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What is Holding Back Disruption in the Norwegian Fintech Market?


This week in fintech

November 1 · Issue #120 · View online

A weekly summary of the latest news in our world of finance, design, and technology.

  • 🌩️ Leaving the cloud
  • 😉 A wink-wink-nod-nod attempt
  • ⛓️ The only crypto story you’ll ever need

🤔 What is Holding Back Disruption in the Norwegian Fintech Market?
Last week I held a presentation about the Norwegian Fintech landscape and trends at Norges Bank and Simulas CBDC event. After my talk, Torbjørn Hægeland, Executive Director for Financial Stability at Norges Bank, came up to me and said that he noticed there wasn’t much disruption in my examples. Truth be told, he was right. Despite many predictions and warnings, there hasn’t been a lot of radical change in the Norwegian Fintech market. Mostly there have been minor, incremental improvements and regulatory changes moving things forward.
Since I started helping Skandiabanken create its first responsive online banking solution almost ten years ago, a lot has happened. The last ten years have been more about minor, incremental improvements. Sure new technology has come (and gone), but for most users, there hasn’t been a lot of disruption. It has become easier to pay person to person, more accessible to pay companies, more straightforward to save and access your accounts, easier to apply for loans, and much more. Still, far from the significant disruption we were promised. Why is that?
In my view, there are four main reasons. Firstly, the underlying infrastructure in banking is very complex, consisting of legacy systems that are hard to replace. Secondly, the regulatory environment is very tight, making it hard to experiment or be disruptive. Thirdly, banks have been very good at acquiring or copying successful Fintech startups, making it hard for them to scale up. Lastly, the customers themselves have been quite happy with the existing solutions.
The best example of disruption I have seen is how AI has grown over the last six months. From having some fringe examples to suddenly having believable text-to-image (and even video) solutions, AI pair programmers, and even writing software that helps write texts. If we get a disruption within Fintech in the coming years, I believe it will likely be based on AI advancements rather than on Blockchains. The main reason for this belief? User Experience. So far, I haven’t seen an example of a Blockchain-solution making anything more accessible (or understandable) for the end-users. On the other hand, all the AI examples I’ve seen save people hours.
The overall lesson is that it takes more than technology to create disruption. It takes the right mix of technology, timing, and user needs. (Case in point; the last two sentences were written by an AI)
🌩️ Leaving the cloud
37 Signals, the company behind Basecamp and Hey, is reporting that they are leaving the cloud and returning to on-premise servers after a decade. The argument is that the cloud excels when your load is highly irregular, with wild swings or towering peaks of usage when you don’t know if you need ten or a hundred servers. The argument is also that you don’t need anyone to handle the hardware for cloud solutions, but 37 signals argue that they’ve yet to hear of organizations at their scale being able to materially shrink their operations team just because they moved to the cloud.
We’ve written about something similar over a year ago, where A16Z argues that SaaS companies should move back from the cloud to their own data centers once they scale and don’t have hyper-growth anymore.
Meanwhile, Google Cloud and Coinbase announced a new, long-term strategic partnership to better serve the growing Web3 ecosystem and its developers. The collaboration will involve Coinbase selecting Google Cloud as a strategic cloud provider to build advanced exchange and data services, and Google Cloud to use Coinbase Commerce to pay for its cloud services via select cryptocurrencies.
😉 A wink-wink-nod-nod attempt
Speaking of servers: We’ve previously written about GDPR essentially banning large parts of the web due to requesting data from outside the EU. The consensus has been that you are compliant if your data is stored on servers located in the EU. I’ve even made a tool to check where your server requests go and their location: David Heinemeier Hansson is living in Denmark and working for an American company and has written a thorough writeup on the whole situation:
Bottomline: American companies will never be able to resist the demands of American intelligence services. It doesn’t matter if their servers are located in Virginia or Paris or on the damn moon. Europe should either come to terms with that reality or raise a real privacy wall despite the costs. But until Europe makes up its mind, European companies would be smart to ignore the whole charade. Like most of them have done anyway.
⛓️ The only crypto story you’ll ever need
Whenever I’m trying to understand a confusing new finance topic, be it NFT, SPAC, or the latest weird cryptocurrency, there’s only one person to turn to: Matt Levine.
Now he has published a 40 000 word article on cryptocurrencies. In comparison, a book of 150 pages is ~ 37 500 words. The article (book?) offers praise of the good parts, and critiques of the bad, and has some hope that this newfangled way of moving money and information around has staying power.
The Only Crypto Story You Need, by Matt Levine
A fun sidenote: Matt Levine has been taking some time off from his regular newsletter to write the above story, but was constantly forced back to work to comment on Elon Musk buying Twitter. The Verge has written about the whole story.
“He’s a very smart guy who is very much not a lawyer, and that is very fruitful.”
That's it for this week 👋
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Marius Hauken, partner Stacc X
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