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UniCredit must walk a fine line between innovation and stability, CEO says

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UniCredit must walk a fine line between innovation and stability, CEO says

Financial technology and big tech competition keeps UniCredit SpA on its toes, but the bank is taking a pragmatic approach to innovation, recognizing that its ultimate role is to provide security and protect deposits, CEO Jean-Pierre Mustier said.

"It's fantastic to have competition. I do a lot a sport, I'm a keen sailor, and when I practice with people who are much better than me, then I become better. If there are other players that are better than us, we have to improve to become better," he said, speaking during a panel at the Sibos technology and banking infrastructure conference on Sept. 25.

Where UniCredit is not in a position to develop technology itself, it partners with financial technology firms:

"It's better to be proactive than play the ostrich. We were the first to introduce Apple Pay in Italy. The more we can partner the better. It's better to lead the disruption than to be caught out by it," he said.

But banks must innovate and partner sensibly, and stay true to their role as guardians of their clients' money:

"The question is what does the client want. Of course, the client wants a nice product that is easy to use. But the client expects a financial institution to provide security. At the end [of the day], what do you need in order to do that? You need to have a lot of capital. The true nature of a financial institution is to have a very strong balance sheet," he said.

The end game for fintechs is to acquire as many customers as possible and ultimately be bought out, Mustier said. But this is not the ultimate goal of a bank, which is to protect deposits, he added.

Retaining client relationships

"I am extremely comfortable — while not being in denial — in saying that the financial institutions that will last need to have a huge amount of capital and a footprint that is very large," he said.

Even if UniCredit increasingly acts as an intermediary between different partners, it will still be able to retain relationships with its clients, Mustier said.

Banking business is "extremely sticky" and clients will stay with UniCredit rather than abandoning it for a fintech firm because it represents safety and stability, he added.

Mustier also spoke out against "asymmetric" treatment of banks when it comes to data sharing under new European regulations.

Under the second European Payment Services Directive or PSD 2, banks are required to open up their data to third parties, but banks do not necessarily get the same level of insight into the data of others:

"We are asked to open up our data to everyone, which is fine, that's the rule, but if one of my clients wants me to have access to his data on Amazon or Google that is not possible. I'm going to push super hard with the European Banking Federation to make sure that we have a level playing field. There is no reason why there should be an asymmetric treatment of banks," he said.

PSD 2 came into effect in January 2018.