Fintech now is in a similar place as Big Data was some years ago; everyone speaks about it and agrees it will have major impact, yet its influence on the way we do business remains surprisingly light
A couple years ago, when still in strategy consulting, two exciting projects in financial services came my way. One was to design the future of an Asian bank, the other to ‘reimagine’ insurance.
My employer at the time was aptly named FutureBrand; needless to say people expected us to be experts at foreseeing the future. Reflecting on what we came up with back then, it somewhat resembles those retro utopias of underwater living: Creative and inspiring, but above all a testimony to how hard it is to predict what has yet to come into existence.
Essentially, we had put a great deal of effort in imagining an exciting future for banking and insurance customer experiences – except that we failed to anticipate the magnitude and effect of financial technology startups on shaping a new status quo in finance, as did much of the financial world.
Although 2015 was named ‘the year of fintech’, institutions still find it quite hard to believe in the possibility of being replaced or made obsolete. This surprises me somewhat, as financial services – behind their more or less pompous vernacular – are essentially intermediaries for the storage and exchange of value (more on this in my previous articles).
Strip away branches, advisors, plastic cards and big office towers – what you are left with is a bunch of platforms working with your hard earned cash to offer you some form of monetary benefits (protection and payout in certain circumstances, returns on investments, global convenient access to currency, etc.).
Who says these intermediaries are immune to being reinvented from the ground up? Startups entering the market armed with the technological possibilities of today come in with a fresh perspective and are light years ahead of institutions operating on legacy systems and established notions of how the world of finance works.
Fintech now is in a similar place as Big Data was some years ago. Everyone speaks about it, agrees it will have major impact; yet its influence on the way we do business remains surprisingly light. It makes a lot of sense – the financial industry cannot quite afford to experiment in the way it delivers its core business services. Flirting with transformational opportunities such as Blockchain and other hyped phenomena is certainly the right way; shifting operations to technology that is far from perfectly reliable or trustworthy, however, would do more harm than good at this point.
At the same time, customers increasingly demand companies serving them better respond to their needs, pursue an audacious vision and liberate themselves from the ties of the establishment. Financial players are losing trust with customers because they have not adapted their approach to serving, and fail to deliver against the emerging decision criteria customers apply to financial services today.
Also Read: How will fintech change global finance?
Just like companies failing to adapt their marketing approach to 21st century media, they gradually loose their customer base to focused, purpose-driven and digital native companies that understand digital opportunities comprise more than building a bunch of apps or pushing products through online sales channels.
This is where partnerships between large companies and startups can add tremendous value: Leaving innovation and digital engagement to a technology company creates a win-win situation in which financial services players are empowered to transform even without the internal momentum to make it happen. Unfortunately, successful partnerships between corporates and startups are rare and require the right environment – which may not be the one-size-fits-all approach of startup accelerators.
Great startups are as reluctant to make concessions as large corporates, and the only way to solve this is with an environment of mutual trust, ensuring that each party to the collaboration sees the mutual value-add.
The emergence of fintech as a global brand enables startups and large companies to subscribe to a shared vision of how financial services will transform, acting as a bridge between the diametrically opposed business realities faced by large companies and risk capital backed ventures.
Fintech is a global movement that represents a highly attractive vision of financial services in the future that our entire industry, regulators included, subscribes to. Its colourful mix of Silicon Valley boldness, crypto-currency style rebellion against the status quo, design thinking inspired simplicity and top-notch customer experience acts as a unanimous call-to-action that inspires and dissolves boundaries preventing innovation.
Financial institutions – whose brands associate first and foremost with compliance, stability and rigidity – crave these fresh and progressive fintech ingredients which they have a hard time procuring and integrating into their cultures.
In a nutshell, the financial sector’s flirt with fintech is a public testimony to the expected wave of transformation coming into our sector, and the inability to cope internally. Much as the global fintech movement resembles a fairytale dream future to the outdated reality within financial institutions, there is a clear upside to having good strategy for coping with and benefiting from the impact of fintech on the financial system.
New entrants are expected to create a leaner, faster and more focused financial infrastructure, and established players can benefit by procuring the right partnerships and acquisitions from the start. By profiling major strengths and weaknesses of the institution and screening for opportunities to partner with startups in those areas, they can explore entirely new approaches to doing business without the need for an exorbitant investment. This requires effort in building out an interface between startups and large corporates that actually works, and we are certainly getting closer.
Fintech startups provide a vast testing and learning ground for institutions to understand, invest and stay relevant in the future. As ambitious fintech entrepreneurs re-imagine financial services from the ground up, savvy finance players are learning the ropes so that they can rely on it to provide a strong and urgent rationale for change and swiftly adapt.
Visionary leaders in finance know that everyone benefits from a better financial system and understand that seeking alliance with the sources of transformation is better than offence. This emerging symbiotic relationship between fintech startups and financial services incumbents creates a kind of environment in which the fittest startups and institutions survive together and create a better future of finance.
The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, post your article here.
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