Consumers are gonna consume (whatever, whenever and however they want), challengers are gonna challenge, and banks, most of them anyway, are in for a rude awakening if they don’t innovate their way back to power – and relevance. As Finshape was gearing up for its first year of existence, we spoke to co-CEOs Petr Koutný and József Nyíri to hear what’s in and what’s out for digital banking in 2022, plus what’s next for the company post-merger.
Could you tell us a bit about yourselves and your background? What are the most important lessons you’ve learnt that you’re bringing to Finshape?
JN: In 2014, I was working at IND when it was acquired by financial software giant Finastra. So, from one day to the next, I went from working for an SME to working for a 4,500-strong organisation. I realised that there were different dynamics in place at a corporation of this size in terms of setting and working towards achieving goals as well as making an impact.
After I had left Finastra, I co-founded and ran a small seed investment fund for years. During this period, I worked with dozens of different startups, mostly in the fintech and insurtech space. What I took away from this experience is how important it is to build great teams and find the right product-market fit.
The most valuable lesson I’ve learnt over the years, however, is that the enterprise software business is all about trust. Trust that is not given but earned by delivering high-quality technology and service that consistently meets or even exceeds expectations. It doesn’t come from a piece of software but from teams where everyone has this mindset of not wanting to let clients down.
PK: My path has been very different from József’s. I’ve been with BSC for the past 27 years, where I’ve kept my focus on growing the business. What we share is a passion for products, however.
We at BSC have always strained away from becoming a professional services company, even when it would have been highly profitable. Instead, we’ve put our energy into product development, which requires an entirely different approach.
As a supplier, you basically have two choices. You can create value for customers through a service, that is your knowledge, or you can choose the much more challenging path of turning your knowledge into a product that brings value to customers.
What are the main forces shaping digital banking experiences right now? And how do you think Finshape’s solutions can help banks keep ahead of the curve?
JN: On the one hand, customers are looking for fully digitised, frictionless processes that can be completed without having to go somewhere or talk to someone. On the other hand, when shopping for complex financial products like an insurance policy or a mortgage, they want human help available around the clock. In other words, the experience customers expect is not fully digital or physical. It’s a hybrid, really.
But whatever channel customers choose to engage through, data-driven, tailored experiences are a must. People provide banks with tons of information and are growing increasingly aware of just how valuable their data is. They want to reap the benefits, expecting banks to keep them in the loop not only about day-to-day money matters but also about what refinancing or investment opportunities are available to them.
Financial services providers, whether new or established, can only thrive in this landscape if they’re quick to respond to these changing customer needs. Finshape is here to help them do just that.
PK: The financial services industry isn’t exactly leading the digital revolution. Customers had gone digital long before banks did. As people started spending more and more time on their mobiles, banks realised they had no choice but meet them there. But this won’t cut it anymore. Incumbent banks need to transform themselves to stay relevant. At the same time, they need to understand that digitalisation is not about using digital technology. It’s about becoming digital-first organisations, from top to bottom.
Take the automotive industry, for example, where electromobility is a megatrend right now, driven primarily by Tesla. Incumbents like Volkswagen are well aware they must follow suit and replace combustion engines with electric ones and build software to enhance drivers’ user experience. But they must also understand that this still won’t make them the next Tesla. Because going digital is not about software, it’s about how a business is built. At Tesla, digital is the foundation. At Volkswagen, it’s a façade.
The same goes for banks. Having a flashy mobile app won’t turn an incumbent into Revolut. This is where Finshape’s mission lies. To help banks become truly digital organisations instead of users of technology who play catch-up with newcomers.
Analysts say banks will double down on innovation in 2022. What do you think they will focus their attention on and why?
PK: I think they should focus their investments on improving customer, not user, experience. The two things aren’t remotely the same. Today’s consumers don’t pick their banks based on how their apps look. If they’re applying for a mortgage, for example, it’s the overall experience throughout the mortgage lifecycle that counts, including whether they can apply online without having to set foot in a branch or report the transaction to the land registry as part of the application process.
JN: Let’s face it: most banks, especially in countries with strong market economies, have no problem turning a profit. If you’re profitable, you’re not pressured to overhaul your business model or think outside the box when it comes to product development.
Enter fintechs with high funding and low profitability. Buy-now-pay-later app Klarna, for example, has only taken a small bite of the financial services market and has grown into one of Europe’s largest banks with some 90 million customers.
Incumbents might not think much of this now, as they have plenty of other revenue streams to fall back on. But then they might run into what’s called “the innovator’s dilemma” and become the engineers of their own downfall.
Based on what you see at your biggest clients, what do you consider the main barrier or main barriers in digital transformation?
PK: There are three things that can get in the way of digital transformation: money, people and technology. For banks, money is not a problem. People and tech are. Tech because most incumbents are running on 20-50-year-old legacy infrastructure. And people because wanting to be safe and avoid change is second nature to us. But digitalisation has had a profound impact on our lives, whether we like it or not. Building an agile culture is how banks can become change-capable, while undergoing digital transformation is how they can tackle legacy issues.
What do you see as Finshape’s biggest strengths? What are the greatest challenges you think you will have to deal with as CEOs?
JN: Our people, hands-down. We have over 650 experts with extensive experience in delivering digital solutions for banks. This gives us a competitive edge, because more often than not banking software is, say, 30% the actual product you’ve bought, and 70% product managers, developers and data analysts busy tailoring it to your very needs so you can reap the most benefits.
PK: Customers are another key asset of ours. I keep telling my colleagues how it’s always better to go out, talk to customers and ask them about the problems they face than to sit in the office trying to figure out what we should do to have customers. Do we read industry reports and analyses? Certainly. But we also have over 100 customers who can tell us everything we need to know.
As for the challenges, our most important task now as CEOs is to streamline our companies’ workflows, teams and ideas so we can unlock the potential of the new entity. In maths, one plus one is always two. In business, not so much. Finshape is a great example of how you sometimes have to turn one plus one into three. In this case, through new synergies that will allow us to work together not just besides each other.