ID Finance COO & co-founder, Alexander Dunaev, participates at #4YFN22 panel “Disrupted by Fintech”

2021 has been a record-breaking year in terms of venture capital investment flowing into Fintechs. The sector seems to have been going through a consolidation process and starts showing signs of increasing maturity, as the main players keep scaling-up. These were some of the findings Pep Viladomat, McKinsey LEAP, Expert Associate Partner highlighted during the opening of the 4YFN panel “Disrupted by Fintech”, where he acted as moderator. 

This year ID Finance has been invited to be part of the conversation of 4YFN, a startup-oriented event, celebrated in the context of the Mobile World Congress (MWC). Our COO and co-founder, Alexander Dunaev, participated together wih Alexandre Prot, CEO and Co-founder of Qonto, Itxaso del Palacio, Partner at Notion VC, Pakning Lu, Regional Head of Business Development & Strategic Partnership at Binance, and Victor Cardoner, Principal at Caixa Capital Risk.

Open banking

Looking back a few years from now, Alexander Dunaev remembered how open banking has changed and is still transforming the financial sector. “There is so much value that can be created for consumers and businesses out of access to data and removing the fragmentation that has been taking place during the last few years in a trend that is with us to stay”, he said.

In line with Dunaev’s argument, moderator Pep Viladomat underlined that against common believe, innovation in the case of Fintech has been propelled significantly by regulation in the last years, at least in the European Union. PSD2 and PSD3 have been in key in reshaping the Fintech sector.

Super apps and integration

For his part, Alexandre Prot, CEO and Co-Founder at Qonto, commented that Fintechs are currently following two paths: “Some try to be a super app and stay by themselves; some try to partner combining different services offering more and more value to clients”, he said. Alexander Dunaev elaborated further on this idea and pointed out that Fintechs have entered a new stage aimed at “rebundling services back in certain way”. And this process of rebundling and repacking services back is part of a trend to build super apps. “Companies are actually able to provide much more value to consumers by tapping into third party’s services. You don’t need to develop everything in-house; everything is available on an API basis so you can rebundle your services together”.

Leaving the old legacy behind

In this same line, Victor Cardoner, Principal at Caixa Capital Risk, stressed that Fintechs now tend to focus on one specific pain point, “nailing it, growing fast, capturing audience and they then consider adding more services”. So, there is a reconsolidation of the former fragmentation, “but from a different pace, not building the old same legacy, complex structure” characteristic of traditional banks.

The role of Fintechs vs banks’

The big difference between a Fintech and a bank is that bank can take deposits and deposits are guaranteed by governments, Alexander Dunaev stressed. “Yes, there is a proliferation of banking as service providers, yes, you can offer payments, but the fundamental core of banks accepting deposits that are secured by the states hasn’t really changed and I don’t expect it to change”, he added. In this sense, he pointed out that the “role of Fintechs is actually to push banks further”.

Even though banks have extremely talented people among their personnel, “organizational complexity and IT legacy is preventing banks from innovating in the pace which we are seeing right now and the Fintechs are there to push them”. And even though there is some amount of competition between Fintechs and traditional banks, there is a lot of room for cooperation, he commented.  “I think cooperation and the role of Fintechs of moving the industry forward is critical to the growth in Europe. “

About full disruption

Itxaso Del Palacio, Notion VC, Partner, on another hand, considered that Fintechs today are fully capable of offering consumers and companies the same or better services than traditional banks. “If they provide a better experience to the customers, they are going to disrupt the industry”, she said and admitted being “very excited about radical disruption in that space”. She reminded that other sectors, such as Mobility, have already disrupted the traditional players by building something new, not just creating a software and offering it to traditional companies and firmly believes.

The challenge of cryptos

No conversation about the Fintech scene is complete without mentioning cryptos. Regarding the main challenges, Pep Viladomat and Pakning Lu, Regional Head of Business Development & Strategic Partnership at Binance, had an interesting exchange about the struggle of cryptocurrencies as they are quite volatile and not commonly accepted. In this regard, Pakning Lu admitted that the “main worry is the fluctuation of crypto-prices”, which is why “Binance has secured this allowing their customers to accept up to 50 types of currencies” and additionally allows converting those cryptos instantly into stablecoins. Besides, it is also increasingly contacting other Fintechs that are helping Binance acquire merchants who are willing to accept cryptos, Pakning Lu explained.

Opportunities in tokenization

Even though the use of crypto will be driven by a large extent by the regulatory response, Alexander Dunaev stressed the great potential in the use of tokens and blockchain that goes beyond currencies. In this respect he said that the nature of blockchain of removing the institutions which have been previously governing the trust structure offer great potential to the tech industry, which will most probably increasingly embrace it. “It’s not just about the currencies itself but about the use of tokens and blockchain”, he added.