The Future of Finance - Transforming Financial Services with Bitpanda
On May 4, we invited Lukas Enzersdorfer-Konrad, Deputy CEO of Bitpanda & CEO of Bitpanda Technology Solutions, a leading European trade-everything platform. The topic of the discussion was "The Future of Finance – Transforming Financial Services", as a teaser for his keynote at The Banking Scene Conference 2023 Brussels.
We ended up having an excellent talk where Lukas shared more about the business he represents and how they help shape the future of finance. We also dug deeper into his vision of financial services and the new technology stack currently challenging the status quo.
"We need to differentiate between crypto as an asset class and the role of blockchain technology that enables automated financial services through tokenisation and decentralised finance", he explained. "From my perspective, crypto is being used for investing in a high-risk asset class, where blockchain technology enables much more use cases as a transformative technology for the future of financial services."
It set the tone for the rest of the conversation.
Bitpanda's Road to Transforming Financial Services
Lukas believes that the enormous interest in crypto by retail consumers was because of the low barriers to entry. He witnessed many people investing in high-risk investment asset classes with never having invested in traditional capital market, "even though theoretically this makes no sense from a rational perspective".
Founded in 2014, Bitpanda is an established fintech today, making investing for retail customers as easy as possible. They want to play a pivotal role in making investing in any asset as easy as investing in crypto assets.
Initially focused on crypto assets, they expanded into stock trading and fractional shares based on blockchain technology precisely because of that low barrier to entry. Why should a consumer be able to invest 1€ in Bitcoin and not in regular shares?
Lukas: "With the B2C offering, we learned that we are really good in building technology and products and in simplifying blockchain technology for end-consumers when it comes to crypto as an asset class and crypto-related services and functionalities like staking in a fully regulated and compliant way."
With that knowledge stack, they developed a B2B offering that allows corporate clients to integrate Bitpanda's investment services in their platform with a simple API so they can serve their end customers with investment solutions. Bitpanda is the licensed entity, the custodian, and the technology provider. The corporate client can focus on sales and distribution to their customers.
Today, they are a MiFID2 investment firm passported throughout Europe, with an e-money license and 12 crypto licenses and registrations in several European countries. They provide 250 different crypto assets to more than 4 million users, both in a B2C and in a B2B context. On top of that, they support more than 2000 assets traded as fractional stocks.
Companies they onboarded are, for example, N26, Lydia, Visa, Mambu, and, since April 26 we know they will soon onboard Raiffeisenlandesbank NÖ-Wien.
The need to be trusted is the only constant in financial services these days. In that respect, signing the first incumbent is a milestone in Bitpanda's 9-year history. Suddenly other incumbents see a peer being onboarded, and that enhances trust in Bitpanda's services offering, especially other sister companies of Raiffeisenlandesbank NÖ-Wien would follow.
Trust is also why the company invests so much in financial education, not only towards consumers but also towards banks, regulators and all other stakeholders. Lukas: "What is the risk involved? How does that blockchain work? Yes, education is a super large part of our value proposition across the whole value chain, especially with the end consumer or the end customer, but also towards our B2B clients and prospects, regulators and supervisors." Even branch employees are trained after being onboarded.
Why would incumbents still consider investing in crypto investment services? We asked Lukas: "My advice is to simply start gathering data and look into your payments into the payment flows of your users or their clients, it doesn't matter if it's retail or corporate, and monitor how much money you have to send out in the last two years, for example, to crypto brokerage companies and crypto exchanges. Suddenly, you will be shocked at how much the outflow in absolute value is. That money gets turned around three to five times a year at these places. So suddenly, you understand how much revenue is generated somewhere else and not as part of your value chain."
The Future of Finance Reimagined
Lukas was very transparent about how he looks a cryptocurrency, and one thing is clear: it is NOT about payments, according to him. It is not just about trading and investments; more fundamentally, it taught the world about how to interact with blockchain.
"With smart contracts, you can build automation in liquidity provision, trading, and investment services but also automate certain lending activities, provide collateralised lending through tokenisation etc. The real-world applications of blockchain will not just be for high-risk asset classes that crypto provides."
Bitpanda wants to be a key player in building that extra layer of automation, transparency, and democratisation of investments. Lukas explained that less liquid assets could be fractionalised to be traded in much smaller pieces thanks to tokenisation. So suddenly, expensive art, less liquid shares, or even rare sneakers are available to invest in by every consumer.
Lukas believes that we'll live in a hybrid world of tokens and assets in the future. The underlying technology about the representation of ownership and value will be very different from today.
"The banking industry was the first to look at blockchain potential. In the long run, I look more at the gaming industry and the metaverse with their unique challenges of representing ownership of digital goods. In the end, this needs to be tokenised. Is that part of the finance industry? No, but it's directly related to blockchain technology and the token industry."
"We are on a mission to eliminate the complexity of smart contracts, living and dealing in Web 3.0, NFTs. We want to make the utilisation of blockchain consumer-friendly and easy to use with our interfaces, for you as a consumer, as a financial institution or as a service provider."
To me, the session opened my eyes to how we should look at the potential of blockchain technology. Sometimes we should leave existing processes behind and rethink the way we, as an industry, create value. Perhaps blockchain is not a tool to rethink processes, but should we consider it a way to rethink value creation for the end customer?
I cannot wait to hear his speech at The Banking Scene Conference 2023 Brussels, on May 16, titled “How the Rise of Cryptocurrencies is Redefining the Ethos in Banking”