Fintech startups in Silicon Valley and across the world keep chipping away at services and roles that have previously been exclusive arenas for traditional financial institutions. As new names in payments, lending, and other categories gain momentum, opportunities are opening up not just for entrepreneurs and investors, but for a new generation of consumers as well.

Orange Silicon Valley welcomed experts from many of these breakout startups, as well as banks, VC firms, and regulators, to discuss the shape of Fintech’s future. The ideas that they raised at the daylong February 16 event, “Digital Transformation Through Fintech,” offered a glimpse at possible outcomes, along with a wide range of opinions on what’s working and why some innovation upstarts have failed.

Marc Rennard giving the keynote at Orange Silicon Valley’s “Digital Innovation Through Fintech” event

The day began with a keynote address from Orange Deputy Chief Executive Officer Marc Rennard, who oversees Mobile Financial Services for the company, Rennard offered his perspective on international trends as Orange Bank prepares to launch in 2017. In addition, Orange already operates its Orange Cash and Orange Money offerings in the financial services space. Rennard’s comments set the tone for the diverse discussions that followed. From Millennial habits and the face of retail banking to blockchain-based services and paths to greater financial inclusion, the shared sentiment in the room was that established players face a daunting challenge to keep up with Fintech’s rising stars.

Legacy institutions versus young disruptors is an old debate, according to Rennard. The new discussion on the table in financial services is about legacy players acquiring startups. And that story intersected with Rennard’s description of Orange Bank, which emerged as the result of Orange’s recent acquisition of a controlling stake in Groupama Banque.

Rennard encouraged leaders in the room to adopt an attitude of collaboration among competitors to drive innovation.

“I think we can ask the question, whether it’s possible to imagine an ecosystem with just one app to do everything. I know only of [the Chinese company] Tencent and WeChat, where you can do everything,” he said. “So the question is: ‘Is another WeChat possible?’ Let’s work together to continue to try and find out.”

Morning talks included a conversation between Wendy Lung, the director of corporate strategy for the IBM Venture Capital Group, and Ray Davis, the executive chair of the board for the Umpqua Holdings Corporation. Davis explained how Umpqua Bank adapted its retail strategy under his leadership as CEO and launched a subsidiary, Pivotus, to embrace new trends in tech and consumer preferences.

“We believe at Pivotus that banking is changing, change is changing,” Davis said. “That scares people. I think financial institutions have to reassess how they allocate their capital; I also think they have to invest capital in long-term capabilities.”

Tracy Basinger of the Federal Reserve Bank of San Francisco

The program segued into regulatory responses to disruptive service offerings as Tracy Basinger, the group vice president for the Financial Institution Supervision and Credit Group at the Federal Reserve Bank of San Francisco, sat down with San Francisco Chronicle business columnist Thomas Lee. The talk, which livestreamed by the FRBSF, addressed the tension between regulators and the pace of innovation in Silicon Valley, where startups often act first and deal with regulatory entanglements later.

“There’s no reward from a regulatory standpoint in having an institution fail,” Basinger stated, emphasizing that her goal is to provide confidence and security to the banking system, even as the Federal Reserve system seeks to facilitate innovation. In that pursuit, she made her institution’s priorities clear: “We can’t sacrifice any of our responsibilities in favor of advancing technology.”

Basinger kept her conversation tightly focused on the FRBSF’s mandate and what it is currently empowered to do. However, her commentary did address questions of current regulatory priorities in terms of thinking about Bitcoin and blockchain technology.

“From a Federal Reserve perspective we have responsibility with respect to payment systems,” she said. “We have a team that had done a lot of work on distributed ledger systems … there is a lot of work inside the Federal Reserve on these systems, but it hasn’t really come up to the supervisory level.”

Blockchain technology came up again in the venture capital panel that followed. Thomvest Ventures Managing Director Don Butler, Khosla Ventures Investment Partner Keith Rabois, and Bullpen Capital General Partner Eric Wiesen each pointed to trends and opportunities that they see in Fintech right now, as Marisa Kendall, a technology reporter for The Mercury News, moderated.

B2B payments and cross-border payments specifically will be the areas “where blockchain is likely to be biggest,” according to Wiesen. Still, VC interest is limited at present.

“From a venture perspective, most people are willing to wait and see how it matures before placing new bets, so there’s not a lot of money around for Bitcoin or blockchain startups,” Rabois explained. He added that he has nevertheless seen analysis indicating that cryptocurrency is inversely useful according to the strength of the rule of law in many areas.

Butler, meanwhile, noted that investors have been active in the insurance space recently. Wiesen and Rabois agreed, with Wiesen also citing lending as a category that has his attention.

Keith Rabois of Khosla Ventures

As for the regulatory issues brought up earlier during Basinger’s talk, the VCs on the stage shrugged off the idea that legal entanglements were significant obstacles for them. In fact, Rabois proposed that regulatory scandals should just be considered “part of growing up.”

In the afternoon, the conversation turned to Millennial habits, with Chime CEO Chris Britt, WiseBanyan CEO Herbert Moore, Sindeo co-founder Ori Zohar, and SnapCheck CEO Ken Kruszka sharing their startups’ stories with Jenny Lin, an associate vice president overseeing innovation and ventures for TD Bank. That was followed by a interview between TechCrunch writer Katie Roof and SoFi co-founder Dan Macklin.

Celent Senior Vice President David Easthope moderated the “Blockchain for Banking” panel, which included Civic CEO Vinny Lingham, R3CEV Director of Market Research Tim Swanson, and Chain Partner Lead Clint Gilliam.

“It’s been heartening to me to see not only a free flow of ideas between the big players in this industry, but code as well,” Gilliam said.

The panelists echoed suggestions from earlier in the day, agreeing that blockchain tech is still very much in the early stages of proving its enterprise-readiness for specific applications.

“Right now we’re largely at the POC stage with a lot of companies, so standards makes no sense,” Lingham explained. Lingham also expressed skepticism of POCs already launched by large companies and financial institutions, saying “a lot of what banks are doing with blockchain right now” is just PR.

The end of the day opened up two more fronts in the event’s themes, tackling open banking and financial inclusion. Both sessions brought the conversation back to what tech and services will meet evolving consumer preferences and fill gaps in current service portfolios.

Token CEO Steve Kirsch, Plaid CTO William Hockey, and Citi Ventures Managing Director and Co-Head of Venture Investing Ramneek Gupta addressed the challenges and opportunities surrounding open APIs for banks.

“Our thesis was ‘How do we get people just out of college to build a financial inclusion program?'” Hockey said. He stated that his company sees promise in consumer openness toward new products. “Financial tech has gone from a market that’s gone from early adopters to one that has gone mainstream.”

As for inclusion, the final panel of the day revived a theme from the VC panel, raising the promise of machine learning as a tool that could help improve access.

Sankaet Pathak, Ofer Mendelevitch, Doug Ricket, and Max Gasner

More than 2 billion working-age adults do not have access to an account at a bank, according to Tom Abell, a senior manager at Accenture Development Partnerships, who moderated the inclusion panel with SynapsePay CEO Sankaet Pathak, Lendup VP of Data Science Ofer Mendelevitch, Payjoy CEO Doug Ricket, and One Financial Holdings Head of Product Max Gasner.

“There is a huge market serving the poor in the US,” Gasner said. “They spend $80 billion through payday lenders and the panoply of providers at a very high cost.”
Even as access to better education tools improves, the panelists each expressed doubts that much of the population has adequate awareness of basic savings and retirement services.

“Education is great, but you will need machine learning over the next five years to remove the pain associated with financial inclusion,” Pathak explained. He believes that machine learning can replace the 30-50% of a bank’s work time, which is otherwise devoted to reviewing documents. Moreover, computer vision or better identity recognition could lower the cost of onboarding a customer dramatically.

Therein lies one horizon where tech could radically reshape financial services and operations, which Orange Silicon Valley will be watching closely in the year to come.