Iceland’s legacy banks face being “disrupted into oblivion’ unless they embrace digital change and work with the country’s fintechs, according to a leading Icelandic fintech professional.
Gunnlaugur Jónsson, the CEO of Reykjavik Fintech Cluster, has made a plea to Icelandic banks to work closer with Iceland's fintech community and embrace digital change.
Jónsson was speaking ahead of Iceland Innovation Week, a festival showcasing innovation in Iceland, with talks by founders and investors.
Iceland’s Fintech Cluster, which was set up around five years ago, aims to support the small fintech ecosystem in Iceland.
The Icelandic financial system is dominated by banking giants Arion Bank, Islandsbanki, and Landsbakinn.
Jónsson said:
"I think that we would like to see the mindset changing, especaily within the banks. I don’t think the banks fully appreciate how revolutionary the changes are going to be over the next decade and that they need to participate in that rather than be disrupted into oblivion.
"One good thing about Iceland even though it's small, sometimes it is easier to make quicker decisions.
“Icelandic institutions, be it banks or the government, can be sometimes very agile but sometimes they are not.
“And they need to be more open to cooperation with fintechs. I think they should change their strategies, and focus more on this coming change, participate in that, and encourage it and even fund it and help those companies. We have this vision of that happening.
"Traditional finance and the future of finance working together, I think that is going to benefit everybody.”
One of Iceland’s most prominent fintechs is the challenger bank Indó which was born out of the 2008 financial collapse, which saw the collapse of the country’s banking system.
Indó was created to “restore faith in the banking system through ultimate transparency and no bullshit banking".
But Jónsson said he is not expecting other challenger banks to follow in its wake.
He said:
"I don’t think so, not for now. I think it’s a monumental achievement to have founded Indó. You need regulatory approval, it took them four or five years to get the licence, to operate a bank, it's a great achievement.
“They have filled a gap in the market. I think it is going to be harder to be a second-mover behind them.”
Asked to highlight some of Iceland’s most prominent current fintechs, Jónsson named financial crime fintech Lucinity; personal management solutions fintech Meniga; core banking provider five°degrees, as well as PayAnalytics a fintech which uses data to address the gender pay gap and blockchain startup Monerium.
On what he viewed as Iceland’s sexiest fintech sectors, Jónsson identified blockchain and AI.
But he cautioned that it was hard to work out trends in the country, which is so small with a population of around just 390,000.
He said: “Data on what is hot is scarce because Iceland is tiny. We’re small. We have one financing deal this quarter. There may be no deal next quarter."
On investment in Icelandic fintechs, he urged investors to show patience.
He added: "If I was to advise a founder to receive funding from a VC with such a short time horizon or for example private investors or family office that is more patient, I would recommend the more patient capital."
IMAGE:Matheus Bertelli
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