Franck Vialaron, partner and co-founder at Expand Research looks to offer an independent view of the FinTech landscape both from an incumbent and new entrant perspective. While today’s environment offers an easier environment to set up tech ventures – many incumbent banks are feeling budgetary pressures and talent challenges that can stifle innovation.
Finance and banking is no stranger to technology – but ‘FinTech’ has gained greater prominence in recent years – How would you differentiate between financial technology and FinTech?
Financial Technology is the infrastructure that financial institutions have built to operate their business at scale leveraging the latest solutions available at a given time. An infrastructure that was primarily built in-house because Financial Institutions wanted to retain control and intellectual property but also because of the lack of specialised solutions. FinTech is the growing ecosystem of third party provider ‘fuelled’ by investor money. There are two major categories of FinTech – those who build solutions for incumbents and those who are offering financial services and using technology to scale.
FinTech challenge that long-standing status quo, but to really understand the true scale of technological transformation finance is going through today, we need to look far beyond the start-up ecosystem and pay attention to broader global forces that are at play. This is why in our FinTech research we combine perspectives from banking incumbents, start-up challengers as well as participants beyond core banking and finance (looking at Big Tech, Telcos and eCommerce for example) to answer questions about the future of this industry.
Why the need for Expand Research?
Accurate intelligence is at the heart of sound business strategy for our clients. At Expand we pride ourselves on delivering an independent view of the financial technology world both from the incumbents’ perspective (through our core benchmarking business) and more recently through our outward-facing FinTech offering that we have developed in partnership with our parent company Boston Consulting Group. These complimentary offerings allow our clients to have the most complete insight into the world of financial technology, whether they are a CIO looking for technology optimization opportunities, strategy & innovation officers planning for the future of the business, or investors sourcing opportunities and wanting to validate investment thesis
How does the framework assess the impact of new FinTech entrants? Describe the methodology.
Our FinTech offering has been conceived as a research partnership between Expand and clients to help them understand the key trends in the FinTech industry. We use our understanding of the internal business model & processes of financial institutions, our wide network of relationships with start-ups and incumbents, our exclusive expert network as well as a rich database of over 12,000 global FinTechs to deliver these insights.
When we come across a new player, we try to understand their business, key differentiators, competitive landscape, partnership network, funding history, team background and vision, much like a strategic investor would. After this preliminary scan, however, the potential impact assessment depends on the specific question that our clients have. There is no cookie cutter approach, because we are not trying to model valuations and returns on start-ups for investors – we assess strategic opportunities and threats to our clients’ businesses.
What has been the most surprising results from your research? What impact is the industry seeing?
We are deeply involved in a wide range of technology-related projects from market data, open banking to artificial intelligence and, dare I say the word, blockchain! Perhaps the most surprising fact is that technology is still treated as a cost centre at many financial institutions we work with today. The global financial crisis and subsequent regulation are partly to blame for the slashing of IT costs, that have drastically impacted banks’ ability to innovate, opening many business opportunities for external players (FinTechs) to develop disruptive solutions and start to shift customer loyalty away from traditional financial institutions. Despite the above, many officers within those banks don’t feel the urgency and are still sceptical that technology will be a key long-term business differentiator for their business.
You’ve been working in financial technology for quite some time – how does the current environment compare to the market in the 90s?
Of the many changes that would be possible to list here, the most evident one is the sheer ease of setting up new tech-driven ventures in this space. As technologies such as cloud computing, and even machine learning become commoditized, it becomes easier to quickly build proof of concept products and tests them in the market. Access to funding is also a key enabler and major factor for growth.
The other big shift we’ve seen is of course around talent. If you were a technologist in the 90s, working for a bank was an attractive opportunity. Today we see that some banks struggle to attract top talent, partly because the culture gap between technology and finance has widened drastically. Top developers want to join new ventures, attracted by the increased flexibility they have compared to working for traditional corporates as well as by their ability to make their own mark in the world more easily. This presents a long-standing challenge for the financial incumbents, and maybe the industry as a whole.
