Yesterday, the Minister of Energy and acting Minister of Economy and Innovation, Zygimantas Vaiciunas, and the Minister of Finance, Vilius Sapoka, rang the opening bell of Fintech Week Lithuania. The launch of the four-day online conference shows that when the world is overwhelmed with Covid-19 and its consequences, the world of fintech has been working hard. Actually, the pandemic might have even increased the demand for services offered by financial technology (fintech) firms – as our lives have become even more digital. The Minister of Finance, Vilius Sapoka, has pointed out that it is a ‘great time to expand fintech further’ and improve access to digital identity services, quick fund transfers and credit.
Why Lithuania, and – why fintech and Lithuania? The country’s Minister of Economy and Innovation, Zygimantas Vaiciunas pointed out that in order for a fintech ecosystem to thrive and grow, there is a need for the right support from the government, good tax system and appropriate regulatory rules. According to the Minister, Lithuania has all of these ingredients. This country, which doubled the number of fintech companies in less than two years, remains the leader in continental Europe in terms of fintech licenses. The pro-innovative regulator, the Bank of Lithuania, is contributing significantly to the success of fintechs in the country, as is a solid base of tech-savvy talents.
Lithuania is a member of the European Union since 2004. While country-specific regulations apply, access to one EU country means access to the whole market of 445 billion people. In this increasingly interconnected digital world, we can see that it is important to have a harmonised approach towards regulation and technology for the streamlined customer and business experience. The EU takes digitalisation and technological innovation seriously, signing a number of important mandates in the past few years.
One of such mandates is a European Blockchain Partnership, signed in 2018, with a view to developing blockchain infrastructure in the continent. Speaking at the Fintech Week Lithuania, the European Commission representative, Peteris ZIlgalvis, who is Head of Unit of digital innovation and blockchain, has explained the policies of the EU towards data, digitalisation, blockchain, and Artificial Intelligence. All these plans are important in order to create a framework for convenient, competitive and secure digital finance.
A few months ago, the European Commission hosted a pan-European hackathon to develop innovative solutions to overcome COVID-19 pandemic-related challenges. The result is a total of 117 innovative solutions to tackle the COVID-19 pandemic from the challenge domains of Health & Life, Business continuity, Social & Political cohesion, Remote working & Education, Digital finance, and others. The winner in the Digital Finance category was a Lithuanian fintech company Bankera: it presented a solution to providing small and medium-sized enterprises (SMEs) with short-term financing to cover their liquidity needs during times of COVID-19 crisis.
The Fintech Week Lithuania was proud to host the CEO of Bankera, Vytautas Karalevicius, who said that offering loans was a natural progression for Bankera on top of the blocks that the company has already created. Among the future goals for Bankera is to establish a full-fledged bank in Lithuania.
Indeed, Bankera’s Vytautas Karalevicius fits the description of new banking leaders described by a fintech influencer Chris Skinner. Mr Skinner, who is the author of a new book ‘Doing Digital’, has been analysing the financial sector for a while. He monitors how the intersection of banking and technology affect and direct the future of finance and is titled as one of the most influential people in technology.
‘Fintech companies differ from traditional companies – their creators are young people, and they understand technology much better’, said Chris Skinner speaking at the opening day of Fintech Week Lithuania. ‘It will be interesting to see what innovations come after the COVID crisis’, added Mr. Skinner.
Well, Bankera said that is launching its new loan service for SMEs already in July this year. Thus Lithuania is proud to be at the forefront in offering innovative solutions that tackle the consequences of the Covid-19 crisis.
Mr Skinner has been analysing the change that is ongoing in the financial sector with much detail, interviewing banks like JP Morgan Chase, BBVA and ING to learn about their experience in digital transformation. Chris Skinner noted that transformation is hard and is a dedicated, time-consuming process. However, it is not the strongest or most intelligent species that survive; it is the ones that are the most adaptable to change’– he quoted Charles Darvin as saying.
Mr Skinner states that although many think that banks will be destroyed by technology – they won’t be. However, they will be transformed by technology – it is here to disrupt, to change and do something in a new way.
One of the key things of successful digital transformation is making the business customer-centric, according to Chris Skinner. In finance, companies offering financial services are ‘becoming more like a lifestyle institution for financial needs’, transforming the image of traditional banking. Seeing that and the agility of fintech structures, banks are reinventing themselves, making operations leaner and investing in collaboration with fintech solutions.
Being focused on customers was named as the key ingredient for success in the Fintech Week Lithuania panel discussion about challenger banks versus incumbents. A digital bank N26 that is becoming a household brand in finance in Europe is providing a fresh approach to your daily banking.
A Lithuanian Sarunas Legeckas is based in Berlin and is overlooking the European operations of the N26 bank. Speaking at Fintech Week Lithuania, Mr Legeckas said that ‘it is not only about creating a mobile or online feature, but it is also about creating flow and an experience’, adding that trust is the most important thing in relationships with customers. And sadly, traditional financial institutions have lost their trust over the past decade, making customers ‘tired of banks’. Mr Legeckas has noted that N26 sees in an increase not only in millennial users but also growth in 50-60-year-old users, who have been traditionally loyal to their banks.
A partner at a New-York based law firm Pryor Cashman LLP, Jeffrey Alberts, has noted that the situation with Neobanks is different in the United States than it is in Europe. In the U.S. regulations affect financial services licenses not only at the federal level but also at the state level. Therefore when entering the U.S. market, it is best to focus on the niche sector. Mr Alberts noted that for now, he does not see the threat for traditional banks in the U.S. by the fintech-savvy Neobanks; however, he sees a threat for smaller, regional and community banks in the U.S., as those do not have the resources to be agile and innovative.
The financial technology providers to banks and other financial services institutions: Contis, 11:FS, Mambu and Inventi have gathered online and in the Fintech Week Lithuania studio to discuss who is leading the innovation, Is it banking- as-a-service solutions of customer-facing fintechs? This question is quite common these days: who is driving digital transformation in your organisation, is it the CEO or CTO, and the answer is- Covid-19.
According to technology providers, banks have been built to last, not built to change. Therefore, it is a collaboration between traditional financial service providers and the forward-looking tech industry that make the changes eventually. Our needs are the same, only the channels and the way we satisfy those needs are transforming.
In fact, technology is transforming the financial services so rapidly, and it is challenging to attempt to predict how the user experience will look like in a few years.
What needs to change, according to Chief Business Development Officer at Inventi, Erika Maslauskaite, is the customer onboarding process. The current procedures globally lack synchronisation and do not allow for seamless customer experience, natural choice and flow between the financial service providers. Nonetheless, this is likely to change, and customers will have the right information and data about financial products and services that are available to them.
Data was a topic that took great importance on the first day of Fintech Week Lithuania. Greek professors Konstantinos Sgantzos, George Papageorgiou and a famous cryptographer Ian Grigg, have discussed the need for high-quality data that we receive in order to make decisions.
Speaking about storing data in blockchains and having Artificial Intelligence agents to process it and produce computational results in various topics, the bright minds of Fintech Week Lithuania have argued that an incentive system is essential to ensure the quality of data.
They noted a well-known concept in computer science: ‘garbage in, garbage out’, which means that non-quality input data produces non-quality output. An example of Twitter was given as a collection of large amounts of data that makes no sense. Microsoft has done an experiment once and has trained an Artificial Intelligence Twitter chatbot to become ‘nazist’ in less than 24 hours. What it shows is that the information that we are being given to us strongly affects our views, language manner and decisions.
And this was the culminating topic of Day One of Fintech Week Lithuania: Brittany Kaiser has spoken about how technology and data analytics companies are using our data to affect the decisions that we make. Data that we produce with our online presence is being used to influence our shopping, travel, and political decisions and has become the most valuable on Earth. Ms Kaiser has stressed and brought to our attention that we- individuals who produce this asset class – have no control over such a valuable asset.
The much-awaited guest of Fintech Week Lithuania, Brittany Kaiser, has spoken about her journey in the world of data, starting from Obama campaign to Cambridge Analytica and the movie ‘Great Hack’. Throughout her extensive career, Ms Kaiser has learned first hand how our data is being used in political campaigns to influence our votes, get people motivated, excited: affect them in any way one wants. This, of course, can be used for various purposes, including positive ones, such as analysing data to prevent violence, attacks. However, mostly the technology, finance and retail giants are commercialising our data to benefit their interests. Indeed, Brittany stresses, the giant companies- Google and Amazon are so valuable because of the data that they have about us – this data makes them so incredibly powerful and valuable.
Ms Kaiser says that she is not a total data privacy proponent: she believes that data should be made openly available. However, we should be able to have access to our data, know when and how it is being used, and be able to monetise this data. Brittany is advocating for issues like how do we own our data as a property? How do we ensure the enforceability of data protection? How do we monetise and assign value to the various data that we produce? Brittany thinks that we could give permissions to certain parts of our data, for instance, a person might be happy to share depersonalised data with medical research, or for getting the best car deal. Nonetheless, this data sharing has to be decided by an individual, not by companies that trade and cash-in on our data today.
Brittany Kaiser is a founder of Own Your Data foundation, which places strategic importance on digital literacy for people. She believes that people have to be much more aware of their digital presence online and the traces they leave- data they provide- while using computers, mobile phones and other devices. People do not understand what do they agree to when downloading an App, or when ‘Accepting Cookies’ on a website: and by doing this, they are signing a digital contract, per se. Brittany urges us to learn how to protect ourselves online and have a healthy relationship with our digital devices. Although we live in exciting times of technological development that gives us so much more opportunities and tools, we must get out outdoors and have quality time with each other, she says.
And in this beautiful summer morning full of sunshine, the Fintech Week is embarking on the second day of the speeches and insights: tune in to hear about Digital Euro and other exciting topics today.