Fintech expert Chris Skinner about the COVID-19 impact on the financial market; ‘2030 just arrived in 2020’

Unicorns and incumbents are equally challenged in this crisis

Whether it's about start-ups, unicorns or incumbents; everyone is equally challenged in this crisis, says Skinner. The biggest issue for start-up and fintechs is funding, as fintech funding is at a three year low. Unicorns have to watch out for a drop in valuation (look what happened to Monzo), while traditional banks without digital structures, without a banking app and who can’t work from home have to watch out that customers move to competitors due to a lack of service. Skinner: “Ultimately, the finance players that will survive, have their funding and IT systems in order and are able to respond flexibly to the customer's digital wishes. So, these can be fintechs as well as traditional banks. I think that 25 percent of the institutions will not survive. You’ll see that the weaker ones will become weaker, and therefore more vulnerable to acquisitions. As a result, total M&A activity will increase sharply. Not yet, but when the lockdown is over, because you don’t negotiate things like this through a video call.”

Payment behaviour will change permanently

Cash payments are going through a cycle of decline accelerated by the crisis. Not only in tech-savvy areas like Scandinavia, the United Kingdom or the Netherlands, but even in countries like Germany, where cash is king, you see a change: more than half of the payments currently made by card are contactless, compared to 35 percent before the coronavirus crisis hit. Skinner: “Many consumers use contactless payment for hygienic reasons. Once they get used to this, they won’t go back to their previous habits. Keep in mind that card payments are actually just as bad as cash payments, because you still have to enter your PIN code above a certain amount, even if you pay in a contactless way. Mobile payments will be the winner of the crisis, so it would be wise if we all think about the creation of a pan-European mobile wallet. Now there are several mobile payments systems scattered across Europe, mostly from mobile brands such as Samsung Pay or Apple Pay. We have to stop this fragmentation.”

A united Europe is further away than ever

In order to create a pan-European mobile wallet, or other payment schemes with a European or global reach, it is essential that we work together on a Europe-wide basis. This is also the aim of the European Central Bank (ECB). For example, Yves Mersch, member of the Executive Board of the ECB, previously stated that Europe is largely dependent on non-European systems, such as PayPal, for cross-border payments. He wondered why there are no European companies competing in the battle for global payment solutions. To ensure that Europe becomes a world leader in digital payments, a new alliance is launched this month, bringing together Europe's leading independent payment service providers. It is called the European Digital Payments Industry Alliance (EDPIA). Skinner agrees that without a united Europe, harmonisation or standardization of European payment systems is decades away. “But the cultural and political differences between European countries prevent collaboration. And those differences have only increased during the crisis, now that countries do not always feel supported by the European Union and northern and southern Europe are fighting each other”, says Skinner, referring to the clash between the Netherlands and Italy around the introduction of eurobonds, for example. “Building a united Europe is a major challenge right now.”

Open Banking era

Skinner ends on a positive note. After all, the fact that traditional financial companies are accelerating their digitisation makes them ready to really open up to Open Banking. “That means”, says Skinner, “we can really prepare for the era of Open Banking.”

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