Finovate Europe 2014: Some Key Takeaways

Finovate just ended yesterday, and it was great to see all the new and interesting ideas floating around the financial services space. For those who may not know, Finovate is a two-day event that showcases some of the best new and innovative things happening in financial services technology. Over 60 companies coming from all over the world presented this year, taking part in the rapid format that gives each presenter 7 minutes to show why their product is worth the viewers’ attention. The event can also be a great networking opportunity, as many of the attendees are from large institutions or influential VCs.

Figure 1: Number of Presenter Products with Aspects of Each Category

Here are some key takeaways after watching most of the presentations:

• PFM is still going strong: Banks have been declaring the end of PFM for years now, yet the topic is still one of the most talked about at every Finovate. At Finovate Europe, PFM was the most prevalent. What does this mean for the institutions? Well, first off, it’s obvious that entrepreneurs still see the value in PFM tools. Banks, many of which adopted PFM solutions long ago, have shrugged at the lackluster adoption, subsequently declaring PFM a failed experiment. Financial institutions themselves are partly to blame, hiding these platforms in menus, barely showing any desire to market the products. Yet the biggest problem with PFM is shared by all, vendors and banks alike. PFM doesn’t add value! Let’s just assume most people want to know how much they spend on coffee each month (I don’t!). What comes next? Where’s the action? The fundamental problem with PFM is that the way the data has been leveraged to truly provide value has been disappointing at best. Until the quality of the data is there, PFM won’t be in the mainstream. A secondary concern—the misconception that most vendors buy into—is that PFM can be fun, succeeding through cleverly designed games and well-designed UIs. I hate to say it, but PFM will never be fun! Nevertheless, there were some interesting takes on PFM this year that could offer some new ways to think about it going forward. A company called Tink takes financial data and creates insights for the user like where you spent the most money in the last year, largest one-time purchase, most frequent spending location, and others. The difference is that these are non-intrusive ‘stats’ that show up only if a user scrolls down from the landing page on the mobile app. Three takeaways from Tink’s product: everything is done on the bank side, it’s is more interesting than visualizations of spending categories, and the analysis requires nothing from user. Meniga, a PFM success story in Europe, uses demographic data to help small businesses find market opportunities. It provides competitors’ sales data, locations, profitability, among other things. It’s not PFM is the strictest sense, but that’s probably a good thing. PFM needs a little shaking up

• Moving Mobile Banking Beyond Transactions: While not a new topic, this was a common theme across a variety of presentations. The most common involved using the camera to assist in account opening or paying bills (see Kofax, Top Image Systems, and Axa Banque). Mitek and US Bank have been at this for some time, but the rush of new start-ups looking to fill the gap in the market is telling. As mobile banking becomes more common, and adoption increases, consumers’ appetite for mobile-based interactions will broaden. Banks are not only beginning to offer consumers the ability to do more complex transactions via the mobile device, but they’re opening up ways for financial institutions to monetize the channel. This will effectively make ROI much more tangible, doing away with the misconception that the value of digital channels is ambiguous

• Replace the Password: Is the password dead? That was the question asked by Wired Magazine in November of 2012, and something that has been on the mind of Celent for quite some time. Finovate produced no shortage of companies looking to innovate on financial security. Finovate veterans, Behaviosec, continue pushing their gesture-based biometric product that learns how the user moves and interacts with the device to create a confidence score for use behind the scenes. Encap uses the mobile phone as an authentication device for approving transactions or logging into digital banking. This was the second most discussed topic at Finovate. While biometrics is already used in some places globally, the practicality of such solutions is dubious at best. Security needs to start becoming a little more practical. One of my favourite presentations was from Feedzai, where they use social media data scraping to assess fraud risk. For example, if I just checked in at a restaurant in San Francisco, then it’s likely that a transaction from somewhere else is fraudulent. A few took to twitter to question whether customers would be ok granting banks access to their social media lives. If Citibank starts poking people, then maybe I could see the point, otherwise, it's a practical application for enhancing security. Besides, most social media information is already public anyway

• Lots of Front-end, Little Back-end: One thing Finovate teaches us all is that there is no shortage of great UI designers. One thing Finovate doesn’t teach us is that banking is messy once you start connecting that nice-looking front-end to the messy back-end. Are most of these front-end products from Finovate really bank-ready? I’m not convinced. Large vendors like Misys, Fiserv, and Temenos may not have won best in show, but with integrated backend products, they’re in a much better position to succeed. One of my favorites was Five Degrees, a Dutch back/mid-office solution that runs in the cloud and offers a truly innovative BPM product. Other than that, good examples of back-end innovation were scant

• Social Collaboration: It was interesting to see different idea behind leveraging crowd-sourcing and social collaboration. Nous presented a product for investments that incentivizes users to play a game that aggregates data based on the players’ outcomes. A company called MyWishBoard uses collaboration, similar to SmartyPig, for goals and wishlists list that can be shared via social media with friends. Leveraging the power of crowds has been difficult to accomplish in financial services, and most social strategies have revolved around marketing and customer support. While some of these ideas may not be the best business ideas, it’s nice to see different takes on leveraging the power of social

• No Branch Channel Innovation: Absent from the Finovate line-up were any innovative ideas around branch technology. Celent has written a number of reportslooking at branchtechnology, and there is undoubtedly still much to talk about in this space. The closest the show came was with JHA’s Luminous, a Dropbox-like secure storage cloud application for bank documents. Branches are changing, but they aren’t going away, at least not anytime soon. Banks have been doing some interesting things in the branch channel, but there are still plenty of innovative ways to maximize the brick-and-mortar experience. Celent did a recent consumer survey showing that branch channel adoption is still very high among consumers, and the first choice for important decisions. Considering the adoption gap between PFM and the branch, the low activity is surprising