forces of change. It allows the intermediary between the resource and the client to be removed. The focus shifts from banks that so far have had an image of a place where you can safely keep your money. Now we are talking not only about trust but also about functionality, says Edward Tsvetanov, Revolut official representative for Bulgaria. This is the fastest growing company in Europe. "Everything is result-oriented, how much it will cost us, and how we will achieve it and how long it will take us. We are trying to shorten the processes that exist between consumers and their money. Before you receive the cash note when shopping, you will receive a message on your mobile phone that you have spent the specific amount. We work with five cryptocurrencies. Digitization saves time to connect with the bank or go to the physical branch, it is not just another channel of communication. You digitally manage all your financial processes. When a person travels, one needs specific products, and we only offer our customers what they need. The next revolutionary novelty will be to offer an AI financial adviser and a platform for commission free trading on stock exchanges, "Tsvetanov says.
Focus on the client
Customers expect to receive more for less. They want it now and not in the future, they want it 24 hours a day. Digital technologies allow banks to get closer to the customer, who aims to save time and get a good offer. Blockchain builds trust between the two sides of the deal. The market should be easily accessible, says Boyan Bianov, regional director of Raisin for CEE. He asserts that the importance of banks should not be overlooked, but: "It is not good for piranhas to swim with sharks. Piranhas move much faster than sharks. At some point the sharks begin to feel the pain and that’s the end of the piranhas." Banks adopt and apply innovative technologies as they understand that there is already a new trend. They sense the change in people's attitudes, and it requires them to cooperate with the fintech companies.
Where to now
Here are some of the summarizing comments made at the Innovations forum: The market in Bulgaria needs to wake up and it is time to overcome the information asymmetry. Collaboration is the key word in the digital transformation of banks. Mobile banking is already here, we do not have to wait for the Millennials to recognize it as their own convenient tool. Banks should not impose solutions, but carefully "tap the ground" to sense customers’ needs. We can digitize and transform as much as we want, but if our clients do not, we won’t achieve anything, fintech leaders remind.