Can banks get on “The Startup Way”?

I have just finished reading my second book this year (so I am nearly on schedule with my personal one-book-per-month-rule) and thought of giving you a glimpse of it . The book is called Startup way by Eric Ries. Many of you will know the famous book called “The Lean Startup” by Eric Ries and actually the Startup Way is continuing this story. Focusing on the models and ideas of Lean Startup, Eric Ries provides practical examples about the challenges while implementing them into (big) corporates. Eric has been consulting GE after publishing Lean Startup and helped the company to transform. Thus, why many parts of the book are about GE’s story.

All in all, Eric Ries is describing that corporates have to empower Entrepreneurship as a separate function internally, create internal startups on an ongoing basis that are looking for new breakthroughs with a result to rewrite the company’s DNA over and over. It is a great insightful read with many practical examples. In this blog post, however, I want to focus on the steps of how to transform a traditional company. Eric describes this process as three steps: laying the foundation, rapid scaling and deep implementation.

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Making time for the important things

I was hoping to finish a blog post today that I was working on this week, however, as the piece turned out to be more time consuming than expected I will have to postpone it to next week.

But in order not to skip this week’s blogpost, I will not write about a FinTech topic but rather a small personal change I have made in the last weeks. I have started to give more structure to my week than usual. I was not really unstructured before, but I felt there was still room for improvement. When I moved from Hamburg to Berlin in December 2016, was a greater call to incorporate some work structure as I am usually only two days per week at figo HQ in Hamburg (usually Tue & Thu). This resulted that internal meetings were only possible on these days but certain longer tasks were moved to the days when I was working in Berlin. But everything else – usually calls, emails or other tasks – were just happening whenever they fit in.

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Open Banking around the world

What will be the biggest impact of PSD2: Increased competition? Pushing the bank-as-a-platform model? Forcing startups and banks to work together? All of them are applicable but in my personal opinion PSD2 can have a much bigger impact: if it is the beginning of a movement to provide access to data that has been historically inaccessible for third parties. PSD2 is focusing on payment accounts in the European Union, but if other countries and/or industries are following, PSD2 is just the beginning of a whole movement.

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Deutsche Bank and WhatsApp are launching new payment functionalities

Just two weeks ago I had written here about the impact of PSD2 on services implementing payment functionalities into their service. And in each of the last two weeks there were stories about companies exactly implementing this functionality. Surely, these services are not powered by PSD2 APIs (because we are still waiting for most of them), however, it is again another proof that PSD2 is just one puzzle piece in the open banking movement.

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My personal non-FinTech re-bundling experience

When I am talking about un-bundling and re-bundling of Financial Services you probably know what I mean. If not, you probably know this screenshot of the Wells Fargo homepage where a FinTech logo is added to any service Wells Fargo is offering. This screenshot is easily the most shown graphic at FinTech conferences and explains what un-bundling is: Thanks to many entrance barriers banks were able to offer dozens of products and services without competition with non-banks. This screenshot is now showing how FinTech services unbundle these offerings while offering only one product but focus on being the best in the market for this one product. Re-bundling is the next step, where a player tries to combine different offering into one front-end. Basically re-bundling is like Wells Fargo in the old days, but just that the “re-bundler” is not developing each and every product herself but is cooperating with many different partners to achieve this. Good examples for the re-bundle process are many challenger banks such as N26 in continental Europe or Starling Bank in UK. But also other players are and will be trying to become a re-bundling hub for financial services. The question is who will succeed?

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Crypto-Investing FTW?

For the past years investing in Bitcoin, Ethereum and most of the other Cryptocurrencies has been a smart move and many people have become very rich. Understandable that this attracts a bigger crowd and many providers are already or want to address this desire: Revolut was one of the first players who had an Fintech offering before and enabled now their users to trade three selected cryptocurrencies. In the last weeks, we have seen other big-names in FinTech like Robinhood moving into this space. And even in countries like “put-all-your-money-into-a-savings-account-Germany” the FinTech startup Savedroid is trying to break into this space (and even doing an ICO, which I still have not understood why this is either necessary or helpful but that’s another story).

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The real game changer of PSD2: PISPs

In the last weeks I had plenty of discussions with FinTech entrepreneurs about the impact of PSD2. So far nothing different than in the months before but I am getting the feeling that more and more entrepreneurs are eagerly waiting for PSD2 APIs in order to make use of the payment initiation feature. These players want to become a Third Party Provider or more specifically a Payment Initiation Service Provider (PISP) under the new PSD2 regulation.

I believe that the rise of new PISPs could be an actual game changer for open banking and financial service industry in general. Services that are reading out bank account transactions and balances, which are called Account Information Service Provider (AISP) under PSD2, have been around for many years: early movers were offering Personal Finance Management (PFM) tools and newer players also doing more specific problem solving than just aggregation. These players had ways of getting the data, and even though the technology like screen scraping was not great, it still worked (but slow).

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Welcome to the post PSD2 world!

Welcome to the world of Open Banking! As of Saturday PSD2 is finally alive and what has been discussed and shaped for many many months is now finally reality in most EU countries (but not all since a few have delayed its implementation). And of course “is now reality” means only in the regulative perspective but not in a technical way.

The long-term impact of PSD2 will foster open banking and enables us as end consumers to use financial data whenever we wish to and not when our bank allows us. But what I was wondering about in the last days is the short term impact of PSD2. Access to bank accounts and our financial data has been there already been there before PSD2 – either through account aggregators like figo or through other direct accesses. Thus we will not see many new services in the next following weeks and months and also not after banks will finally release their APIs. These APIs are not a game changer. What PSD2 will change is that the companies who want to access our payment accounts are required to have a license to do so. Consequently, the short term result of PSD2 will be fewer new services as access gets harder and the quality & quantity of accessible financial data remains the same.

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When will we see the indirect impact of PSD2?

The FinTech-famous date 13th January 2018 is finally approaching and less than one week ago. What has felt like ages – probably because it did – is now about to change our lives: PSD2. Banks are obliged to open up their infrastructure to Third Party Providers (TPP), and these TPPs have to finally meet certain criteria in order to access current accounts.

Even though PSD2 is only one week away it will take another few years to see the actual impact of PSD2. The date of 13th January is only important to banks, TPPs and other stakeholders but not the customer. John Doe will bank the same way on 13th January as he did on the days before and will probably not even know what PSD2 stands for or the impact will be for him.

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Who is really the target group of PSD2 API?!

It is the very end of 2017 and as usual for this time of the year there are not many news as most people are recharging for the new year. 2018 will be (another) big year for FinTech as the industry is becoming more mature mostly due to new regulation being finally implemented: most importantly PSD2. So what development will we see in Open Banking in 2018?

This year we have seen already a few banks in Europe releasing their APIs (finally!) and due to the upcoming PSD2 regulation we are in the happy situation to see a lot more of them in 2018. The banks that have gained the biggest attention for releasing their APIs were in point of view BBVA (Spain), Deutsche Bank (Germany), Nordea (Finland, Denmark, Norway and Sweden), ABN Amro (Netherlands) and Hellenic Bank (Cyprus).

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