Stefan Klestil is Holvi’s member of the board who has 20 years of experience in the international payments and banking technology space as an advisor, executive, entrepreneur and angel investor. He is now partner at Speedinvest, a venture fund based in Vienna. We sat down with him to learn first-hand insights about the fintech sector and its upcoming trends.
Can you tell us about your experience with fintech?
When I started my career in 1995 as a bank consultant there was no such thing as fintech. The hottest thing at the time was online brokerage. Being able to do trades online was just phenomenal!
In the late 90s, when the first wave of Internet startups began, I also joined a startup in the US that did account aggregation. In the US, a consumer on average has relationships with six different financial institutions. We were building the technology that allowed consumers to aggregate their financial information into one balance sheet and have an overview of their income and expenses. We had 100,000 sign-ups, but when the market crashed we were left without funding sources and had to shut down. Since then innovation in financial services has been an essential part of my life.
After that, I ran a large operation across Europe with First Data, one of the largest payment processors in the world. Starting from 2008, I became an active angel investor in fintech startups.
As an investor, I not only provide funding but also support startups in many ways by helping them set up operations, find the right banking partners and negotiate contracts with them. For example, I did this successfully in Turkey with Iyzi, a startup that is now the leading online payments gateway. Another example is Number26, a mobile banking startup coming from Berlin and, of course, Holvi.
What is now happening in the fintech sector?
We are witnessing a historical moment. In all financial service verticals – be it the SME or consumer space, insurance or lending – we see young teams coming up with great new ideas and much more convenient and cheaper solutions than the big guys. It’s extremely exciting to be part of that.
What interested you in Holvi and why you’ve invested and become the board member?
I am part of Speedinvest, a venture fund from Vienna, Austria. We made a joint decision to invest in Holvi. Holvi is absolutely unique, there is no such type of offer not just for SMEs but also for new generation of Makers and Doers, as we like to call them. When I think of Holvi’s customers, I think of young people doing their business in coffee houses, they all are digitally native, collaborate with each other on different projects, perhaps even cross-border. They have the need to be able to easily and conveniently manage their finances, invoices, expenses and manage the money flows behind it. This is the most rapidly growing segment in Europe today and they all need exactly something like Holvi.
What is wrong with traditional banks today?
I'm not a big fan of bashing banks for their inability to respond to the digital age. They are facing an uphill battle with huge legacy technology and branch networks, non-digitally native employees, regulation that is getting more restrictive every day and the necessity to serve all customer segments and age groups. Startups, on the other hand, are starting from scratch and can focus on very specific customer segments.
Their biggest problem is that to serve young people today, you need to be a technology services company, first and foremost, not a bank. You need to be agile, experimental and quickly adapt to the customer requirements. And this is not how corporations in general and banks in particular work.
Even though banks are still the largest spenders on IT, they are struggling to create an attractive value proposition for Internet and mobile users. That’s an amazing and sad part: while banks spend a huge amount of money on technology, startups with a fraction of this spending are leading the way. Banks need to completely rethink their IT structures. It’s also an organizational thing – banks have thousands of skilled people focusing on the wrong things.
I see the banks’ survival in partnering with startups. For way too long they’ve been ignoring them or even opposing them through more regulation and lobbying. They shouldn’t be arrogant and instead find ways to partner with innovative fintech startups. But in order to partner successfully with startups, banks will have to change their mindset quite fundamentally.
What are the hottest trends in fintech for 2015?
1. I think we will see a lot of interesting companies in the Internet of things space. Machine-to-machine communication will require payment infrastructure and everything that comes with it.
2. Second, I expect a lot of startups in insurance providing new models of risk coverage. I think we’ll see on-demand models that allow to buy risk coverage with a smartphone exactly at the moment when you need it. Let’s say you’re about to go skiing and you’re going to buy 4 days of casualty insurance right on the spot.
3. Although marketplace lending is one of the areas that has been growing a lot lately, I still see a lot of untapped opportunities in this space. I hope to see more of models where banks join forces with P2P platforms. There is a credit crunch and it’s difficult for small businesses to get loans– about 60-70% of small business’ applications are rejected. That’s why I think we need the law in the European Union, similar to the UK one, that forces banks to pass on the rejected loan applications to alternative finance companies.
4. Cryptocurrency is another topic that is definitely going to gain momentum. I like to think if it as the Internet protocol for money. The money we have been using is not necessarily the right model for the Internet age. I believe cryptocurrencies can play a big role in the emerging markets where about 2.5 billion people don’t have means to make purchases online.
5. We are starting to see new types of banks emerging that allow easy integration of their services via their APIs. Wirecard and Fidor are examples of these kinds of white-lable services but many more will appear in the next few years.
Recent US-based studies show that consumers tend to trust technology companies more than anything else. Do you think there is the same trend in Europe?
It’s probably more relevant for the American consumers than the European. When it comes to fintech, we, consumers, are quite paradoxical. On the one hand, we want the most innovative, convenient, mobile-based financial services. On the other hand, when it comes to money, we tend to be rather conservative and want to be sure our money is safe. It’s always a delicate balance of these two things. So successful fintech companies have to be as innovative as startups and as secure as traditional banks.
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