Fintech isn’t over-hyped. It’s just getting started, and the most innovative companies are the ones you haven’t yet heard of.
Last week, at London’s Innovate Finance Global Summit, we got to hear fintech’s biggest thought leaders comment on the state of the industry today. Across panels, interviews and fireside discussions, the speakers expressed enthusiasm that “Fintech” is finally beginning to climb the value chain in financial services, as the spotlight shifts away from consumer-focused companies and towards B2B, white label and enterprise solutions.
B2C Fintech isn’t disruptive (yet)
Thought leaders were quick to dismiss the overplayed “disruption” narrative as inappropriate for fintech. As Matthias Kroner, the CEO of Fidor Bank commented, “Disruption contains a mass factor, and today fintech is not mass relevant” when comparing its customer base to that of the major incumbent players in financial services.
For the past few years, most fintech has focused on p2p lending, payments, remittances and robo-advisors, which served a direct need for consumers, who were still feeling the anti-bank sentiment from the 2008 financial crisis. Nick Hungerford, the CEO of Nutmeg, noted that the most important task in 2010 was rebuilding consumer trust in the wealth management industry. At the time, a product with transparent pricing and a friendly UX interface was a good place to start.
Lipstick on a pig
While robo-advisors, challenger banks, and other B2C companies were early innovators who brought “fintech” into the public eye, they are all built upon existing “old pipe” infrastructure. To Matthias Kroner, a pretty UX on top of existing infrastructure is just “lipstick on a pig,” and the solutions with staying power will be the ones that work with incumbent players to improve their offerings, inside and out.
Big changes behind the scenes
In North American and European markets, thought leaders expect the most disruption to occur in back offices, through collaboration between startups and large institutions. The CEO of DueDil, Damian Kimmelman, observed that fintech has been “chipping away” at bank market share from the outside, but is only just beginning to transform institutions from the inside out. Tomorrow’s fintech successes won’t be seen as disruptors, but enablers.
Through the use of APIs, blockchain technologies, the cloud, and data analytics, financial institutions can cut out real inefficiencies in their infrastructure. Today, only 3% of finance executives have a tech background. For those institutions who fear becoming irrelevant, this is already changing as they adopt more data-driven strategies and work with fast-paced startups to improve their product. Eventually, ten-year decisions will be achieved in ten minutes, allowing institutions to be truly responsive to their customers’ needs.
How incumbents remain relevant
For incumbent firms in financial services, thought leaders prescribed a two-step journey to continued relevance:
- Welcome the new technology that is available
- Change the culture, otherwise, don’t even bother with the technology.
In November, the Barclays CEO warned of an “Uber moment” in financial services, and the industry has picked apart the metaphor ever since. With high customer acquisition costs, slow sales cycles, and a hugely established market, financial services is likely to experience more collaboration than disruption.
The programming at Innovate Finance Global Summit showcased an industry that is excited to power this wave of collaboration, as B2B tech solutions eclipse the earlier customer-focused fintech companies, improving the incumbents from the inside out, rather than putting lipstick on a pig.