Financial services firms have paid attention as a variety of mostly-American-owned digital companies have gained increasing market share, a trend that has increased notably during the Covid-19 pandemic.
Since Amazon is one of the best-known of these firms, those who want to emulate its success have dubbed the process “Amazonisation”, a concept explored in more detail by a Luxembourg for Finance session held earlier this year.
The event featured a presentation by Sherry Madera of the London Stock Exchange Group on the importance of data and what she termed “the new data landscape”.
Shift in power
Beyond her emphasis on the data aspect, Madera defined what the event title means to her: “We’re defining it as the shift in power to consumers driven by online platform. And this applies to many industries and supply chains, including financial services. And we’ve experienced an increased use of data and digital platforms for payments, identity verification, remote infrastructure, including trading floors.”
A panel discussion led by Nasir Zubairi, CEO of the Luxembourg House of FinTech, the LHoFT, solicited views on what “Amazonisation” meant.
Claire Calmejane of Société Générale talked about how her employer’s strategy has been inspired by Amazonisation. For her, the platform aspect is key to the significance of Amazon. “Today, banking and oil have been leading the world by market capitalisation for 10-15 years. And it’s no longer the case. Today, it’s platforms or nothing. They create a new market between their customers and the provider that is leading the world in market capitalisation. For me, financial services have to find their way in this new business model.”
Efficiencies driving platform move
Edward Glyn, managing director and head of global markets at fund automation and digitalisation firm Calastone, cited data illustrating why many customers prefer dealing with a platform like Amazon. Key for one segment of customers are efficiencies such as saved payment information, which allowed single-click, frictionless purchases. He explained that “Calastone came in to the industry 12 or so years ago, with a single raison d’etre” which “was all around removing friction.”
Anders la Cour, CEO of Banking Circle, a FinTech which he launched back in 2013, explained how his company has focussed on what it sees as an “API (application programming interface) first strategy”. An API allows a another company to offer services by interchanging with another firm’s data system, analogous to how a platform works.
The regulator sees no issue
Karen O’Sullivan, the Luxembourg financial sector regulator CSSF’s head of the innovation payments, market infrastructures and governance departments, explained how the supervisor views the move to “more digital online platforms and interactions”.
“Our mission as a regulator is really to supervise the financial sector, to make sure there’s financial stability, and ultimately, to make sure that there’s protection of the consumer. The fact that there is more and more use of digital platforms, it doesn’t change that role.” All platforms do is make the regulator’s job more complex, she explained.
O’Sullivan later confronted the assumptions of many in attendance about the CSSF’s view of cloud computing, a key element of most digital platforms. “Contrary to what many people might think, we are very favourable of the cloud. And we always have been, I mean, not to go into the history of it. But way back in 2017, we already issued our own circular on the use of cloud.”
The PayPal view
The session wrapped up with a Q&A with Sean Byrne, the CEO of PayPal Europe, on the firm’s experience with Luxembourg and going through the Covid pandemic.
“Digital payments have gone from being a nice to have to an essential service,” he explained. “in the pandemic, consumers moved online in very large numbers. And what we’ve seen is as the lockdowns have reduced and released, we’ve seen a continued elevating use of online activity by consumers, They have obviously seen the convenience, the ease of use, the time savings by using online payments and e-commerce activity.
Byrne explained how PayPal’s own platform works in relation to its cross-border offering. “When I look at that space from the lens of small business, of course, what they get when they’re using PayPal is you’re tapping into our two-sided network. And when you look at that two-sided network, you see 75 million active accounts in the European Union, but you also see, almost 400 million active accounts across the entire global population of PayPal account holders. So as that small-medium business, I am using the PayPal brand, and the opportunity of that trust and convenience, to access that market.”