How digital finance players can grow their business and preserve margins

Companies should focus on cost-effective fintech solutions that customers will actually use, two fintech CEOs have said.

The comments came on a “CEO insights” at the technology conference on 27 June 2024.

The covid-19 pandemic induced a “complete revolution” in the fintech space, said Harry Gill, chairman of Pay10. The firm is a major player in instant payments and digital wallets in India and the Gulf region, and plans to expand into Europe. Pre-covid, cash was king in India, with a mere 500,000 digital payments per year, Gill stated. Post-covid, cashless transactions have taken over, with the firm clocking up 13bn digital payments just in the month of May 2024. He does not anticipate any decline in volumes: “No one wants to go back.”

Solutions as a service

Gill said firms designing fintech solutions should think in equal parts about “who will use it” and cost. “Cost should not discourage” potential customers–both businesses and consumers–from using an app. For example, Pay10 developed a QR code-based payment systems for small merchants like vegetable stand vendors for whom buying a dedicated payments machine would be prohibitively expensive.

“Technology is only as good as” its level of usage, said Gill. If a company builds “a great technology, but no one uses it,” then it’s a failure. In addition to a use case, companies should in parallel outline “the adaptability case and the profitability case.”

Rakuten is a Japanese conglomerate with more than 80 businesses in e-commerce, media, financial services and other sectors globally. Its European financial hub, based in Luxembourg, serves sister companies across the EU. Toshihiko Otsuka, CEO of Europe Bank, said the group would like to extend this model–“payment as a service,” “banking as a service” and “lending as a service”–further across the group and to “non-Rakuten companies as well.”

User acquisition cost

Customer acquisition costs have been “skyrocketing” and don’t appear to be slowing down, said Otsuka. When asked why that was by the panel moderator, , co-founder and chief sales officer at , Otsuka replied that the number of “players are increasing and consumers are getting more demanding.”

Instead of relying on “marketing gimmicks,” Otsuka hopes that improved usability will make existing “customers more comfortable” adding products and services on the platform. For example, the firm would like shopping customers to become banking clients and banking clients to open a brokerage account.

Artificial intelligence

Otsuka referred to , Luxembourg’s top financial regulator, that the use of AI technologies in the financial sector does not require additional regulation at the moment. Otsuka said, “that’s a great remark.”

Acknowledging that people have fears about AI, Otsuka said, “I play chess.” In 1997, an IBM computer beat world champion chess player Garry Kasparov “and people thought chess would die.” But “several million people” still play chess today.

As for a specific use case, Gill cited fraud detection. “We will require a tool to stop a transfer before it’s performed.” AI is not needed for post-fraud investigation, but to “understand” what the user is doing “before a transaction is approved, to stop fraud. There AI will be very helpful.”