EIT Digital’s Willem Jonker discusses innovations in the digital finance sector

An image of a banking app to illustrate digital finance technology
© iStock/ipopba

SciTech Europa attended the launch of EIT Digital‘s Scottish satellite office in Edinburgh, where we gained insights into the digital finance sector and how EIT Digital is shaping its future.

We spoke to Willem Jonker, the CEO of EIT Digital, to discuss the importance of digital technology for consumers and business in the financial sector, the challenges of innovative banking technologies, and the future of digital finance.

What is the importance of using digital technology to deliver innovative financial products?

There is a lot of innovation happening in the financial sector, with many innovations in payment services, transaction handling, and increasing global competitiveness between the financial institutions. At the same time, there is a lot of regulation in this sector; national borders are being broken down, and as the competition grows, more new regulation surfaces which allows new market players with new financial services.

The data around financial transactions has become increasingly important. There is new legislation which, for example, allows parties access to certain transaction data and for its analysis. This is happening to the extent that financial data becomes a business in itself, whereas previously it was the transaction making that was the business model. This means that digital technology is penetrating further and there is more competition. One example is that certain smartphone providers introduce payment services bound to the device, separate to traditional bank cards, so customers expect a much speedier transaction.

The need for immediate transactions, this collection of new services, and the data around it, will continue to increase in importance, and it drives the transformation of the industry. Simultaneously there is lots of disruption occurring in this sector, such as Bitcoin, creating almost a parallel universe of payment and transaction services. One of the big challenges associated with this is that governments also want to monitor money streams, and with cryptocurrencies, it is harder to supervise for fraud prevention.

This context makes the digital finance sector a very interesting area in which to operate and drive innovation.

How does EIT Digital’s Finance action line contribute to the digital transformation of the Financial Services Industry?

What we are doing is driving innovation in such a way that new financial services are inclusive, are used the way they are intended to be used, and there is enough public supervision over what is going on in the financial transactions, to ensure openness and transparency. There is an enormous interest from banks in several of our network locations including London, Madrid, Hungary, and the Netherlands.

More more personalised and individual plans which utilitise digital technology will become available. It is necessary to have compliant solutions due to regulation, so our understanding of the financial regulation is essential. Our understanding of the ecosystem, and of how the different services in the financial system influence each other is also key.

As well as understanding the technology, we focus on the social responsibility. One example is blockchain. Everyone is very enthusiastic about blockchain, but the question is: is it possible to have a completely decent centralised system which is still compliant with international legislation when it comes to financial transactions?

For the benefit of society, we are working towards systems that are compliant, in order to create an equal playing field where everybody can participate in the system.

What are the challenges associated with ensuring that innovative banking technologies are used to add value for the consumer?

The consumer benefits by the speed of transactions and by the cost effectiveness of transactions. So if you can do it more effectively and reduce on cost this will be beneficial. The idea is that it will be up to the consumer what information they want to disclose, and what type of service they want access to. The main challenges are ensuring speed, efficiency, choice, and personalisation of services.

Consumers want to have choice, but at the same time, these choices must not be too complex. There is a trade off between consumer choice, and having too many options to consider because it is too complex to understand the differentiation between each service. We want to make sure that people are in a position to make fact-based decisions, and that everybody has access to the technology. Everyone should also have understand the consequences of using certain services, which will impact the way that people interact wit h the technology.

One example is the shooting that took place in the Netherlands. The police needed to gain access to the suspect, but were unable to locate him in the centre of the city. The person was located due to the innovations in financial services. When the police were unable to trace his mobile phone due to him switching it off, they tracked a transaction he made using his bank account on a friend’s phone. This is a concrete example of how interactions with your bank account have consequences that should be understood. Of course, in this example the circumstances were exceptional and there were legal grounds for this monitoring. Nonetheless, it is interesting to see how innovation in financial services makes an impact on people’s lives in this case.

How will EIT Digital further strengthen its recent Digital Finance area in the future?

Our priorities are, as in all EIT Digital areas, to create and grow European digital companies. In this case, these are companies that are working on FinTech solutions. This is  complemented by our entrepreneurial education activities, where we educate and bring talent to Europe to further develop this application. The reason we have come to Scotland is to select promising the companies in the digital finance area. There are already around one hundred companies that active in the ecosystem.

We assess these companies and find out which ones we can scale, and what the company needs in order to grow. We also connect them to our European ecosystem to help them to  reach markets, gain financing, and help if they need additional financing rounds through our investment programs.

If a Scottish start up wants to reach markets in Germany, France, Italy and Spain, for example, EIT Digital is the machine that helps them to land there. Because of our ecosystem and connections, we know the people on the ground there. We connect to the ecosystem with the purpose of scaling up companies, creating new ones, and making sure that people are educated on the subject of digital finance so that we get the talent into the ecosystem here to further boost the whole development of those companies.

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