Our world is full of pithy one-liners and Tweet-worthy phrases. We’ve all been to conferences where we have heard: ‘Innovate or die’ or ‘Ignore the HiPPOs’ or ‘We’re just a technology company with a banking licence.’
Many of these well-worn keynote fillers have roots in real life case studies, lessons from the trenches of innovation projects, and real efforts to improve and enhance our industry. However, devoid of their historical context, these ‘quotes’, repeated ad nauseum on event stages around the world (and broadcast on PCs) lose their impact. Like the eponymous Rita from Willy Russel’s Educating Rita searching for a ‘better song to sing’ and instead finding only ‘different songs’ that on her lips sound ‘shrill and hollow and tuneless’. (This is a low point in the play – she does, eventually, find a ‘better song’.)
It is because of this I often find myself wanting more from these motivational quotes, proclamations of prediction and confident assertions on the direction of our industry. The phrase I am examining today is:
“In the future all companies will become FinTech companies.”
When I first heard this sentence, I thought: ‘Wait, weren’t we all just talking about how banks will become tech companies?’ If the banks are abandoning … ummmm banking, to become tech companies, is there now a void? Does Silicon Valley abhor a vacuum? If all banks are now tech companies and all companies are now FinTech companies does that mean that all FinTech companies are still FinTech companies or a different type of FinTech company? In the future how will we tell the real banks from the banks in tech clothing (or the tech companies in bank clothing?) <==This is how my brain works – I accept donations or cupcakes.
This phrase has its roots in a presentation from Angela Strange of Andreessen Horowitz late last year, aptly titled: Every Company Will Be a FinTech Company. In her presentation Angela starts off by saying: “In the not-too-distant future, I believe nearly every company will derive a significant portion of its revenue from financial services.” <==Emphasis mine
Now let us start with the title of the presentation. The general partner at the hugely influential, Silicon Valley Venture Capital firm doesn’t actually make the point that all companies will become FinTech companies. What she is saying is that innovation and enhancements related to the infrastructure of financial services are fundamentally changing how these services are delivered to customer and by whom. She continues by saying: “Every company, even those that have nothing to do with financial services, will have the opportunity to benefit from FinTech for the first time.”
Notice that Angela does not say ‘financial services’ but FinTech. She is talking about the technology. It is one of the quirks of our industry – and one that most outside the industry get wrong when they discuss disruption – is that financial services is embedded in almost every aspect of our lives. Unless you chose to move to the middle of Montana and live in a cabin, off the grid and as far away from civilisation as possible – you will have to use the services of a bank (or other financial institution) at some time. Payments, loans, investments, savings, pensions, insurance etc… are all part of the engines that support all of us when we go about doing things with our lives that ‘have nothing to do with financial services’.
Of course, the Andreessen Horowitz presentation does point to the well-known fact that not many people ‘love their bank’. She also makes the extremely valid – and often overlooked – point that for the 50% of Americans who live ‘paycheck to paycheck’ their experience of the modern banking system is a less than satisfactory experience. She asks the question most FinTech companies ask, which is: ‘Why has the status quo existed for so long?’
Well, to quote one of my favourite minds in the industry, Terry Chapendama of National Bank of Kuwait (International) PLC in a recent LinkedIn post:
“…Financial Services are a massive trust play.”
And he continues his point by saying: “This is often missed when people look at how to disrupt the market.”
It is safe to say that I agree with much of what Terry is saying. But FinTech thinkers do not live on one opinion alone. I went out to find a few more views on the topic
Rita Martins, Digital Transformation Manager at HSBC (speaking as her own opinion and not necessary the views of her employer) says: “In my opinion, there will be a continuous trend of companies entering the Financial Services space, however will EVERY Company be in this space? Probably not. Financial Services is a complex industry with considerable global and local regulations to be abided by.”
But Rita, what about Angela Strange’s point that the ‘status quo’ of financial services has not resulted in improved customer satisfaction for a wide range of society? Won’t non-financial services brands entering and offering FinTech mean better service for customers?
“It depends. Non-financial services brands will typically be looking at the problem/job to be done from a different angle, without considering infrastructure or regulatory implications, which may initially be an advantage. However, they will need to ensure that the new experience is still seamless once all components of being a player in the Financial Services industry are integrated,” says Rita.
My next stop on my ‘Will every company become a FinTech company’ rabbit hole was the ever reliable and always smart Paul Loberman (coincidentally, late of HSBC).
“Whilst the ability to offer FinTech capabilities will increase through the multiplicity of Banking-as-a-Service providers, it will still take a long time for business owners to realise that they can even offer FinTech products and increase their revenue stream opportunities,” says Paul. “It will certainly increase but not every company will take advantage of it. Businesses that sell direct to the public will see the biggest rise in providing FinTech services. Credit cards, buy-now pay-later, and micro loans are the obvious beachhead to dip your toe in.”
So that is a ‘no’ from Paul, as well. But what about the customer satisfaction angle? We all know banking is a trust business – but can’t we strive to be loved as well? “Yes, but brands that are already providing great service will need to ensure that partnering with FinTech does not dilute their service levels or brand reputation,” he says. “Lifestyle brands will not want another Wirecard outage on their hands.” <==Ouch
Of course, the original Andreessen Horowitz presentation happened in November of 2019 – that distant past when Corona was merely a weak-ass beer and a selection of washable face masks didn’t adorn most people’s hallway cloakrooms. COVID-19 and the global, pandemic lockdown has thrown a spanner in the works for many companies that once prided themselves as being ‘innovative’ and ‘progressive’. Just like there aren’t many atheists in fox holes, when the pandemic shit hits the fan most people are looking towards ‘secure, regulated financial institutions that are allowed to take deposits and make loans’ (that would be a bank) to process their furlough checks, or apply for small business protection funds.
“Crises have shown to be an opportunity for disruption with Uber, Whatsapp, Venmo and other startups being created after the 2008 financial crisis. The global pandemic will be no different; in fact, the pandemic has already started to change the customer’s behaviour and needs creating some space for new propositions,” says Rita.
Many are predicting that the impact of COVID-19 on our jobs, our cities and our general lifestyle choices will have a long tail – long after the danger of the infection is contained (we hope).
“I think companies getting into FinTech do need to tread carefully, as we all find our way in how consumers and businesses interact in the future,” says Paul.
“There is lots of opportunity stemming from the pandemic, particularly as more businesses go online. However, if a non-financial brand starts overstepping with its newfound financial services capabilities, for example, spamming with buy-now pay-later offers…we could see an increase in the number of customers getting into debt – a trend that is already starting to raise concerns. If those issues lead to regulators stepping in, that could set back all FinTech services.”
Financial services is, at its heart, a trust business. We trust secure, regulated entities to keep our money safe so we can engage in activities we do love – spending time with our families, eating out at a nice restaurant (I miss that soooo much!), reading, swimming, baking … take your pick (I can’t just list all the things that I love 😉). Does that mean that all tech companies will become FinTech companies – in the way us FinTech nerds understand a ‘FinTech company’? Uber can offer its drivers any number of cards, banking or remittance services they like, but I am not holding my breath for sightings of an Uber card (which would be metal, of course) being slapped down at wine bars around town (when they re-open) any time soon.