Would-be entrepreneurs and bank executives gathered at a Startup Weekend in Cambridge to explore the future of financial technology, or "fintech" - with a special focus on smartphone payment systems.
"Fintech" is a hot new area in startups. The term can apply to almost any technology-driven innovation in financial services, but at the moment, it's especially associated with new systems for mobile banking - apps like Apple Pay or Google Wallet, for example - and new non-bank credit systems like peer-to-peer lending (e.g. Lending Club, Zopa) as well as alternative e-currencies (e.g. Bitcoin, TradeQoin).
Banks: Silicon Valley has your number
Susanne Chishti is the founder of Fintech Circle, a fintech-focused angel investors' network. An Austrian banker who has lived in London for many years, she believes no corner of the financial world will be left unchanged by fintech.
"Fintech startups are proliferating. We're in year 2 of a 20-year run of transformative fintech development. Every sector of banking can be renewed using fintech. At the end of twenty years, all banks will be fintech businesses," she told DW.
That doesn't necessarily mean existing banks will all be out of business and replaced by disruptive Silicon Valley startups, she said. It means that established banks will have to embrace fintech in order to keep up with the evolution of finance.
The holy grail in payments
"The holy grail of payments is a secure, platform-agnostic e-wallet and payments system," Chishti said. Such a payment technology would let you send money from anywhere to anywhere: From your Facebook page to your Google mail account; between different smartphone apps; between, to or from all bank accounts.
"It's coming," Chishti said. "Lots of companies and startups are working on this, but we don't know who will win the race yet, or what kind of underlying software protocol it will involve."
54 hours to change the world
At Fintech Startup Weekend, seven competing teams were given 54 hours to develop a fintech startup proposal. These weren't teams who had been working for months on a project together; the teams were formed on Friday evening, at the start of Startup Weekend, out of clusters of complete strangers who happened to sign up for the event.
The teams spent the weekend brainstorming, arguing, harvesting feedback from experienced bankers serving as mentors - and in the end, each pitched a startup idea to a panel of three expert judges.
First prize: A chance for the winning team to be invited into a support program for early-stage ventures run by "Accelerate Cambridge," a special unit of Cambridge University's Judge Business School. The program's director, Hanadi Jabado, is an angel investor and serial entrepreneur. She's the driving force behind Startup Weekends in Cambridge, on themes ranging from biotech and edutech through, in this case, fintech.
Big old banks look to date sweet young startups
The weekend's corporate sponsor: BNY Mellon, a heavyweight American business-to-business bank and financial services company with more than 50,000 employees worldwide. BNY sent more than a dozen employees to Startup Weekend, about half of them fiftyish bankers there to serve as mentors to the startup teams, and the other half young employees sent to participate in the competition.
The idea, according to one BNY executive present, was to stimulate BNY employees' creativity by "getting in the room and breathing the air" - i.e. getting a taste of startup culture, and a sense of emerging trends in fintech.
Breathing the air, drinking the nectar
"BNY Mellon is becoming an interface between fintech innovators and large established financial institutions that don't know how to engage with startups," Jabado said.
"A lot of banks see fintech startups as a potential threat. BNY doesn't - it's trying to play a bridging role. It wants to become a core player in fintech by nurturing an ecosystem of startups and young companies that could add value to BNY's clients."
Jabado spent the weekend ebulliently cajoling participants to develop startup pitches - and daring them to take the resulting projects seriously.
A handful of participants had arrived with carefully considered startup ideas they'd clearly been thinking about for some time, but most saw the weekend as an exercise, a learning experience. Some teams spent the weekend developing pitches based on ideas dreamed up on the spot, on the first day of Startup Weekend.
Serial entrepreneur Elon Musk made many millions as co-founder of PayPal, an early fintech startup. He went on to co-found Tesla Motors, Space-X, Solar City, and - maybe soon - the Hyperloop (pictured)
Scan and bag your own groceries
After hearing the seven pitches on Sunday evening, the judges chose their winner: "ScanLine," a proposal for a smartphone app that would have shoppers scan barcodes of items they buy in stores, and serve as their own checkout clerks - enabling stores to save money on clerks, and clients to avoid wasting time in checkout line-ups. The system would enable consumers to better track where their spending-money was going. A motion-tracker in the smartphone would serve as an anti-theft mechanism.
There's no word yet on whether the winning team will actually go ahead with the project. But it was clear that most of Startup Weekend's participants had enjoyed the process - and everyone now had a better idea of how to prepare a startup pitch to present to potential backers. Starting a company became more thinkable, a less remote possibility, by the end of the weekend.
The payment system winner hasn't emerged yet
Startup Weekend aside, there's a fierce competition in progress amongst real-world entrepreneurial teams. Who will dominate the future of e-payments? Apple Pay? Google Wallet? MCX? Ripple? Bitcoin? Pingit? Or some other system that's just a gleam in a startup entrepreneur's messianic eye at the moment?
Susanne Chishti had no view on whether the system that eventually emerges as the dominant payment protocol would use blockchain technology - the system underlying Bitcoin and some other new digital currencies - or something completely different, like the software underlying Barclay's Pingit mobile money-sending app for smartphones.
Electronic payments via smartphone apps will likely make physical cash obsolete - though in Germany, many people feel privacy and anonymity concerns remain a reason to hang onto paper cash
Whatever emerges, mobile payments shouldn't be tied to a particular carrier or company, and you shouldn't need an account at a particular bank in order to use it, Chishti said. "That's the problem with Pingit, for example - you need a Barclays account to send money from it."
Let a hundred flowers bloom
The list of fintech startups is long and growing. Somewhere out there, whether in Cambridge or Berlin, San Francisco or London, Moscow or Chennai, tiny startup teams are working on various fintech applications you and I have never heard of - yet we'll both be using those apps daily within just a few years.
After working absurdly hard for several years, founders of especially successful projects will have become very rich. Of course, for every team that strikes it big, there are dozens, even hundreds, who fade away. But founders can increase their odds of success by breathing the air at events like Startup Weekend - and getting tips and insights from experienced entrepreneurs willing to mentor new startups.
A tip for would-be entrepreneurs from Hanadi Jabado: Choose your team very carefully, since "73 percent of teams die because of team issues. As an angel investor, I never invest in the idea. I invest in the team. A good team can do almost anything; the only thing a bad team can do is fail."