As part of this , Delano asked nine professionals in Luxembourg’s financial sector how digitalisation has been changing investing. We sat down with , founder and CEO of the sustainable investing platform Moniflo, to for an interview to hear more about the topic.
For Bock, there are several ways that digitalisation has changed investing: the relationship with the client; the amount of information readily available; the democratisation of investing; and the transparency and efficiency benefits brought about thanks to technology.
Digital relationship the new normal
First, digitalisation has changed the relationship with the client. The “support” has become digital, “meaning people have started to have an application on their computer or on their mobile phone,” he observed. “Instead of going to the guichet, they could access a platform and do a certain number of things.”
To add to that, communication got digital. “I remember having discussions with bankers, and they always said, ‘No, no, our business is about money. People always want to see, they want the human communication.’ And I always say, ‘Yes, they might want to have human communication, but not face-to-face in your building.’”
“This is the new banking,” said Bock, enthusiastically waving his mobile phone. “This is the new guichet.” And “the moment you have to go to your bank, you are really annoyed, you say ‘What the hell, do I really have to go?’”
They do not want to see your face. They want to get things done
The covid-19 pandemic has solidified the shift to a digital relationship, from account opening to client services. “When you’re starting a business relationship, you might never see a person or a building. You are just started on a device, and you continue, and that’s it.” Everything exists in a digital space. So long as the apps are well-built and work, “then people might be happy forever. They do not want to see your face. They want to get things done,” said Bock. “There are humans behind--everybody knows--but you don’t need to see somebody’s eyes.”
More options
This, moreover, breaks down borders. “My platform can sit in Lithuania, I don’t care. Twenty years ago, I could not have acted rather quickly with a bank in Lithuania, in Spain, I don’t know where. But if the relationship gets digital, I don’t care where the place is,” so long as it’s in Europe, because of the regulatory framework.
“I have more choices than ever to say with whom do I want to get into a relationship. I can easily have three banks, or three institutions or three apps,” so long as they all work. “It is quite a dramatic change.”
In the past, when you connected to your banker via phone and he was not available, well, you had the tendency to accept that he was not available
“It also means that you have to completely reinvent the way you communicate with the client, the way you interact with the client,” said Bock. Client expectations have changed. “In the past, when you connected to your banker via phone and he was not available, well, you had the tendency to accept that he was not available.” Now, “if your app is down, you get crazy. What the hell is going on?” Clients expect things to be done now.
Education and the “abundance of information”
The second way that “digitalisation has completely changed the world” is related to education, transparency and the “abundance of information.”
“There’s never been so much free advice flying around,” said Bock. In the past, “when a banker would have given an education to a client, he felt that he has received advice. ‘Ah now I understand, okay, thank you for explaining.’”
Today, the question is more, he argued: why should I pay you for explaining something that I can find on Youtube, in articles or by asking OpenAI or ChatGPT? “Of course, like always, somebody can say, ‘Can you really trust this ChatGPT?’ But then can you really trust the other person, that he speaks the truth? Because they can also lie to you. So that is not an argument.”
You have to move up the scale of your service
“Education is not advice. In the past, it was perceived like that. So you would never have paid money for education. Now, you have to move up the scale of your service. When a client comes, instead of just believing, he asks critical questions, because he has read on the internet or on Youtube.” Before, for instance, if you wanted to compare interest rates, you had to phone up the banks and see what they were offering, said Bock. Now it’s much simpler to obtain this information.
“Democratisation of finance”
Digitalisation is also leading to increased affordability and the “democratisation of finance.” People have started investing via apps and digital brokers--Trade Republic or Robinhood, for instance--and not via their banks. People can participate and “dare to experiment slightly more” because they don’t have such high entry barriers.
Accessibility has been smoothened out, transparency has increased and information is everywhere. “It has never been so easy to access these services,” said Bock. “The mode of accessing is a reason for that; the fact that everybody can participate and access information has eased that; but also the cost has eased that.”
There are also asset classes--like private equity--that “I believe one day will be accessible to nearly everybody, and technology will play a major role in that.”
Role of blockchain in the future of investing
Thanks to digitalisation and new technology, investing is getting cheaper and more efficient. “Client information exists in digital form,” he said. “[The information] is not in the head of somebody; it is really all bits and bytes. So we can trigger the automation.“ But for Bock, things are now roughly at the age of a 12-year old human. Maturity hasn’t been reached yet. “If you look at it--the banks or the financial system--the industry is really not automated at all.”
Compare the number of robots that are involved in building a car, then look at how many robots are deployed in a bank. “There are not so many,” he pointed out. There’s room for automation to be deployed.
“My outlook: for everything that does not need anymore a centralised clearing system, we’re going to see the race of more and more decentralised finance. And the capital infrastructure of the future for decentralised finance--that is blockchain.”
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Blockchain is a key element of Moniflo, the sustainable investing platform founded by Bock. “It is dramatically cheap and efficient and safe.”
“A registration of a legal, binding, digital record that you can produce in court costs us 0.0009 cents. You cannot make it cheaper,” he argued. This accounting record can--at any moment--be accessed by the platform, by the service provider, by the client, by the regulator. A bank statement can be falsified. But “if a transaction is registered on the blockchain, I cannot control these 1,000 computers; I cannot falsify them. It’s impossible. Once it’s there, it’s there. That’s it. That’s why it makes it cheaper, safer and more transparent for everybody.”
This all seems very logical. So why isn’t it happening faster?
“Because everybody lives well of what they have now. It works; the client is ready to pay,” said Bock. “Change is always difficult, because change is perceived by insecurity.”
“I admit it’s easier to do what we [Moniflo] are doing, if you start from the greenfield and you say, ‘Well, I don’t even start in the old world, I start directly in the new world.’ Of course, if you have invested a lot of money in the old world, the way to the new world is of course more burdensome, more expensive.”
Cloud computing
The last element that Bock argued would make investing cheaper was cloud computing. It’s just getting started, “but it’s going to continue its journey, for sure.” Firms in the past have built special places to put their servers--they need to be secured, “catered for” and they cost a lot of money. “In modern setups, these servers exist, but not at your premises.”
“You have given them to AWS, Microsoft Azure, I don’t know where. People have built this entire infrastructure--not only for me, but for thousands of me, and that’s why it’s simply cheaper, more efficient,” said Bock. In this manner, “I always have the advantage of the latest server technology, the latest software developments, the best firewalls at a price that is unbeatable--it’s impossible as a smaller firm to do that.”
“That’s why fintechs are possible. Honestly, if you would not have had these modern infrastructures, the setup of a new company would cost far, far more money,” said Bock. So this “will make either the big players by far more agile and quick, or there will be by far more defi [decentralised finance] players coming up.”
An alternate version of this article first appeared in the .
This article was published for the Delano Finance newsletter, the weekly source for financial news in Luxembourg. .