Icelandic banks risk being ‘smashed into oblivion’ if they don’t embrace fintech, says top fintech boss

Iceland’s traditional banks risk being “blasted into oblivion” unless they embrace digital change and collaborate with the country’s fintechs, according to a leading Icelandic fintech professional.

Gunnlaugur Jónsson, CEO of Reykjavik Fintech Clusterappealed to Icelandic banks to work more closely with Iceland’s fintech community and embrace digital change.

Jónsson spoke ahead of Iceland Innovation Week, a festival showcasing innovation in Iceland, featuring talks from founders and investors.

The Icelandic Fintech Cluster, established about five years ago, aims to support the small fintech ecosystem in Iceland.

Iceland’s financial system is dominated by banking giants Arion Bank, Islandsbanki and Landsbakinn.

Jonsson said:

“I think we would like to see a change in mindset, especially within banks. I don’t think banks fully understand how revolutionary the changes will be in the next decade and that they need to participate in them rather than be shocked into oblivion.

“One good thing about Iceland, even though it’s small, is that sometimes it’s easier to make quicker decisions.

“Icelandic institutions, be it the banks or the government, can sometimes be very agile, but sometimes they are not.

“And they need to be more open to cooperation with fintechs. I think they should change their strategies, focus more on the upcoming change, participate in it, encourage it and even finance it and help those companies. We have this vision of what will happen.

“Traditional finance and the future of finance working together, I think this will benefit everyone.”

One of Iceland’s most prominent fintech companies is the the challenger bank Indo which arose from the financial collapse of 2008, which saw the collapse of the country’s banking system.

Indó was created to “restore trust in the banking system through maximum transparency and a ban on banking bullshit.”

But Jónsson said he doesn’t expect other challenger banks to follow in his wake.

He said:

“I don’t think so, not for now. I think it’s a monumental achievement to have founded Indó. You need regulatory approval, it took four or five years to get the license, to run a bank, it’s a great achievement.

“They filled a gap in the market. I think it will be more difficult to make the second move behind them.”

Asked to highlight some of Iceland’s most notable fintech companies, Jónsson named fintech financial crime Lucinity; fintech personnel management solutions Meniga; main banking provider five degrees, as well as PayAnalytics a fintech using data to address the gender pay gap and blockchain startup Monerio.

In what he considers Iceland’s sexiest fintech sectors, Jónsson identified blockchain and artificial intelligence.

But he cautioned that it is difficult to pinpoint trends in the country, which is so small with a population of about 390,000.

He said: “Data on what is hot is scarce because Iceland is small. We are small. We have a financing deal this quarter. There may be no deal in the next quarter.”

Regarding investments in Icelandic fintechs, he urged investors to show patience.

He added: “If I were to advise a founder to get funding from a VC with such a short time horizon or, for example, from private investors or family offices who are more patient, I would recommend the more patient capital.”

IMAGE:Matteo Bertelli

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