Sponsor 0:10
Welcome to the dynafin podcast. We bring you the latest finance and technology news straight from the market
Koen Vanderhoydonk 0:27
Welcome to another dealer same podcast and today I have two special guests. On one my hand I've got your Can you introduce yourself your
Jo Cuyvers 0:36
icon, your service manager, Managing Director at dynafin consulting.
Koen Vanderhoydonk 0:40
Hello, welcome, and welcome Morton.
Morten Virenfeldt 0:44
Hi, my name is Morten, I'm founder and CEO at AQrisk that is Copenhagen based FinTech that specializes in supporting banks in optimizing their core banking business.
Koen Vanderhoydonk 0:58
Excellent. So all the way from Denmark. Yes, that's right. Welcome to be here. Thank
Morten Virenfeldt 1:02
you for having me.
Koen Vanderhoydonk 1:04
Excellent. So your in the recent years, there has been growing trends towards digitalization, we all know that an automatization. All that in the credit and loan industry in Europe, with financial institutions offering online loan applications and digital tools for managing loans. What do you think is happening in Belgium? Do you see this trend happening in Belgium to see something special.
Jo Cuyvers 1:28
But I think these trends is not only happening in Belgium, but indeed we see it also in our country. So credit institutions and large credit departments of financial institutions face a lot of challenges today, I think it's important to have to name maybe some of them macroeconomic, you know that there's a lot of uncertainty today having a large impact also on credit activities. We have these European regulations that have a large impact also on the activities in the credit departments. The cost to operate for financial institutions continue to increase. So they also need to have a look at her internal cost structure. No surprise, no surprise there. And we see also the continuous increase in market competition, also in credit solutions. So together all these different micro and macro economic challenges for our customers, we see that they turn to new technology, technological solutions, combined with data analytics.
Koen Vanderhoydonk 2:29
Interesting. And, of course, we have the pleasure and joy to have somebody from a different country than Belgium. So an obvious question would be Morton, do you see like similar things happening in the Nordics?
Morten Virenfeldt 2:41
Yes, we see very similar effects on the digitalization side of it. Of course, the banks have come a long way in recent years. But I also think that there's still room for a lot of improvement going forward.
Koen Vanderhoydonk 2:57
And when we talk about improvement, and we talk about digitalization, we which are the technologies then that are typically used?
Morten Virenfeldt 3:05
Well, typically, it includes, you know, automation includes advanced data analytics includes machine learning. And it includes just in general, utilizing all of you massive amounts of data, much better.
Koen Vanderhoydonk 3:27
It's a data business, your same thing here.
Jo Cuyvers 3:29
It is a data business. I mean, what you would like to do is to have perpetual risk assessments on your existing portfolio, credit portfolio, and of course of your no decision making on new credit, let's say granting of new credits. What you also would like to do based on strong data insights is to create predictive models, when the your your clients are in need of new credit solutions. You want to predict this. So what we try to do together with our customers is to help them create the new digitized processes from front to back.
Koen Vanderhoydonk 4:09
Morton that's right in your alley,
Morten Virenfeldt 4:11
right it is exactly in our le we. So like I said, we help banks optimize the core banking business. An important part of that is making it easy for the bank advisors to price clients and assess clients very easily and very fast. And also making it easy for them to have an overview of what's what's the status from a profitability level across all of their, you know, across their credit book, and also being able to assess what are additional business potentials on across the client side. We also help management define their risk, risk appetite and being able to support a system bias be via it, whereas today often risk appetite as well. Risk Appetite is just defined in written procedures that are difficult to really, you know, embrace the complexity of pricing. We also support banks in making it much easier to do stress testing and scenario analysis. Of course, all of this requires a lot of data.
Koen Vanderhoydonk 5:21
And I think that the latter is it's also a regulatory requirements. So we maybe jump easily into what is happening on the regulation sparks. Your what what do you see in what's happening on the Regulations Part? What are the trends, what is currently buzzing?
Jo Cuyvers 5:38
I think there's especially the ESG word that is buzzing in the market, that's what you're referring to. The Nephin is currently doing a market study in Belgium, where 15 financial institutions participate, to have, let's say, a benchmark on the maturity level of implementing these ESG requirements, specifically in credit departments. So we hope to have some really interesting insights in the coming months.
Koen Vanderhoydonk 6:06
Excellence pass, that's looking forward. But
Jo Cuyvers 6:09
yeah, we also have so we have a lot of discussions ongoing with these banks, with the system, sustainability managers and the credit departments. And we see that they have done already a lot of stress testing in collaboration with the European Central Bank, to name some, they have done some stress testing on flooding risk. Also on mortgage risk, when they have a look at their current portfolio of mortgages, they would like to have a view on the energy certificate of each of the, let's say, investments and credits they provided to. If we have a look on the more S and G, part of the ESG, regulation, social, we had an interesting discussion with sustainability manager saying, okay, when we're granting credits, we want to grant credits, and to have this financial inclusion of everyone to be able to have credits for for example, housing. And also to be able to renovate houses to make sure that they are future proof. And we see them also focusing on the governance part where they focus a lot on knowing the customer on analyzing transactions know your transactions. So meaning financial security of the of the system.
Koen Vanderhoydonk 7:29
What strikes me in this story is ESG is around data data, which is not available. So why don't you just start walking before you run? Morton?
Morten Virenfeldt 7:40
Yes, we, I completely agree with Joe that ESG is, is a very hot topic. And we also feel it from our clients. They're pushing us to include ESG into the pricing. But But you're absolutely right, data is a fundamental issue in terms of the ESG agenda. And we need to be it needs to mature a lot. So what what we are also providing is a platform that makes it much easier to come out of, you know, using simple Excel sheets or, or ad hoc approaches. So we actually have a systematic and systematic framework to how you assess and price clients. So so once you have that in place, it's much easier to build ESG stuff on top of that, you can say other than that, in terms of the regulatory stuff, I would say what we feel a lot is, of course, the added capital requirements we see on banks, and that makes it a lot harder for for banks to be profitable. So it's it really, it's really important for them to be supported in what we call risk based pricing. And that's a key component of what our our platform provides to our customers.
Koen Vanderhoydonk 8:59
I was also wondering that all this shift to digital and more mobile banking, so maybe even call it Do It Yourself channels, does that actually have an impact on the way credits and loans are being granted?
Morten Virenfeldt 9:14
Certainty we, we're having different projects right now working with customers that are looking to actually, you know, turn the turn the screen towards the customer. So the customer is more involved in the credit assessment process themselves, they can get a deeper insight. We were in talking with one customer on providing it to in the retail space that of course, requires simplifying stuff a bit. But it's also about as a bank providing transparency, so and gaining more trust from your clients and you can achieve that by Yeah, being more transparent and having a framework where you can Should we share? Okay? For you to achieve these interest rate levels, you need to provide me with more collateral or whatever. Being able to do that in a in a, in an interactive fashion with your customer is something we actually also see,
Koen Vanderhoydonk 10:17
is that something you see in the market as well?
Jo Cuyvers 10:20
Yeah. And in addition to this, we have the user experience, that's very important. When digitizing your credit granting process, you want to have it fluid, you want to have it really user experience friendly, meaning digital identity management, meaning real time risk assessment, I hear more than say, okay, you can share your screen with the customer that meaning that the system needs to work real time, input your risk parameters and have the data to have real time risk assessment. And also the support of digital contracts and cetera. So you can have the real, the whole granting cycle in a digitally.
Koen Vanderhoydonk 11:08
We're almost at the end of this podcast, unfortunately. But as a tradition, one word, one last question. Difficult question. To both of you. What what do you see the trends is in credit and loans in the next couple, five to 10 years?
Morten Virenfeldt 11:26
Well, I see, of course, that in our core business, it's definitely there will be a need for approving the risk based pricing and being able to to fit it much better to management requirements. But also the whole trends transparency part is extremely important.
Jo Cuyvers 11:48
Yep. On my side, risk based pricing, yes. It will end up in more individualized pricing, based not only on client segments, but also on the projects that are being financed.
Koen Vanderhoydonk 12:04
They that's the ESG part again, yes.
Jo Cuyvers 12:08
Having a positive impact on different industries, forcing them to invest and to take credits for greener projects.
Koen Vanderhoydonk 12:16
All right. Gentlemen, thank you so much for being in this podcast. Thank you also to the audience. And please stay tuned for more updates of the markets but Edina fin podcast. Thank you so much. Thanks, goon. Thank you.
Sponsor 12:28
Thank you very much for listening to our dinner fin podcast. Stay tuned for more updates by following us on this channel.