Encounter with Marco Houwen, serial entrepreneur, about innovation in the financial sector.
Marco attended the Money 20/20 conference in San Francisco, the largest conference about the transformation of the financial sector in the world. We met up with him to after this visit to ask him a few questions:
According to you, what makes the Money 20/20 conference so important?
This conference is very important because it brings together stakeholders from all sectors of the financial ecosystem, companies of all sizes and many decision makers.
The topics discussed around innovation in the financial sector were countless, from online payment systems, over innovative core banking systems to virtual currencies The workshops were particularly interesting, thanks to two start up contests. The pitches were very dynamic and the teams were able to exchange with all Fintech investors on site.
What topic impressed you most?
Today there is an excitement around the Bitcoin, which I call "the biggest real life proof of concept ever." It is designed to replace the conventional financial system and this is what will prevent it from evolving. The signs, however, point rather in the direction of integrating the underlying technology of the Bitcoin, the Blockchain in banking environments. The revolution will come in stages!
What do you think are the trends to follow in the field, the "next big things"?
At the conference I identified two:
- There is an entire ecosystem around gift cards and loyalty cards which responds to a problem in the USA: they have a lot of these cards and vouchers, they take a lot of space and nothing is digitized. We see models with exchange platforms for loyalty points which are on some platforms even convertible into money, etc., this is awesome! However this is not necessarily relevant in Europe because the market is not as important.
- The second trend already attracted some attention on the European market and will become more and more interesting: the financial loan system will be revolutionized, considering the ease of giving loans now, for example through peer to peer system. There are several possible models, with or without the participation of banks, and there’s a real potential to develop. This will boost the availability of loans and simultaneously address a latent problem in Europe: banks are increasingly reluctant to lend, to early stage companies for example.
How do you feel about all these innovations as an entrepreneur?
It's only the beginning! There is a lot to do, it is very technical and we are facing an extremely regulated area to be reinvented. So it takes a lot more time, but the change is inevitable. In my experience, when there is an innovation that optimizes costs and processes, it will be implemented, even if this can take some time.
What place does innovation have in the financial sector?
All the major players in the financial sector are aware that there is an evolution in progress. Most of these companies are directly or indirectly interested by these developments, and some have even begun to use some of these new technologies to optimize their environment. But we remain in the eternal paradigm: when an innovation disrupts a market, the players do not necessarily have the needed responsiveness and adaptability to adopt the change. For example, if Amazon decides to digitally distribute funds tomorrow, even the strongest financial funds centers will be in danger. In the end, the interest is there, but there is still some way to go for banks, insurance and funds industry.
What are the opportunities in the large financial center that is Luxembourg?
Luxembourg undeniably has the know-how about funds, banks and financing tools, and the opportunity to use it in order to create innovation from within. The question is how and when this will happen? There are currently a number of good initiatives going in this direction, including the House of Fintech, which is being created by Luxembourg for Finance and the Chamber of Commerce.
Is it easy to finance start-ups in Europe and in Luxembourg in particular?
The money to finance innovation is not lacking in Europe. What is lacking is the will to finance startups, new ideas, with the risk of losing money. It's a problem of mentality. VC fundraising n Europe, in general negotiate company valuation too well, this leads to a great dilution of the founders at an early stage, which penalizes the next fundraising and prevents the emergence of "unicorns". It's a vicious circle ! With this approach, Europe is not able to create the next Facebook or AirBnB. The only way to change this situation is to create competition at the level of funding opportunities.
Managing Partner at BHS Services, Marco Houwen is resident and active member of the nyuko community.