Vantage: MKB Fintechlab

As the managing director of MKB Fintechlab, a leading Budapest-based innovation lab and MKB Bank’s start-up incubator, two things motivate and inspire me to do what I do in FinTech:

  • I am excited about the opportunities that lie in the digital transformation of financial services, and
  • I believe start-ups and corporates have the power to change the future together.

I am responsible for managing the team, leading the creation and execution of our strategy and constantly bringing in new business opportunities for Fintechlab. It is a team effort and I am proud of the team that we have built in Fintechlab. Prior to Fintechlab, I was working as executive assistant to MKB Bank’s CEO, before which I worked with early-stage start-ups as a venture capital analyst and also set up the region’s first fintech meet-up series together with my co-founders.

1. What is the aim of MKB Fintechlab and how is it trying to achieve this goal?

The role of Fintechlab is to build a gate between MKB Financial Group and the start-up and technology world. Through such a gate, innovations can be built into the everyday life of MKB Financial Group, creating value for both clients and colleagues. We believe large corporates and start-ups complement each other and the synergies of working together in banking provides a better customer experience for clients and value for shareholders.

To achieve this, we do 3 simple, yet very difficult things:

  • We build a community from regional talent in the CEE region through regular events, idea competitions, hackathons and active communication
  • We also invest in and help build start-up companies in the FinTech sector in the form of an acceleration programme. We run a programme every spring for early-stage FinTech start-ups, with the main goal of bringing the start-ups the commercial partnerships they need to launch and grow. During the acceleration programme, start-ups receive funding, access to a coworking space and partner network, industry insights and knowledge through mentoring and workshops and – the biggest differentiator – access to the Bank’s technology sandbox
  • Finally, we build bank-FinTech partnerships to bring innovation to market. Through these partnerships, the bank behind us gets access to top talent innovation and the start-ups get early validation and revenue

2. Incumbents and start-ups often find it difficult to align on common goals and approaches when aiming to collaborate. What is your experience with FinTech partnerships? How do you come across potential challenges?

We have managed to help 3 of our start-ups to live partnerships with MKB Bank where the bank got access to meaningful innovation and the start-up secured their first revenue stream.

The biggest challenge we see is the difference in language and culture. Start-ups are focusing on a single goal and product and usually have a short runway during which they have to show meaningful results. On the other hand, a bank has several projects in the making, several interests and usually employees do not fully embrace the ownership approach.

What we realised is that prior to working with start-ups, the incumbent bank has to invest time and resources into figuring out the strategic assessment of a certain innovation model and technology, find out the exact fit to its current model and operations and delegate resources and deadlines to the future partnership as well.

The good news is that the methods the start-ups are using can help accelerate this process – just think about lean start-up or service design.

The way we overcame this challenge is that MKB Fintechlab serves as a translator between the two worlds and helps the bank embrace these tools and work on the criteria required for successful partnerships.

In addition, when the bank starts using the tools the start-up is already using, it helps them understand each other and work together during the partnership as well.

3. The European FinTech movement has so far been largely focused into a few large hubs such as the U.K. and Germany. How would you characterise the Hungarian and wider Eastern European FinTech scene? What are the main trends and most innovative solutions we should be aware of?

The level of talent – especially technical talent – in the Central Eastern European (CEE) area underlies why these countries play such a meaningful role on the global FinTech stage. The region has been a perfect spot for more than a decade for global incumbents to outsource to and invest in, the region now forms a growing part of their IT and Shared Service Center (SSC) activities. Lately, the key countries, like Hungary have started focusing on creating value-added opportunities and jobs, and the region’s start-up ecosystem started flourishing.

Within the start-up and innovation ecosystem, the FinTech ecosystem has become particularly strong in the last 2 years, after most of the banks, universities and investors started investing heavily in education and engagement. We believe that we had a key role in creating this flourishing FinTech ecosystem by being the first bank that embraced the opportunity that lies within the sector and called for start-ups with whom to collaborate.

When we think about how we can improve Hungary’s FinTech ecosystem, we look for global role models and I believe Hungary has the opportunity to shoot for a status similar to that of Israel, where innovation is born in a small country and not just imported without local value-add. Our initiatives take time to yield such results, but we are in the game for the long-term.

Although the ecosystem is up and running, at the moment, there aren’t a lot of scaled up FinTech solutions that the customers use day-by-day in Hungary or the region. I believe that one of the main reasons for this is the low level of financial literacy in the region whose development requires serious investment and time from both the public and private sectors.

4. This year’s Budapest FinTech Show highlighted the recent progress made by the Hungarian FinTech scene. Where do you see the biggest opportunities for FinTech in Hungary?

Hungary’s and especially its capital, Budapest’s opportunities lie in the following:

  • We have open and innovative banks: banks are not just open to partnerships – we have incubation and acceleration programs (MKB, OTP, KBC), live partnerships and the first API sandbox in the region from MKB Bank.
  • We have a progressive regulator: The National Bank of Hungary has been preparing the first regulatory sandbox for FinTechs in the CEE region and plans to implement it next year.
  • VC funding is accessible: hundreds of EUR millions are available through private, state and EU funds for talented founders.
  • We have role models to turn to: We have our own Skype and PayPalstories in FinTech — we have founders who have built companies and now give back their knowledge to the community. We are happy to have most of them as our mentors in Fintechlab.
  • As mentioned above, talented co-founders and first employees: the level of talent in Budapest is prominent and these organisations provide toolkits for people with ideas to start and test these. Notable mentions include: Corvinus Fintech Center, CEU Msc in Finance, Blockchain Competence Center.

5. Are there any common misconceptions held by peers, incumbent banks and/or other industry stakeholders around FinTech? Why do you think this is the case?

Coming from a banking innovation background, most of the issues I see are raised by regulators or banks.

Security issues:
There is a misconception where over-regulation feels like security but it is not true anymore in the digital age. Bankers tend to discount the security of innovative start-ups and overvalue the security of their own, well-known systems. It is understandable, as banking is a trust business – you trade your customers trust that they put in you to overview and manage their money. But you have to be open-minded and not create a competitive disadvantage for yourself.

FinTech revolution and the threats of it:
Most people tend to overestimate the opportunities from FinTech start-ups and underestimate the threats from players who have not entered the scene yet. I believe that it is more like an opportunity when it comes to FinTech start-ups with whom we can partner up to widen the scope of our presence in our customers’ life. If we understand our customers’ journeys and we solve more problems together with start-ups, we can create value together. I see the bigger threat in established, global digital players (think GAFA and others) who are present on the same customer journey. For them it makes sense to integrate the financial life of their customers at some point. I believe banks will be around for hundreds of years but they have to fight hard and invest heavily into innovation to remain/become a value-added service provider to their customers and not a utility hidden behind big platforms.

Banks know it all, can do it all and will do it all:
Usually there is a certain misconception in the head of bank executives that if they have already thought of the start-up’s idea, it’s something they could do themselves – “why bother to partner with start-ups”. I believe the key in innovation is not the idea but the execution and banks who realize that they usually don’t have the talent and capabilities to execute with the speed of a nimble start-up can leap ahead of the other banks.

6. What pearls of wisdom would you share with FinTechs starting their journey and why?

Build a strong core team:
There is a certain amount of work you can do and challenge you can take on in 24 hours as an individual. Building a strong and complete team will allow you to exponentially increase your capacity. Ideas usually change and validation proves you wrong in the early days of a start-up but if you have a strong team behind you, you can always find new meaningful problems to solve.

Solve big enough problems:

Solve problems that change the life and/or work of your customers in a meaningful way. If you can do so, it will be easier to motivate your team members, easier to find investors and your customers will be willing to pay for it.

Figure out your business model early:

In the financial sector, acquisition costs are usually higher than in other sectors and moreover, conversion from freemium to premium is harder to do. Figure out what is your business model and set your KPIs according to them. And as mentioned above, solve big enough problems – somebody will pay for it.

7. What would be your advice for banks looking to partner with FinTechs?

Be patient and invest into understanding what exactly you want to do:
Don’t get into the whole FinTech start-up scene just to score some Proof of Concepts (PoCs) to show off to the press.

Build competence and find the champions inside your organisation who will help you be transformative:
Don’t just rely on consultants but use them to help you build internal capacity. Once you have those couple of champions in your organization, be patient and provide them with opportunities to transform your culture.

Be brave – test different models:
There are several ways for start-ups and incumbents to work together and not every one of these models fits every corporate. Test and choose the best model for you in the long-term and don’t be afraid of letting some of these models go after trying them.And most importantly, never forget that this is a long process. We have been investing into our partnership with the FinTech world in the last 2 years and we are just at the beginning.

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