6th Frankfurt Finance Summit: the Future of Finance Decidedly Digital

On May 12, 2016, top names from the finance sector and politics came together in Frankfurt for the 6th Frankfurt Finance Summit. This year’s Summit was titled On the Move – the Future of Finance and explored digitalization’s implications for the industry and regulators. More than 200 people attended the conference held in Kap Europa, the first congress center in the world to be awarded a platinum certificate by the German Sustainable Building Council.

Of particular interest during the Summit were young financial technology companies, or FinTechs. Amongst other points, the day’s first panel explored the regulatory implications of digitalization and FinTech. The second panel of the day called Digitalization – the Dawning of FinTechs and moderated by Bloomberg Television’s Caroline Hyde, focused solely on FinTech. Even the conversation between Prof. Dr. Andreas Pfingsten and Diwakar Gupta highlighted the important role that digitalization is playing in increasing financial inclusion in developing economies in Asia, where millions of people lack access to brick and mortar financial institutions and cash still reigns supreme.

In his opening address, Tarek Al-Wazir, Hessian Minister of Economics, Energy, Transport, Urban and Regional Development, highlighted the importance of FinTech for the region and discussed the most recent developments in the continued effort to advance the Frankfurt-Rhine-Main region as a European center for FinTech companies. “[Digitalization] is not only a technological development. I think digitalization is working to restructure the economy and to change our lives. In fact, we are witnesses of a revolution,” explained Al-Wazir. Further stressing the importance of FinTech, Al-Wazir stated that, “The financial center Frankfurt needs to catch up in this development. Here, as elsewhere, the rule applies: either move with the times, or the times will move on without you. […] The region of Frankfurt enjoys ideal conditions to evolve into an international FinTech hub.” At the end of his address, Minister Al-Wazir outlined new details of the highly anticipated FinTech Hub to open in Frankfurt in September 2016.

The Future of Finance

With a look to the future of the financial sector, Carsten Kengeter, CEO Deutsche Börse Group, shared some of his views in a conversation with Prof. Dr. Uwe Stegemann, Director McKinsey & Company. Besides discussing topics like a possible Brexit or the merger of Deutsche Börse and the London Stock Exchange, Kengeter was keen to recognize the importance of FinTech and the new approach of his own organization in supporting FinTech and innovation. Kengeter pointed to Deutsche Börse’s own Venture Network, the recently launched FinTech Hub in Frankfurt and their commitment to initiatives like Dialogue Forum FinTech Frankfurt-Rhine-Main: “With our FinTech Hub being part of the Hessian State Government’s FinTech initiative, we want to give start-ups in the financial sector a jump start, thereby contributing to the creation and development of a FinTech community within Frankfurt’s financial center. Frankfurt should become Germany’s leading FinTech center.” Deutsche Börse Executive Board Member, Hauke Stars, would even point out later that Deutsche Börse was indeed itself a disruptive FinTech in the 1990s when it brought digitalization to the trading floor.

The panel, Redefining Banking – Regulatory and Economic Challenges, featured some of Europe’s top names in regulation and supervisory. After stressing the importance of the Capital Markets Union for growth of the European economy, the role of regulators in digitalization came into focus. Felix Hufeld, President of Germany’s Federal Financial Supervisory Authority (BaFin), stressed that his agency would create regulation that treats FinTechs and established institutions equally, helping to ensure a level playing field. Gabriel Bernardino, Chair of European Insurance and Occupational Pensions Authority, explained, “We need to create the possibility for companies to innovate, but also within boundaries that will protect consumers.” Sylvie Matherat, Member of the Executive Board of Deutsche Bank, further explained, “Digitalization has a fundamental impact on the banking industry and banks’ business models. Through its Innovation Labs, Deutsche Bank collaborates successfully with FinTech companies. We are embracing technology innovation as a source of future differentiated value to our clients. However, given the increasing importance of FinTechs it is vital that they are regulated adequately. Regulators need to find the right balance between fostering innovation and safety for clients and the financial system.”

Günther Oettinger, European Commissioner for Digital Economy and Society, delivered the Summit’s first keynote address, examining digitalization and the European strategy for fostering digitalization and creating a Digital Single Market. He stated, “Our duty is to protect the consumer, the investor and their personal data and to ensure a level playing field for all players of the sector.” Oettinger inspiringly stressed that the time is right for an open dialogue on digital transformation and gave details of an action plan to be released later in 2016, the result of discussions with political and business leaders across the EU.

The Dawning of FinTechs

The second conversation and panel titled Digitalization – the Dawning of FinTechs, moderated by Bloomberg Television’s Caroline Hyde, proved to be one of the most exciting and lively conversations of the day. In his conversation with Hyde, Gottfried Leibbrandt, CEO of SWIFT, stressed the importance of cyber security and how digitalization can create new vulnerabilities. Leibbrandt also posited that banks should cooperate with FinTechs and that adapting their technology would help them and consumers. The panelists continued the conversation on FinTech and discussed how FinTech is changing back office functions in banks as well as the role it plays for end-users or consumers. On Blockchain, Hauke Stars of Deutsche Boerse stated, “Blockchain has the potential to disrupt the financial industry right from the center.” Stars continued to explain, that “The big cost and the big benefit in the financial industry is not the consumer from my perspective, it’s the B2B business. And when I look at the costs banks have in the back office and the infrastructure costs and the opportunity for efficiency with different technology, I’m sure there will be an impact on the way finance is run in the future using this technology. It is the way the financial infrastructure is run, the underlying technology that I see as changing and the driver for change.” Roland Boekhout, Chairman of the Management Board of ING-DiBa AG, highlighted his organization’s efforts to cooperate with FinTechs, “Our goal is to be the leading digital bank in Germany. Besides developing our own digital services internally, we emphasize cooperation with FinTechs who are also developing technology and services relevant for our customers.”

A distinct honor this year, was welcoming Dr. Wolfgang Schäuble, German Minister of Finance, to the podium to deliver this year’s Keynote address: Tectonic Shift – Where will finance move to? In his keynote, Dr. Schäuble addressed the UK’s possible exit from the EU saying, “I think both the EU and the UK are better served with Britain remaining,” and that, “Great Britain’s relationship with Europe should not be defined by splendid isolation, but by splendid integration.” He further explained that the future of finance is deeply seeded in the future of the EU. He lauded regulators, saying that the risk of tax payer money being used to save failing banks has fallen. He also shed light on progress that needs to be made towards strengthening the banking union. Finally, he touched on digitalization and innovation expressing that all industries must be innovative to find business models that fit to the new world. Following his address, participants enjoyed the opportunity to ask Dr. Schäuble their own questions.

The final conversation of the day between Prof. Dr. Andreas Pfingsten, Director, Finance Center Münster, University of Münster, and Diwakar Gupta, Vice President, Asian Development Bank (ADB), centered on Financial Inclusion, covering a broad area from policy making to society to digitalization. Gupta explained the challenges of financial inclusion in areas where one third of the population lives in poverty, topping the list being limited access to financial services and getting people to use them for the first time. He asserted that governments must play a central role in crafting policy to support technology that will help foster financial inclusion. The success stories of mobile banking networks in Africa evidence the need for the expansion of FinTech to support these aims.

In its sixth year, the Frankfurt Finance Summit proved again to be a great success, proven by its resonance in the media and not only the distinguished speakers and panelists, but also the high-profile participants. The Summit was also available via a Livestream which was viewed by more than one thousand people throughout the day. The complete recordings of the Summit can be viewed in the YouTube playlist below.