“The first investment in the process of putting the economy on a path of innovation should be investment in human resources, and long-term plans must begin with education,” says Sebastian Ptak.
FinancialObserver.eu: Will robots begin to pay us benefits from the Social Insurance Institution?
Sebastian Ptak: The fear that robots will take away our jobs is justified. Various data show that the robotization of factories is progressing rapidly in Korea and Taiwan and in not the too distant future people working there will lose their jobs. A robot will always be cheaper. And these are precisely the types of factories which we’ve brought in to Poland. So we have to switch to a completely different path.
Do we know what kind of path?
In the case of innovation and competencies, we will still win over robots for a very long time. Let’s focus on that.
How can Poland do that?
Poland has very well educated people who have a chance of creating a knowledge-based economy. And has no other alternatives in order to leave the middle-income trap. We will not find diamonds in the Świętokrzyskie Voivodeship. So a knowledge-based economy is our only chance.
Who is supposed to build it? The state?
The participation of the state in investments in innovation is essential. In a project implemented in Israel the state invests in tech companies, providing guarantees to investors from high-risk funds. Having the same risk in other countries, they will come to Israel because there is a state guarantee.
The optimal division would be one where one-third of the investment is financed by citizens, one-third by the state, and one-third by high-risk foreign capital.
There have already been such attempts, associated with EU funds, whose participation decreased the risk. There was the Innovative Economy program, action 8.1. It didn’t work out very well.
That is because Poland has a problem on the part of the civil service. Who is to invest on behalf of the state? The program Innovative Economy 8.1 failed because it was a meeting of a civil servant who had no idea about business with people who had no money for a business. For a civil servant, the important thing is the indicators of absorption of EU funds, their safe spending and settlement. Civil servants avoid risk.
In turn, the appetite for risk of those applying for funds was based on the fact that if they failed, someone else would pay for their failure. All that is important in business was negated on the very level of the idea behind that program.
Does this mean that Poland should not finance start-ups?
Poland obviously shouldn’t finance large companies, because they will cope on their own and obtain capital without much problem. Small companies are also problematic, and their financing is associated with high risk. In my opinion, in the first place this risk should be taken by the young entrepreneurs themselves, followed by investors and lastly, the state. Otherwise, Poles will arrive at a situation where most creators of start-ups only think about how to obtain and consume further financing.
The greatest strength of the Polish economy should be medium-sized companies. They have gone through the most difficult period, they were able to survive the risks of the beginning of their business activity. They have a business model that has worked. They have a chance of becoming large companies, for whom obtaining capital on the international market will not be a problem. State support should go in that direction.
This is discussed to some extent in the “Plan for Responsible Development” prepared by Deputy Prime Minister Mateusz Morawiecki. Moreover, it provides for the mobilization of domestic savings.
Poles live in a relatively poor society, where the share of wages in the GDP is at such a low level that individual savings will have little impact on the financing of the economy as a whole. I think that the “Plan” mainly provides for financing by large companies which have in total, let’s say, PLN100bn in their bank accounts.
Most of these are state-owned companies. The state becomes a super-investor. Who is supposed to make specific investment decisions, if not a civil servant?
If they are made by an official, then the plan cannot be successful. Those who have the best company to fill out applications will win. Meanwhile, innovation has no chance, because a public official is not able to deal with it. It would have to be someone who has investment experience.
He must be able to judge that something is risky, but could be successful. In the countries in which such state investments were successful they were run by people who worked in the financial market. They provided knowledge and investment know-how, which a civil servant does not and will not have.
Have Poland become hostage to the ideology of the “cheap state”?
Cheap and unintelligent. Because Poland wants to reach the heights of financial and technological capabilities without spending on the staff. There is no problem with spending money on a new factory, on servers, but there is a problem with spending on people. And at the same time Poles want wages in Poland to be better. Meanwhile, for a company operating in the field of innovation and services, 80-90 per cent of costs are precisely the people. Obtaining a lease for machinery is not much of a problem, but bringing in the staff and keeping it is an enormous one. This is a matter of reversing a certain trend in thinking.
This sounds very optimistic. We started from a bleak vision of robots taking away jobs from people, and now we’re saying, like comrade Stalin, that cadres are the key to everything. Is that the conclusion?
Of course not, because the plan of Deputy Prime Minister Morawiecki, a plan covering 30 years, should begin today in school. That is the conclusion.
The most desirable profession in an innovative economy is an analyst, who can combine many different things, move between different areas. The type of school that Poland has is preparing people for work in a factory, in which people will sooner or later be replaced by robots. What matters in school is the average grade, and so passions are extinguished, and everyone gets a smattering of knowledge. What counts are individual skills, which is entirely different from in a company, where team skills are important. The school is focused on the past, while the company is focused on the future. This is not a type of school for a society that will go forward, which will be innovative.
The financial sector is clearly ahead of other areas of the economy in terms of innovation, creating solutions that could provide a civilizational push for the country. But there is also not a word on its role there.
It is true that the Polish financial sector, and in particular the banking sector, is among the most technologically advanced in the world. This is due to several factors. Firstly, a sort of “bonus for late entry”. Polish banks have simply skipped a certain stage of development and level of technology, in which the banks in developed countries invested, and “leapt” directly into the era of digital banking.
The second thing is the high competitiveness of the banking market in Poland, which motivates banks to fight for clients through convenient electronic services. The third important factor is, of course, the relative affluence of the sector. Finally, the development was and remains fostered by the model of technological modernization based on cooperation with tech companies and developing new solutions with them.
In this way, the investment risk and the risk of innovation was reduced – it was borne by the suppliers.
Competition forces banks to engage in a technological race, and at the same time they are very afraid of technology companies entering the financial sector. What is Fintech?
In simple terms Fintech is the financial and technological industry. These are usually innovative companies which are doing a lot of damage to the old banking sector across the world by offering financial services based on Internet solutions – convenient and tailored to the needs of internet customers. In Poland the situation is different due to the technological advancement of the banks. However, in certain areas, e.g. in payments, competition from global Fintechs will be significant, not so much in terms of technology, but prices.
The strategy of many companies of this kind in the world is to take away from the banks the “last mile”, that is, the access to the client. Again, to put it simply – they want to use the banking infrastructure, e.g. bank accounts, and create more convenient and cheaper services on its basis. In this system the bank is “pushed out” to the background, and both the client and the service charges are taken over by the Fintech third party.
Many banks have already understood that the only way to defend the market is to co-operate with Fintech companies. There are banks built in such a way that they take different services from different companies, adding their own brand and money.
Most of them are feeling, however, that they are lagging behind.
Information technologies are no longer a problem, and they allow for fulfilling even the craziest ideas. The problem lies with the procedures and human mentality.
Is that the reason why lending companies are taking over the market of quick loans for small amounts from the banks?
That is a part of the reason. Banks have all the advantages in their hand in order to perform the same process ten times better. They cannot put the blame on regulations, it is just a matter of will, the adaptation of the process, the use of technology. I do not understand why I cannot take out a loan in the bank without leaving my home, but I can take a payday loan in that way. The problem is that the behavior of a user on the internet is completely different when there is no direct contact with him and we have to identify him.
We have to apply entirely new scoring models. Not all banks feel yet that behavioral data related to what we do on the internet can have the same value as hard data in the form of a scan of an ID card or some document. But some banks have already implemented this and have passed the inspection of the Polish Financial Supervision Authority. This means that from the viewpoint of regulations it is possible, and so it’s all about the mental attitude towards the use of soft data.
The banks are pointing out that the Fintechs are not subject to regulations.
For now this issue does not affect Poland, or affects Poles in a negligible way. There is no Fintech in Poland, which tries to take from the banks the “last mile”, that is, the contact with the customer, and is not subject to regulations. The companies doing the payments are regulated, the loan companies likewise. The banks are subject to more stringent regulations because they have a certain monopoly – they can take any repayable funds from us. The flow of money and payments is open, but the key is its source. For example, virtual wallets fail because they have a weak source of money. The competition between banks and Fintech does not take place in the area of regulation, but that of user experience.
Lately I have heard several presidents of large Polish banks speaking with one voice, that no other institution would enter the Polish market in the segment of payments, because this position was already taken by BLIK. Did it succeed?
I wish BLIK all the best, but you have to remember that cash still rules and makes up 80 per cent of the market. In the field of electronics, the contactless card wins, as it is very convenient. BLIK is obviously doing everything it can to be as convenient or even more convenient, but if someone comes in and says – you don’t have to do anything, just place your phone next to the reader and complete the transaction. No one who would like to do something similar in Poland could win with BLIK, but their real competition is Apple or Samsung.
There are three elements that determine the success of payments. The first is the physical interface, i.e. the phone, the card, the computer screen. The second is the sales network, i.e. the payment terminals. The third is the source of money. In theory BLIK has all of them, but Apple wins with the interface, because the ability to make payments is integrated with its operating system and phone. As a result, there is one less step to complete the transaction. We don’t need to open the application, we place our phone at the terminal and we pay. Today the war is about this one step.
Sebastain Ptak is a member of the management board of the tech company Blue Media.