In our quest to determine what is shaping financial services and FinTech for the report "Finance and FinTech Innovation 2025 – Hybridization Designs the Future of the Finance Industry", we spoke with Angela Nickel, CEO and Founder of COMO Global, and voted ICT Entrepreneur of the Year in Luxembourg in 2019.

With embedded finance in the news daily, it was impossible to ignore this subject in the debate on the future of finance. Needless to say, we needed to bring COMO Global around the table. As Angela explained: "Our company is providing embedded finance. Being a licensed financial institution that is offering FinTech services, we can serve both worlds: the technological and the financial one. That means we can target a customer-facing role and support existing institutions".

Higher inequality in the FinTech industry

One of the key messages that I took from the talk with Angela is that the pandemic was not only a health crisis but potentially also a technological one. The uncertainty and unpredictability in the economy paralyzed many, predominantly young tech companies.

As Angela explained: "This wave of economic downturn limited the expectations of many upcoming FinTech, creating in them ample room for fear, doubts, and pure speculation. The uncertainty resulting from this created a negative social and psychological impact. That resulted for some a semi-paralyzing approach in terms of hiring, development, and self-confidence".

The finance industry quickly understood that superior digital services were a priority to thrive during a lockdown, for which many financial institutions needed help from third parties.

Established players mostly grasped the benefit of this. As trust was highly valued, they had a proven track record and understood the power of strong virtual leadership, essential to hire new talent, to retain existing talent and to successfully implement new projects.

Although Angela didn't want to predict the future, she is afraid that we are evolving to "an anti-democratic place divided by the haves and have-nots, where there are a few financial giants cornering the digital market, and many small players competing for the slice of the pie that those giants have not yet devoured". However, she remains hopeful that this will not be the case.

FinTech and the Civic Digital Democracy

Looking at the future, two domains emerged for the future of FinTech, enabling both equality and human development. The first is FinTech companies in cross-border payments and remittances, a business that is expected to grow to +950 billion/year by 2026.

Although a few big players dominate the market of cross-border payments and remittances, Angela believes that there is still room for small FinTech companies to challenge the status quo: "Today, the average percentage cost for remittances is 6.5%, with some companies charging up to 18% in some cases. Digital remittances can lower the cost to less than 5%, saving billions of dollars to families receiving those remittances."

The second domain where FinTech companies can make a difference for humans and society is in a civic digital democracy, explained Angela. She referred to Estonia, the first fully digitalized country in the world, to show the potential of such a society. However, she also tempered the expectations for a fast global evolution toward this civic digital democracy.

"lt is a long and complicated process where technology, innovation, and politics must combine and recombine to make it happen," explained Angela. "Fintech trying to get into this hyper innovative area must learn how to navigate polities, finances, diplomacy, and cutting-edge technology since the customers are the nation-state itself. This could be a multi-billion effort that can completely change the world as we know it. A Digital World can redefine all the existing rules of multilateral relationships, making a world of participative democracy a concrete reality."

FinTech as the Jugglers in the Circus called finance

Finance is a complex industry; its challenges are enormous. Although financial institutions show more openness to collaboration, Angela does not see equal partnerships happening anytime soon.

She explained this with the following formula: "In the current transition towards a digital economy, FinTech entrepreneurs are usually young people savvy on the technology but without financial knowledge; and financiers are usually people with financial skills and capital, but without much technological knowledge". The ones with capital define the rules, the technology facilitator takes the subordinated position.

Successful FinTech companies are the jugglers that find the balance between good technology, a balanced financial situation and a trusted market position. The most crucial ingredient for success, though, is the capacity to generate bright ideas and to put that into music.

"A fantastic idea might bring the rest of the ingredients into play", explained Angela. "That has been historically, the tremendous success of the most successful FinTech we see in the world today."

If you would like to know more, we recommend that you read the white paper "Finance and FinTech Innovation 2025 – Hybridization Designs the Future of the Finance Industry", which includes insights from Angela Nickel and many more key stakeholders of the Luxembourg finance industry.

More articles of different contributors to this study can be found here.

At The Banking Scene Conference 2022 Luxembourg on February, you get the chance to join the conversation. Together, we investigate how banks should pivot their role in society to continue being trusted partners for their stakeholders in the future. Angela will also be there!