What does the future hold for fintech innovation overall and blockchain in particular? That question was posed to a panel of visionary leaders assembled from around the globe by Ripple’s SVP of Business & Corporate Development Kahina Van Dyke at Swell 2018 last fall.

As we step into 2019, it’s helpful to revisit their thoughts on the role of regulators, the real-world applications for blockchain underway in Africa, how to drive innovation from within large financial incumbents, and other meaningful changes already underway around the globe this year.

Importance of fintech in Africa

Tokunboh Ishmael, Chairwoman at African Venture Capital Association and Managing Director, Director and Founder of Alitheia Capital, helped jumpstart the conversation with her thoughts on fintech in Africa. As a financial service and digital computing veteran that now manages fintech investments from her offices in Lagos, Nigeria, she has had a front row seat to the evolution of fintech on the continent.

When she began investing in fintech more than 10 years ago, she said research showed 70% of the Nigerian population was excluded from the banking system. Like much of Africa, Nigerians operated on a cash basis because banks and retail institutions had become complacent serving the 1% of the population with money.

But as fintech activity and investment increased, there has been a marked shift in the country. Emerging fintechs have made it possible for Nigerians to use digital services instead of cash for payment and other basic functions. At the same time, these upstarts have spurred the incumbents to re-evaluate their business models and begin serving a wider swath of the population.

One of Ishmael’s favorite examples is a company called Paga that had 2,000 clients when she initially invested. Now, ten years later, they have nine million customers—a level nearly on par with Nigeria’s largest bank that is 100-years-old and serves 10-12 million people.

As a result of this success story and others, new research shows that the number of unbanked Nigerians has shrunk from 70% to 45% of the population.

Fintech environment in Europe

While the number of underbanked customers might be less in Europe, the continent is seeing similar levels of disruption and innovation. Ben Brabyn is Head of Level39, a fintech and cybersecurity community in London that numbers more than 200 companies and is charged with elevating both these disruptors and awareness for the technologies at large.

Brabyn attributes much of Level39’s success to the unique nature of London. As a city, he said it blends the tech environment of San Francisco, the creative community of Los Angeles, and the banking chops of New York with the political and regulatory activity of Washington D.C.

This has led to a thriving community of disruptors with deep roots in adjacent areas of expertise. The resulting level of cooperation has made for what Brabyn thinks are distinctive gains in innovation.

How to foster innovation at incumbent banks

Amy Radin is the former Chief Innovation Officer at Citi, E-Trade and a number of other leading financial brands, and the author of The Change Maker’s Playbook, a book profiling change agents in business.

When asked by Van Dyke (a former colleague) how incumbent banks can innovate from within, Radin wryly observed it’s been ten years since the collapse of Lehman Brothers and the onset of the financial crisis. She was laid off then because at the time banks associated the idea of innovation with the creation of toxic assets that contributed to the collapse.

As a result, the last ten years have been challenging for the big banks. Focused on reducing expenses and managing compliance, she says they took their eye off the innovation ball and now have to play catch up.

She pointed to the example of Citi, which downsized from 375,000 people at the time of her dismissal to a little over 200,000 now. That reduction eliminated a vast amount of institutional memory and created an outflow of talent to other companies and upstarts.

Radin says that over the last five years, these same banks have now become more attuned to innovation and opportunities. Specifically, she has seen investments in the omni-channel experience, AI, robo-advisors, blockchain and mobile.

But these banks still need help connecting user needs with business drivers. Even for fintechs she said it’s a lot of the old business models—lending, deposits—just with a “fresh coat of paint.” There is a need for new ideas and approaches like Ripple.

Radin warned the audience not to write off incumbents because just as startups don’t “own the market on innovation”—neither do incumbents “own the market on bureaucracy.”

She did later agree that big companies have a predilection towards inertia, even joking that many banks pay lots of people to stop people like her. For these big companies, the reinvention of the how often becomes more important than having a brilliant idea. In her words, they want to “engineer for predictability when you’re doing something that is highly unpredictable.”

Role of regulators and impact

As the panelists discussed the changing nature of regulators in relation to fintech, it became apparent that Europe and other parts of the world have a much more collaborative regulatory environment than the United States.

Ishmael praised regulators in Nigeria for being forward thinking and helping bring fintechs and incumbents together to create “win-win” scenarios. Brabyn even went so far as to describe the UK’s Financial Conduct Authority as the “superhero of fintech” for its support of innovation. Interestingly, he pointed to an emerging European appetite to be known as a regulatory superpower that exports standards around the world.

When asked by an audience member whether it was better to have this supportive bench of regulators or something more conservative as in the U.S., the panel replied that both are desirable to create balance. While Brabyn pointed out that tougher regulations do not deprive us of innovation, Ishmael said they can even instill a needed level of discipline.

Applications for blockchain and prospects for fintech

Van Dyke returned the panel to the topic of blockchain and asked each their thoughts on potential applications for the technology. Ishmael was passionate about its use in Africa, saying it’s not a “nice to have” but rather an essential technology for solving access.

She went further, explaining its key areas of application will be in digital identity and payments. For a continent that lacks an established identification system (think social security in the U.S.), blockchain can be transformative. By solving for identity, it can have follow-on impact and applications in areas like healthcare and education.

For payments, Ishmael pointed to regional, cross border transactions. Today, those require expensive exchanges into dollars, a costly process that stifles economic growth. Technologies like Ripple can enable growth in faster, easier regional commerce. Blockchain can also ensure the integrity of records and transactions that occur at handoff points between banks and rural transfer agents where locals deal in cash.

Radin supported the potential for blockchain on a larger, enterprise scale. She sees “cause for optimism” in the growing quorum of smart people that view potential in the technology and are experimenting with real use cases. Radin says that while it will be messy, “there will be breakthroughs.” She’s so bullish, that she says as an early stage investor she feels she should have more money in play because there is going to be a lot of value created.

Prospects for fintech innovation

Brabyn reinforced this tone of optimism but also sounded a note of caution. He is excited about what the future holds for fintech innovation, but is concerned that populism and a growing backlash against technology in general could be red flags. He said as an industry we must make the case for value in order to earn a license to operate. Without it, he’s worried we might find the ability to innovate curtailed.

Ishmael closed on an up-note though. She believes that the time for distributed ledger technology is now because we have finally become adept at explaining it and finding use cases. In five years, she thinks it’ll be integral to everything we do.

In the example of Africa, she forecast that what is known as the “Last Billion” will leapfrog the rest of the world and demonstrate how to best use these technologies.

Watch the full panel here: