2017: the year we get real?

There is no doubt that 2016 has been a tumultuous year.

From Brexit to Trump and the Ukraine to Syria, we have seen many upheavals on the geopolitical front. A lot has happened in Fintech, too, although here the upheaval has in my opinion been almost all positive. Today FinTech is firmly established as one of the biggest sectors in all technology.

What will next year bring?

We can look forward to more tumult I think. If there is one overarching FinTech trend, I would say that several things that were only “potentials” in 2016 will become much more concrete. That could make 2017 the “year of getting real” on a number of fronts.

Here are some of my thoughts.

The year ahead: Predictions for 2017

  • The year of the pilot. 2017 will be the “year of the pilot” for blockchain in financial services, as it moves from proof-of-concept into production. We should see this in particular in cross-border payments and trade finance. Overall however blockchain will still be restricted to the “low hanging fruit” in banking. I remain convinced that broad-based application of DLTs will happen more quickly outside of financial services.
  • The year of the standard. We may see significant progress in blockchain standards during the year. If so, it will be driven by small groups working on specific use cases as opposed to large, complex consortia. Indeed, I expect we will see consolidation in the blockchain consortia area.
  • The year of the platform. On the back of increased standards and interoperability, we should see broad-based platforms and ecosystems continue to emerge, driving banking as a service and the creation of new business models. Look for this particularly in the robo-advisory and lending businesses.
  • The year of the attack. The number of cyber-attacks on organizations will increase significantly, and we can expect a steady stream of revelations about hacks. Denial of service is becoming much more threatening and dangerous for banks and in 2017 banks and others will be called on to toughen their defenses. This will be reflected in cyber-security spends, which among wholesale banks will increase from 5% of total tech budgets to 7-8%.

Eye on the prizes: Trends to watch in 2017

Along with the above “predictions”, here are some of the trends I think worth keeping an eye on in the coming year.

  • PSD2 pushing partnerships between banks and FinTechs. Banks and other financial services players will have to spend 2017 preparing for the implementation of the revised EU payment services directive PSD2 in 2018. With the creation of open banking platforms, there will be opportunities for FinTechs to partner with banks to create more exciting customer experiences and provide increased transparency on performance and fee structures.
  • Competition among financial centers for FinTech innovation. 2016 was the year of regulatory sandboxes with the FCA and MAS Singapore leading the change by establishing themselves as business developers with a mandate to attract business to their respective jurisdictions. In 2017, leading regulators will strengthen their position with global collaboration and implementation of new policies and laws based on learnings from their “sandbox” environments in order to reduce uncertainty in the FinTech ecosystem.
  • The continued rise of smart machines. It’s no secret that there are great strides happening right now in artificial intelligence. Advances in machine learning and robotics will I think continue to sweep the business world. Startups will continue to get funding in the areas of risk assessment, research, investment management, trading and back office automation.
  • An intensified war for talent. Banks and FinTechs will be competing for people with the right skills. The key expertise in financial services will be in artificial intelligence, in particular robotics and machine learning, where the game will be to attract scientists with Masters Degrees and PhDs. There will also be a battle for domain and technicaly expertise in finance, distributed ledger technology, and cyber security.

A new road

Finally, 2016 was a very big year for me personally.

2016 was also the year of the launch of Bussmann Advisory, with the goal of helping companies stay ahead of the digital disruption curve.

The company has gotten off to excellent start, better than I could have imagined. For that I am grateful, to my new clients and all those who have collaborated with me and supported this move.

With that, I would like to wish everyone the best of the season and a happy and healthy new year. It promises to be an interesting one.

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Next FinTech hotspot? Look to the Bosporus

By Oliver Bussmann and Dr. Soner Canko

When people think of vibrant FinTech hubs, cities like London, Singapore or New York usually come to mind. Fewer would put Istanbul on their list of major centers for financial services innovation.

Unjustly, in our opinion.

The truth is, Turkey has been a hotbed of financial innovation for quite some time. Thanks to support from the government and the Turkish financial services industry, we think it has what it takes to soon be counted among world’s top FinTech locations.

Here’s why we think so.


Young, and plugged in


Turkey has a history of embracing new technologies, including mobile banking and peer-to-peer payments, ahead of other nations. Turkish banks, to take one example, were pioneers in the development of digital wallets allowing clients to make direct payments to vendors and each other. They have also championed innovations, like biometric authentication at ATMs, that are still rare in most other jurisdictions.

Part of this success in financial innovation can be put down to the country’s natural advantages. With half of its 80 million inhabitants under the age of 30 it is a nation of young people, many of whom are very well educated. Turkey also leads many other Western nations in terms of internet speed and smartphone penetration. This makes it a good environment for digital innovation in general and FinTech in particular. Under these conditions it’s no surprise that Turkish bank clients have shown such a keen appetite for adopting new technologies.

Turkey’s innovation track record is also a result of government policy. In 2009 the Turkish government launched the Istanbul Financial Center Initiative with the goal of making Istanbul a global financial center by 2023 (and of turning Turkey into the world’s first fully cashless society by the same date). Since then the government has passed laws to bring Turkish financial markets closer to their EU and US counterparts, merged its stock, gold and derivatives exchanges to form Borsa Istanbul, the largest exchange in the region, and built a Canary Wharf-style financial district on the Asian side of the Bosporus. The government has also announced plans to create a Finance Technopark in Istanbul in cooperation with the Turkish exchange and a leading university.


Fintech Istanbul: The next step on the road


The launch early this year of Fintech Istanbul, with which Oliver has been collaborating closely, is an important milestone on this journey.

Sponsored by BKM (Interbank Card Center) – the only company in Turkey providing switching, clearing and settlement for card transactions, as well as the operator of the National Digital Wallet, BKM Express, plus the national payment scheme TROY – the new organization aims to foster FinTech collaboration and help position Istanbul as an important FinTech hub through a number of different activities.

These include:

  • FinTech 101 trainings focusing on teaching local entrepreneurs the basics of Fintech as well as digital innovation.
  • FinTech meetups as a regular platform for all members of the ecosystem to meet and share their experience and expertise.
  • Information dissemination through posting the latest FinTech news and views on social media and the fintechistanbul.org website.
  • Cooperation with other FinTech hubs through developing its global network, including as a new member of the Global Fintech Hubs Federation (GFHF).


Collaboration as key to innovation


Fintech Istanbul is also keen to attract outside experts to the Bosporus to share their knowledge and so help the hub mature. That was why when BKM heard Oliver was regularly in Istanbul on an advisory project for one of Turkey’s larger banks, it invited him to give the keynote at the graduation ceremony for its first Fintech 101 class.

We expect this collaboration to continue. As Oliver has written elsewhere, FinTech ecosystems and innovation management and orchestration, is required to be successful. With farsighted policy and its natural advantages, there is no reason to think that Turkey won’t continue on its path to the top leagues of FinTech.

We invite all those searching for the next great FinTech hotspot to learn more about Istanbul and Turkish FinTech. They may very well find what they are looking for here on the Digital Bosporus.

Blockchain in 2017: From proof to pilot

By Oliver Bussmann and Nick Williamson

In September we – Oliver and Nick – published a joint blog post on why we didn’t think blockchain would be disrupting banks first. This caught some by surprise, since not only does blockchain seem predestined to disrupt financial services, but every day seems to bring new developments in this space.

On December 1 we had a chance to clarify our position at the Credits Blockchain and Bourbon fireside chat, where some 80 guests joined us at Level39 to quaff and question us about our views on the future of this tech – as well as share theirs.

We found the event interesting on two counts. One, it gave us a chance to clarify where we think blockchain is going in the immediate future. Second, it was a good sounding board for discussions on some of the larger blockchain trends we think will be of interest during the coming year.

Getting real


First, to our “predictions”.

  • From proof to pilot. 2017 will be the “year of the pilot” for blockchain in financial services, as it moves from a proof-of-concept technology into production, especially in the cross-border payment and trade finance areas.
  • From slow to fast. This will move more quickly than expected, and we could reach a “tipping point” over the next 12 months if enough players with enough financial capacity come together, as seems to be the case in several areas at present.
  • A better experience. Players have to prepare for the implementation of the revised EU payment services directive PSD2 in 2018. With the creation of open banking platforms, there will be opportunities for FinTechs to partner with banks to create more exciting customer experiences.
  • Fending off the attack. Cyber-attacks on organizations are on the rise, with denial of service becoming much more threatening and dangerous for banks. 2017 will be a year to strengthen defenses.
  • Banks still lagging. Financial services blockchain implementation will apply to the “low hanging fruit.” We stick with our main thesis that broad-based adoption of blockchains will happen more quickly outside of financial services – in areas like supply chain management, in e-government, or health care.

Racing ahead


Besides putting ourselves out on a limb with our concrete predictions for the coming year, we had a chance to discuss some longer-term trends and issues with our guests. Here are a few things we think worth keeping an eye on.

  • Breakthrough constellation. Technological breakthroughs usually happen at that moment when the five or six technologies needed to make a real change become cost-effective and convenient to use. With advances in secure hardware (IoT and smartphones) coupled with the improved algorithms in blockchains, we think the constellation is coming together for Distributed Ledger Technologies (DLT).
  • Race for innovation. In financial services we will see a ramping up of the already intense race between jurisdictions to push FinTech innovation, driven by regulators.
  • Setting the standard. We may see significant progress in blockchain standards during the year. If so, it will be driven by small groups working on specific use cases as opposed to large, complex consortia. We believe that attempts to establish standards before real-world, full-scale applications take off are likely to fail, and that it is always better to derive standards from successful implementations as opposed to the predictions of standards bodies.
  • DLT-enabled financial use cases resemble many of the broader FinTech use cases in that they enable the unbundling of previously combined functions. As FinTech unbundles specific services such as retail FX exchange, we can expect DLTs to be used to unbundle the on-boarding and trust relationships from the end execution in a wide number of sectors.

Great debates


One final thought. During the Q&A after our talk the broader societal implications of distributed ledgers was raised several times. The issues, while hardly new, can be thorny. Blockchains, for instance, are sure to intensify discussions about the balance between privacy and security.

We make no predictions here. But if we do start to see large-scale implementations of blockchains during the year, we wonder if these and other broader societal discussions might become more pronounced in government circles and potentially among the general public.

We would certainly welcome that. From the Silk Road to the DAO, DLTs suffer from bad press. As well as being a year of maturation for this technology, it could also be the year we begin to make a better case for it.

That would make for a good year indeed.