Fintech firms should get into bed with banks, according to The Fintech 2.0 Paper, published in June 2015 by Santander InnoVentures, Oliver Wyman and Anthemis Group.

The authors of the paper suggest that fintechs can only get so far working as industry outsiders:

“[R]einventing our industry’s core infrastructure and processes…can succeed only as a collaborative endeavor, with banks and fintechs working together as partners.”

Of course, the authors would say that: Santander InnoVentures is a bank-owned business unit that invests in fintech, and Anthemis Group advises fintech startups. Both sides have an active interest in matchmaking.

Nevertheless, it’s still pretty good advice, practically self-evident. For any progress to be made in financial technology, the fintechs have to sit at the table with the banks themselves. That’s the only way forward, right?

Well, that’s what I thought before I read The Fintech 2.0 Paper.

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As described in The Fintech 2.0 Paper, it’s easy to buy a house in Denmark.

In 2009, the Danish government launched an “industry utility” for the real-estate business, with participation compulsory across the industry.

In Denmark, an electronic land registry (e-LR) stores ownership records and transaction details for each parcel. Separately, a centralized real estate portal provides open access to comprehensive details about properties listed for sale: the sales prospectus, public valuation, ownership, financing details, energy rating, environmental issues and technical survey details.

Buyers and sellers, along with their real-estate agents and banks, all have access to these resources. Buyers can easily search for affordable properties through comprehensive, complete listings. Built-in connectivity to the banking system enables rapid electronic mortgage applications. Buyers and sellers can enter into electronic purchase agreements, with online authorization for rapid closing. The e-LR gets updated automatically with the details of the new owner.

The 2009 launch had its share of startup problems – the staff was overwhelmed by requests due to over-optimistic estimates, poor usability and other factors (Source: “Why the Electronic Land Registry Failed,” by Soren Lauesen, 2012.link). Healthcare.gov, anyone?

Fast forward to 2015, and Denmark’s real-estate industry is being held up as an example of “Fintech 2.0.”

Note these salient features:

  • Built by government (not a collaboration between banks and fintech companies)
  • Built using ordinary database technology (not a distributed ledger financed by digital scrip)
  • Paid for by taxes (not by monetization of personal data obtained cheaply through overreaching T&Cs and EULAs)

On behalf of Danish citizens and the Danish economy, the government of Denmark constructed the essential elements of a well-functioning real-estate market for the 21st century: an electronic land registry, an electronic listing service, and an all-electronic route to closing a sale.

In Denmark, the way forward was not waiting for the market to build a consumer-friendly service that was Pareto optimal for all of the business interests involved. Instead, the government built something useful on behalf of the citizenry. And it looks to me that the real-estate industry had no choice but to adapt.

Any realistic chance of the U.S. government sponsoring an industry utility for real estate?

“If elected, I will push to create a national, electronic registry of real-estate ownership, so that anyone can see who owns any property. Why should you have to pay, or make a special trip to a records office at City Hall, for access to information that’s owned by We, the People?

“My administration will also build a central real-estate portal, so that you can hire any broker to list your house without having to pay excessive listing fees. And when you’re searching for a house on our listing service, you’ll know that you’re looking at the entire list of available properties, not just the list of properties from sellers who’ve agreed to pay an arbitrary commission to the gatekeepers of the system.

“But if you like your current real-estate broker, you can keep your current real-estate broker.”

Yeah, it’s a long shot.

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The Fintech 2.0 Paper: rebooting financial services was published by Santander InnoVentures, Oliver Wyman and Anthemis Group on June 16, 2015 (press release, PDF). You can follow discussion about the paper using the #fintech2 hashtag on Twitter.

Read more about Denmark’s electronic registration system: Danish Geodata Agency.

The United Nations Economic Commission for Europe (UNECE) has a Working Party on Land Administration that holds seminars and workshops on the topic. Some resources: Survey on Land Administration Systems. Also, here’s a presentation from 2010, “Danish experience with introduction of e-cadastre in 2008 and e-registration in 2009” (PDF).


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Image: “Københavnsbrand1728-vester-kvarter2”. Licensed under Public Domain via Commons.