Shifts in the Finance Industry: The Digital Euro, Fintechs, and More

At a fringe event of the MBA finance module at the WU Executive Academy, a panel of leading fintech experts discussed hot topics in the finance industry.

The digital euro is all but a certainty, and more and more fintech start-ups are entering the markets: the finance industry seems set to entirely reinvent itself in the coming years.

The digital euro was also on the agenda in the “Hot Topics in Finance” module of the Executive MBA Finance at the WU Executive Academy. Towards the close of the module, Professor Alfred Taudes hosted a panel discussion with finance industry experts about changes and hot topics in the field. Alfred Taudes heads WU’s Research Institute for Cryptoeconomics and has taught at the WU Executive Academy for many years.

Petia Niederländer serves as Director for Payments, Risk Monitoring and Financial Literacy at the Austrian central bank and is an expert on innovative payment systems, regulations, and digital skills of final customers. For her, disruptive fintech start-ups are causing a veritable commotion in the industry: “Last year, the number of fintech companies in Europe exceeded that in the US for the first time. These European companies are developing new services related to novel payment systems. As a result, banks can no longer view themselves as merely a part of the traditional money lending industry but are forced to develop into service providers,” Petia Niederländer said. Loans were no longer an attractive business. She sees the future of banks in combining loans with further services in order to create added value. “The majority of providers and start-ups entering the market is trying to generate added value by focusing on customer relations, collecting customer data, and creating new business models.”

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MostlyAI certainly thinks so. The start-up translates customer data into synthetic data compliant with the strictest data protection laws. The synthetic data can then be used for model calculations and customer behavior forecasts. MostlyAI co-founder Klaudius Kalcher recounted his start-up’s early days in 2017: “Back then, we were the first start-up on the market that generated synthetic data. A year later, the GDPR entered into force in Europe. For us, it turned out a great advantage.” Providing data security for final customers has become a global trend far beyond Europe. MostlyAI has generated synthetic data for Erste Group and its George app. For Klaudius Kalcher, the changing role of banks is a tremendous opportunity: “Banks will cease to be monolithic players. Right now, platforms providing financial services are the latest trend. Established banks benefit from the great trust customers place in them. They can use this strong starting position to integrate external services into their platforms and in this way expand their service offer.”

But payment systems and online banking are not all there is in the fintech sector. A case in point is FINcredible, another start-up, which carries out credit checks for, e.g., lease agreements. Co-founder Alexander Eisl is also a lecturer in the MBA module and the Chief Scientific Officer at the Austrian Blockchain Center, which is part of the Competence Centers for Excellent Technologies (COMET) program. “Many landlords and landladies demand prospective tenants to submit their payslips of the last three months. What we strive to do is provide reliable and GDPR-compliant data – with the final consumer’s consent,” Alexander Eisl explained.

Professor Alfred Taudes also brought up the topic of financial literacy. Is our society financially savvy? Petia Niederländer can’t quite confirm that: “The good news: financial literacy is increasing. The bad news: it was really poor to start with.”

As the European Central Bank has announced the introduction of the digital euro, it has become all the more important for people to grasp the ins and outs of data and data security. “For banks to be able to distribute the digital euro, final customers need to have a digital ID: They have to create, save, and manage their data in their accounts. They must know how to create a license proxy. All of these steps are necessary for them to be able to use a digital currency.”

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Petia Niederländer emphasized that actions were required on the European level: “European economies would be well advised to invest in the infrastructure and data pools needed to offer such financial services in Europe as well.” She called upon the Austrian central bank to create awareness among the country’s banks for the fact that they are competing with fintechs and that they must be open for more innovation. She shared some futuristic visions with the audience: “I believe that the way we pay will change drastically in the next years. It is even possible that, one day, it will be our fridge or car that handles this task. At the moment, we are still relying on ethical standards that stand in the way of such a scenario. But in the future, consumers might be able to choose what they pay with.”

The Executive MBA Finance at the WU Executive Academy is a part-time program for executives and managers. In the course of 18 months, participants acquire theoretical expertise, analytical know-how, and practical management tools that will help them succeed in a highly dynamic financial sector that is strongly influenced by globalization. What is more, the teaching staff includes international finance experts (hailing from, e.g., Lehigh University and the University of Texas at Austin) who impart knowledge that can be put into practice right away. A new round of the program will start in October 2021.

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