Why collaboration is the glue that binds the Stockholm fintech ecosystem
For Michal Gromek, collaboration is key. After moving from Berlin to Stockholm in 2014 he made it his mission to ensure that the city’s flourishing fintech startups, scaleups and unicorns didn’t get trapped in silos that would hamper their growth.
He also placed an emphasis on the mutual benefits to be had from startups and traditional finance companies learning from each other. Fortunately, Stockholm is a city that prides itself on innovation, openness and flat hierarchies, meaning the barriers to communication across company lines are unusually low.
“Stockholm allows me to combine multiple passions in one place and it encourages me to retain an interdisciplinary approach to fintech," he says.
Thanks to a varied professional life, Michal Gromek has gained deep insights into the Swedish fintech ecosystem: he covers Nordic fintech for Forbes.com, is COO of a fintech venture, co-founded a fintech innovation foundation, teaches at business schools, and is often engaged as a keynote speaker.
Although aware of the many challenges that both the Swedish and international fintech arenas are facing, his strong belief in collaboration as one of the key success factors is fueling his mission to glue together the many different areas of fintech.
"There is nothing more rewarding than to design and lead workshops with executives of banks and insurance companies, law enforcement representatives, politicians or other decision-makers and see them experiencing a paradigm shift that leads to more collaborations with fintechs. Seeing such change in action can often be way more impactful than initially anticipated, but when it happens it fills my heart with joy to see that we all take an active role in making the world a better, more sustainable and safer place.”
In a recent Nordic insurtech report co-authored by Michal, representatives from both sides of the aisle came up with a list of 84 different types of challenges they faced when collaborating on innovation projects.
From a startup perspective, these are the four challenges most frequently raised when dealing with established finance companies:
- Lack of a single point of contact to receive pitch decks, take meetings and answer questions
- Black boxes of internal processes that make it difficult for startups to access information and documentation about required steps, documents and decision-making processes
- Long turnover times between the first meeting and implementation including signing agreements, transfer of intellectual property and agreement on the conditions of the partnership,
- Uncertainty about expectations from incumbents regarding required startup maturity before a partnership can be formed.
For incumbents, these 5 challenges were deemed the most pressing::
- Legacy systems and the difficulty of technical integration using new programming languages,
- Confusing technology with solutions as incumbents request fintechs to wait for a partnership agreement until the core system has been replaced, which sometimes can take a very long time,
- Proven development partners, as framework agreements and ongoing SLAs, make them hard to replace,
- Unclear mandates within the organization. As fintechs ventures often require interdisciplinary collaboration, a range of mandates from different incumbent departments is necessary,
- Lack of communication with the ecosystem as incumbents work primarily with consultancy companies but yet rarely with fintech companies to solve their challenges.
In recent years a growing number of Swedish fintech companies became unicorns and the sector has expanded its offering both vertically and horizontally towards more sophisticated products. Even though banks, fintechs and insurance companies have launched some engagement mechanisms in the last years, those improvements are not yet where they could be.
The pressure to implement a portfolio of recent regulations such as MiFID II, PSD2 or the 5th AML Directive has forced fintech companies to upgrade their compliance processes and has brought them closer towards traditional financial providers in terms of regulation and processes. This development has made fintechs more attractive to work with for traditional financial providers as regulatory risk is steadily decreased. Furthermore, a few fintech companies such as Omocom, Kidbrooke and Fairown that have been featured in the latest Stockholm fintech guide have focussed on building business models around incumbent-startup collaboration. Change is already on the way.
This story is featured in the new Stockholm FinTech Guide, which you can download here (PDF).
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