In this interview with Supertrends, Dr. Daniel Fasnacht, CEO and founder of EcosystemPartners and lecturer for the Finance Executive Education program at the University of Zurich, shares his insights on the current state and future trajectory of the fintech sector. He discusses what might lie ahead for the sector, what can be learned from innovation in China, and the development of the “techfin” industry and “superapps.” He also addresses the potential of quantum computing in finance, the hype surrounding blockchain, and more.

Daniel Fasnacht: My name is Daniel Fasnacht. I used to be in the business world, starting my career at SAP, then moving to Accenture, a consulting company, and then I moved into banking: Credit Suisse, Julius Baer, some hedge funds, private equity firms. During all my professional career, I’ve been very interested in trades and innovation themes, and that's why I moved, five years ago, back to academia, where I am a lecturer and program director for certain executive education programs.

Supertrends: What's on your radar at the moment in the fintech sector?

D.F.: I found that the innovation hot spots moved from Silicon Valley, with all these tech companies, as you know, to Chinese innovation hubs like in Hong Kong or Shanghai. And if you look at these Chinese fintech companies, they are far advanced in terms of digitalization, in terms of materialization of data, in terms of social commerce, in terms of everything you can imagine that could be kind of disruptive. That's why I like to learn from these models. I also found that people or banks in Switzerland have a long history, but they are lacking all this knowledge. We can learn from China, which is quite new.

Supertrends: What progress has been made in this in the last few years? What's the stage of learning?

D.F.: That's a good question, actually. We did an event last October at the cantonal bank in Zurich, and we introduced the “superapp.” A superapp is something coming from Alipay or WeChat. We don't know them here in Europe. We had a presentation by one of my colleagues; she's Chinese, and she presented the superapp. The audience was so excited about that—they couldn't imagine that it would have an impact in the near future, maybe in Europe, maybe even for a cantonal bank in Switzerland. We are far away from what they're doing there. We're just starting to learn and to try to understand how we could use it.

Supertrends: What role could quantum computing play in fintech?

D.F.: We have to do much more research about it in terms of the hardware because the hardware is not stable enough. That's the main issue of quantum computing—that’s one thing. The other thing: quantum computing is quite expensive and it's incredibly complex. Most people have no clue about quantum mechanics. I don't know about quantum mechanics as well. And now we're talking about quantum computing, which is the acceleration of quantum mechanics. I think it's very complex; it's very shaky in terms of infrastructure and hardware. It will take years until we can run, let's say, a finance Monte Carlo simulation with quantum computers.

Supertrends: Is the hype around blockchain well deserved?

D.F.: So, that's also a very good question because, usually in my lectures, I’m teaching about disruption—what is disruption. So, many think that blockchain is very disruptive; it will change everything we do. If you look at the facts and figures, you find that blockchain can be used as a base infrastructure for logistics or for whatever. But it's also used as a payment method, and it's also used as an investment—all these cryptocurrencies you can invest in. If you compare the investment side—so, all the cryptocurrencies—with all investment or asset classes like equities or bonds, gold, or real estate, you come to the conclusion that the overall global market sizes of all the other asset classes are huge. So, they are around US$4,500 trillion, global market cap, and the highest market cap that cryptocurrencies had in 2021 was around US$2.6 trillion. That's a fraction, maybe zero-point-zero-something. It's nothing. So, there's no adoption rate. Therefore, we can actually say that it is hype, and we don't know in what direction that hype goes. As we saw with the Internet at the end of the 90s, we didn't know that everything was going to go through the Internet 20 years later. So, maybe we have to wait another 10 years. I don't know.

Supertrends: What about generative AI?

D.F.: I think the point is that generative AI has evolved over the last one and a half or two years, with an adoption rate of—I don’t know, it’s massive—within a short time, 100 million users or 200 million users. The benefit is that people get something back immediately, so they can use it; it has a benefit for private individuals but for companies as well. So, something is coming back, and it's quite cheap. Everybody can access it through the Internet. You just have to pay a monthly fee, and if you don't want to pay the fee, you get another model that’s less advanced, but at least you can use it and it gives you some benefit. I think that's the trick. If someone can use it, get something back, or it makes a contribution, then it will stay. And I think a generative AI will stay. It will change societies, science, businesses, everything.

Supertrends: Is the US the place where generative AI is happening?

D.F.: I mean, at the moment, it is the case. Because if you look at all these big tech companies with trillions of market caps—it's just huge. We don't know that in Europe. We have some big companies that invest in disruptive technologies, but the pioneers and the leaders are in the US and in China. If you look at Alibaba and Tencent, they do many interesting things as well. But people don't know them here. We still prefer to look to Silicon Valley, to tech companies like Alphabet or Meta, instead of checking out Alibaba and Tencent or Baidu.

Supertrends: What are the key challenges facing the fintech industry?

D.F.: I think the fintech industry as we know it and as we term it “fintech” will vanish. Because we will not talk about fintech in maybe five or six years, because it's state-of-the-art. We're using technology to leverage financial transactions, to develop new products and services, to even create new business models. So we're just using technology. For green issues, like for ESG (environmental, social, and governance) investment, we’re just using technology. Therefore, I think the expression or the term fintech will become common sense, state-of-the-art, and we will just talk about, I don’t know, another term, maybe another expression, maybe no expression. Because if you look at China, they call it “techfin.” Because what they do is, the tech companies, they are adding some financial services to it, and then it’s techfin. We try, with our huge traditional banks, to use 90% financial knowledge and financial experience, and then add the digital part. Then it's called fintech. Maybe it's a different point of view, or maybe it's a philosophical question. But I think that technology companies penetrating financial services is the future, and not vice versa

.Supertrends: Apart from what we’ve discussed, what are the areas of innovation with the most potential for growth?

D.F.: I'm a believer that everything is coming together. So, business-wise and sector-wise, all these sectors converge. That's what we see or what we have experienced in these Chinese companies. For instance, Alibaba was a pure e-commerce company. Now, with Alipay, which also does finance, it’s one of the biggest techfin companies, with all these financial services. So, they moved from e-commerce to financial services and then combined it with the superapp, which is called Alipay. They also have logistics; they have these media entertainment industries that they integrate. It’s the same with Tencent, with WeChat, exactly the same. It’s a superapp, integrating all the technologies. So there’s everything in it. There is big data, artificial intelligence, cloud computing, augmented reality, blockchain. So, it converges, and I think that's the future as well. We don't know, we don't talk here in Europe, or especially in Switzerland, about superapps. But I think we can learn a lot about superapps. Even Elon Musk wants to transform Twitter into X and into a superapp. So, we will see.

The text is a transcript of an interview conducted on 15 May 2024. The interview was conducted as part of Supertrends “Interviews with Experts” series. Please note that the transcript may have been lightly edited for editorial reasons.