We recently sat down with Henrik Lie-Nielsen to uncover his views and to talk about all things FinTech. Henrik is an experienced investor and the Board Chairman of Stacc, a FinTech platform that provides a cloud-based ERP system to incumbents, challenger banks and other FinTechs.
[KAE] What is your involvement in the FinTech space and your journey up until now?
[HENRIK LIE-NIELSEN] My entry into the space began through conducting digital banking projects, back in 1996. We created some of the very first online credit application systems for Norwegian banks. We built the first Internet-only bank in Norway in 1999…so it goes way back! My work has mainly centred upon digital strategy, internet and mobile banking – developing new concepts and ideas within the incumbent banking space to help build the digital services that go beyond those they offer through brick-and-mortar.
The company I had was sold off to a Swedish company in 2010 and I stayed on in the management team of that company, operating the Norwegian subsidiary, for a couple of years. In my previous company, there was a small team that had built lending services and a loan management platform. I really wanted to encapsulate that team in one brand and to focus it as a product platform company rather than as a services company. We founded Stacc with 7 or 8 engineers, on the basis of a product platform company and the team now consists of 25 people.
[KAE] Please tell us more about Stacc.
Stacc’s whole system is based on a cloud-based ERP system and it provides a lot of things that would normally be built into a banking system for free (including accounting, general and customer ledgers). You get these things as a commodity from the underlying ERP system. That makes it a cheaper platform to develop and since it’s also part of Azure, the Microsoft cloud stack, there are a lot of interesting things going on with Cortana, the artificial intelligence engine.
In essence what we’re trying to do is offer a lightweight banking platform which is primarily geared to either deposits or loans (not your daily payments or paying bills). Our value proposition is that, if you’re a big bank wanting to launch an alternative lending product with the attributes that you can’t provide in your current legacy system, Stacc provides the platform to get that product up and running within weeks. I really see the tech stack in banks being broken up into separate more single purpose systems serving different product lines and initiatives – whereas our platform can be used as a single product platform.
[KAE] If we look at Stacc’s current clients, there is a wide spectrum of different players. In your opinion, what are the key distinctions between working with an incumbent and with a FinTech player?
I think there are a couple of different things to consider here.
- Agility: a start-up will have their whole team focused on bringing their products to life and everything will revolve around getting this into production and ultimately, to launch date. So in that way, start-ups work insanely fast. On the other hand, incumbents will have some kind of divisional or product manager whose research focuses on getting the product out into the marketplace and monolithic legacy systems; which is expensive to run and maintain. In terms of the RFP process, an RFP or a negotiation with a challenger bank would be easier and likely entail sitting round the table and mapping out how to solve the challenge.
- Level of red tape: the procurement and planning process, the bureaucratic element of incumbents comes into play.
However, we don’t want to change the back-end system of the big bank. That’s not our prerogative.
[KAE] What is Stacc’s strategy?
The standard Norwegian approach to providing technology products to the banking sector would be to try to get a huge market or wallet share in the big banks. We want to have a more cost-efficient platform that is cheaper to buy, to operate and is faster to develop (in terms of product development). Our goal is to secure a lot of clients in a lot of countries; volume and scale instead of deep and broad relationships with the big banks. I think this will help to keep us agile. Although, if a bank is testing out some agile new ID prototyping and test launching in the market for instance, they are the type of initiatives we would want to be a part of. We are not here to compete with banks but we are here as a provider to them, challenger banks and to FinTech players alike.
[KAE] How do you envisage the banking space panning out over the next few years?
I suspect that we’ll see a very broad form of “industry blurring”. In essence, we think that a lot of normal banking players will start providing a banking service with or without a banking license (some require them and some don’t). The banks will then broaden their services into non-banking services. Another typical thing I envisage in the future is that banks start to give away accounting systems. Say the likes of Sage and Xero…why shouldn’t a bank give away a small business accounting system, for free, to their client? Their Internet bank is the accounting system. The mobile bank is the accounting system. That’s the kind of industry blurring that I think we’ll see going forward.
A bank will solve different problems for its clients in order to avoid being reduced to some commodity supplier with some kind of distribution system/chain. I guess we’ll see the same after PSD2. You’ll get a lot of account aggregation type services. The bank needs to make a decision. Do they want to be a supplier into those services or do they want to make them and retain a relationship with the customer?
[KAE] You mentioned PSD2. How big a change do you think it will bring?
I think it’s a massive thing but it will take time. Even the technical specifications aren’t totally clear yet. How will a bank comply with opening up? A lot will have problems even managing it, but we’ll see third party payment service providers, meaning that you can move payments from the banks’ infrastructure in terms of distribution channels. That’s a huge game changer because the number of log-ins in the traditional internet bank will decrease and it’s the same with my SME/ERP hypothesis – I just pay the invoices and without going into the bank. With PSD2, the bank wouldn’t even need a private system. Sage can act as a payment service provider. So that means that the banks will have a lot less face time with their clients. They need to create new digital accents and experiences to be able to retain their client relationships and PSD2 is a major rival to that. How long will it take? I don’t know. How will it play out in the end? No idea!
As a bank you need to sense that this will be a moving target for years to come. There will need to be some small investments in different theories and ideas, basically seeing what sticks. That’s kind of contrary to the way banks normally work. Due to the fact that they work with long planning horizons, they want to know every detail and every little “X” and “Y” before they commit to anything. They could spend a million planning on it and say no, whereas I would recommend them to spend a million trialling. That way, there may be half a million spent on something worth going forward with. I think incumbents need to be more agile in the way they approach experimentation and it relates back to how we position ourselves; as enabling experimentation.
About the Author:
Henrik is Board Chairman at Stacc, the Scandinavian based FinTech platform company that provides a complete contract management and accounting solution for lenders and banks wanting to automate their back-office operations.
Henrik is a serial entrepreneur within the financial services industry with particular expertise in business and software development. For more than 20 years, he has advised financial services firms around the world on the technologies that will support them as they adapt to keep up with the needs of a changing marketplace.
More about FinTech Vantage:
This post is part of the FinTech Vantage series by KAE that provides a fresh perspective and hears first-hand from various players across the FinTech ecosystem.
KAE will be posting a number of interviews with FinTechs that share their candid viewpoints and to really get under the skin of the FinTech world.
If you would like to share your views and participate in the FinTech Vantage series, feel free to reach out to us at FinTech@kae.com