Fintech startups and traditional banks are increasingly realizing that they need to collaborate to capture new opportunities, argues Mariano Belinky, Managing Partner at Santander InnoVentures. Traditional banks can learn from startups new ways of serving costumers while startups can leverage banks’ consumers to bring them their products.
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Mariano Belinky: Since December 2014 he manages Santander InnoVentures, Santander Group's global venture capital fund, focused in early stage Financial Technology investments. He joined Santander InnoVentures from McKinsey & Co., where he was an Associate Principal in the Corporate and Investment Banking and Global Risk Management practices, based in New York. Here, he spent six years advising global banks, asset managers and private equity firms acrossNorth America, Europe and Latin America on multiple strategic topics.
photo credit: Chewy734
Licensed drivers don’t have any disadvantages that couldn’t be fixed with the right motivation, says Markus Villig, founder and Ceo of Taxify, the “anti-Uber” application aiming to help traditional taxi firms and drivers respond to Uber and its likes.
Markus Villig: Taxify helps taxi companies grow their business with great technology they couldn’t afford themselves. In most countries a taxi license costs just 300€, so taxis don’t have a big fundamental disadvantage to ridesharing apps with unlicensed drivers.
With the help of convenient booking applications & improved service standards, taxi companies can successfully adapt and grow their market share.
Most people actually prefer licensed drivers who can use fast-lanes, if their service, quality and price are on the same level as private drivers.
The Digital Post: Is the idea behind Taxify concretely working? What is the response of taxi firms and that of the consumers?
Markus Villig: Taxify has thousands of drivers and hundreds of thousands of customers using the platform every month. This shows that people have nothing against taxis, but they have a problem with the bad quality and high prices taxis historically have had. Taxify solves that, by making licensed drivers actually attractive.
The Digital Post: How does your start-up operate nowadays? What are the plans for the future?
Markus Villig: We are growing fast and opening new cities every month. We already are the market leader in Eastern-Europe and our first goal is to become the largest taxi app in all of Europe by number of bookings in 2016.
Our goal is to provide people with the most convenient and affordable transport we can, so taxis are not a niche service, but a mainstream alternative to public transport.
The Digital Post: Your experience shows that the so-called “uberification” of the economy can be turned in favour of the very traditional business models it is said to threaten. What do you think?
Markus Villig: Licensed drivers don’t have any disadvantages that couldn’t be fixed with the right motivation. Historically taxis have had the freedom to overcharge and offer low quality services.
With the launch of new unregulated ridesharing apps, the licensed providers are feeling enough pressure to change their offering. Taxify is there to accelerate this process and provide the tools needed to survive.
Markus Villig is the founder and CEO of Taxify, the largest taxi booking app in Eastern Europe.
photo credit: Gisela Giardino
Despite what many people may think, there is no real lack in capital supply for Europeans interested in launching their own start-ups in the digital domain.
The rise of (digital) technology start-ups is a global phenomenon, with extensive start-up ecosystems – such as the one in Silicon Valley – being replicated all over the world. Like any other region, Europe is highly interested in reaping the economic and societal benefits of a flourishing start-up economy.
In a recent speech, Neelie Kroes (the former Commissioner for Europe’s Digital Agenda) stated for instance that two out of three (!) new jobs in Ireland are created by start-ups in the first five years of existence.
Not all is rosy, though. Critics often say that it remains hard for European start-ups to get access to the proper financial means to kickstart their businesses.
But is that really the case?
It’s definitely not their biggest problem. Despite what many people may think, there is no real lack in capital supply for Europeans interested in launching their own start-ups in the digital domain.
Virtually each region has done a good job in developing the appropriate funding mechanisms to support start-ups’ launch activities. In other words: it’s not (all) about the money. As a matter of fact, three bigger threats to European start-ups’ longer-term growth can be discerned – culture, regulation and mindset.
A first issue is Europe’s fragmented market – not so much from a geographical perspective, but rather from a cultural one. Indeed, in spite of all good intentions, it remains difficult for European start-ups to sell their products across ‘cultural’ borders. The use of different languages is one obstacle, of course, but divergent social aspirations and cultural values are equally important barriers.
For example, selling a solution for personalized online advertising might be perfectly acceptable in one region because of the advantages it brings (instead of being spammed, one only gets to see those ads that are in line with his/her interests), but it may fail completely in cultures where this is perceived as a direct assault on people’s privacy.
Intra-European legal and regulatory barriers present additional obstacles. A concrete example is the burden that accompanies the launch of pan-European digital health solutions, with each European country having issued its own regulations related to the development, sale, usage and reimbursement of products and services in the digital health realm.
And finally, there’s mindset. Contrary to the US, where everything is big and aimed towards rapid international expansion, European start-ups typically have a more ‘provincial’ mindset. In today’s global, digital economy, though, that’s a major shortcoming. In order to really succeed, start-ups should have international ambitions right from the start.
As we observed already, none of those barriers exist in the US – making this geographical and cultural region a single, big ‘unified’ market with more than 320 million consumers.
Both its scale and transparency make it an easier target to introduce products and grow. A bit ironically perhaps, even conquering the rest of the European market is typically easier if done from the US…
So, how can we address those challenges? I see three important lines of action, in which European policy makers have a major role to play:
– From a regulatory perspective, measures should be taken to further unify the European market – so that its full potential of more than 500 million consumers and potential investors can be tapped.
Streamlining regulation in domains such as digital health, for instance, would already open up a wide range of growth opportunities for potentially hundreds of European start-ups.
Obviously, this would not help us overcome the cultural boundaries overnight; but to that end, instruments are already in place, such as the European Network of Living Labs (ENoLL), to help companies investigate how people will respond to new products and features – before the actual market launch.
– To foster the pan-European growth of start-ups and overcome the provincial mindset, a number of good initiatives have already been taken as well.
One concrete example is the creation of EIT Digital, which helps European start-ups accelerate their growth – o.a. by finding European and worldwide customers for their products and solutions, or by helping them raise funds.
– And finally, when it boils down to securing first customers, Europe should investigate the concept of ‘innovative procurement’– a best practice that has already been widely adopted by the UK and US administrations. It requires government bodies and local branches of big multinationals to allocate a certain percentage of their public procurement activities to innovative start-ups.
As such, start-ups can more easily get the necessary credentials and references to continue growing their businesses. According to certain estimates, public procurement is worth €2,000 billion to the EU economy – so dedicating even 1% of that amount to innovative procurement still equals €20 billion per year to support the European start-up ecosystem.
But also for that, a cultural and regulatory shift is required…
photo credit: Shumona Sharna
Which EU countries have been so far successful in exporting digital services and which are not? The result is surprisingly mixed.
Earlier this month the European Commission presented its new strategy of the Single Digital Market. Several of DG Connect’s most important goals are to give everyone a fast connection to an open internet and to support European innovators, entrepreneurship and start-ups.
The creation of a true Single Digital Market should impact the export performance of firms active in the digital economy. This columns ask which countries in Europe have been so far successful in exporting these digital sectors (i.e. services) and which are not. The result is surprisingly mixed.
The figure below shows the relationship between the exports of digital services on the vertical axis and an index measuring the so-called network readiness of countries on the horizontal axis.
This latter index on is taken from the World Economic Forum which measures the extent to which an economy is prepared to apply the benefits of information and communications technologies (ICTs) in order to promote economic growth and well-being.
Included in this measure is whether countries have the latest technologies available, whether firms absorb technology, or whether multinationals bring in new technologies into the domestic economy, etc.
Data-intensive services exports and network readiness index (2012)
On the vertical scale, digital services are defined as the producers and users of data services. The producers of data services are those active in sectors such as data processing services, software publishing services, telecommunications, or internet publishing and broadcasting services.
These are sectors that bring forward data in their production process, which is then used in many other sectors inside the wider (downstream) economy. Using much disaggregated data, it is possible to measure in great detail how much each and every industry uses these data services from data producers.
Unsurprisingly, the biggest users are at the same time the producers. Users of data services are therefore in turn telecoms, software publishers, internet publishers, data processing and hosting services firms, but also sound recording industries and the motion and video industry.
Taken together, these services are data-intensive as they work a lot with data. Using a different data set and connecting data-intensive services with trade, the vertical axis shows how much each country in the world actually exports these data-intensive services as defined above. This export measure is put in logs.
The figure shows that there is a pretty clear relationship between the readiness of a country in terms of ICT networks and the level of exports a country has regarding data-intensive services. In other words, a stronger ICT network in countries is positively associated with exports of services which intensively use data and the ICT network.
Countries with low network readiness show low levels of data-intensive services, but countries with high network readiness exhibit a higher level of services which precisely depend on a strong ICT network in order to transmit data. In the figure above, the European countries are given in blue and are marked with their 3-digit country code. It shows that overall most European countries are doing well.
However, there are countries which are doing better than others, even between countries sharing a similar level of network readiness.
For instance, although some countries such as Italy, Spain, but also Poland and Romania have an average score on ICT networks, they nonetheless are very successful in exporting data-intensive services compared to Lithuania, Estonia and Slovenia which actually share a similar level of ICT network.
Similarly, countries such as Great-Britain, France and Belgium are outperforming Scandinavian countries whilst actually having the same potential to export when looking at their ICT networks.
In fact, surprisingly Finland and Denmark export as much data-intensive services as Romania and Poland despite having a much higher network readiness index.
What can we therefore say about the success of Europe’s new strategy of the Single Digital Market?
Well, in terms of trading it, much scope still exists for the Nordics and the Baltics to improve their performance in exporting in the digital economy of Europe. Perhaps the Commission’s new digital strategy should focus first on these countries and try to figure out why these are the underperformers.
This post was originally published on the ECIPE (European Centre For International Political Economy) webpage.