Unlike almost any previous category of new business, fewer have gathered more attention or than that of the recent fintech wave, currently being experienced on a global scale.
Wind back the clock just 3 years, and it would have been hard to get even the most excitable futurist interested in the boring world of banking. It was about mobile – more specifically, Apple vs Samsung, a race that now seems won – e-commerce, social networks, messaging apps and media consumption (the likes of video and music content) and how they would become ever-present in our lives, which indeed they have.
But as those who see these opportunities in every market, so they saw banking as the next industry to fall. Or to put it better, to bend and stretch to a new paradigm, where the banks were joined alongside a myriad of offerings and competitors to which often they have no answer, due to a variety of reasons that we’ll get into shortly.
It was no surprise these new players saw the chance to unseat the banks occurred at this specific time, for it was a perfect storm brewing for the banking industry to confront.
What were these factors coming together? Let me count the ways.
The house always wins more – a relatively one sided exchange of value…
Decades of questionable innovation and customer services followed centuries of the same old banking business model increasingly shifting the scales away from the average person and towards the halls of power in now globally interconnected organisations built for shareholder gain.
Protected by governments to ensure stability – and power
And these banks and organisations are often protected by governments as cornerstones of economies, as they are seen as so crucial to the continuity of daily life.
Leadership cultures built to preserve this power
Leadership and management cultures built on command and control rather than deep collaboration; on risk aversion (with justifiable reason) rather than experimentation and innovation; on creating predictable robotic processes, and in the end, robotic people.
Systems and processes rarely challenged, leading to dramatic legacy tech
A deep set and troubled relationship with technology also existed for years. Old creaking systems still exist, with expensive overheads and rigid frameworks in which to transform into something new were maintained by ‘techies’ that were seen as internal service providers or vendors, and internally charged appropriately. Everyone’s hands seemed tied by technology, creating an ‘us versus them’ environment with the business.
And a world of technology emerging and dominating outside the organisation…
Outside the bank, technology was changing dramatically, both for the consumer and the employee – a customer’s iPhone often held more computing power and experience design quality than the entire banks operating system – or at least it appeared that way. Where Amazon, Google, Apple were offering seamless, ‘ecosystem’ based experiences in a digital environment, banking felt it had simply transferred the analogue experience onto the screen. Where Louis Vuitton, Burberry, Mercedes Benz blended the digital with the physical experience, banks struggled to make even customer data cross over between different channels, let alone create a deeply thoughtful branded experience.
Customers then used that technology to make their own connections, relationships and life paths
No longer needing brands to direct them in all manner of their lives, consumers and businesses could now make ‘direct’ relationships with each other. Sharing information and ideas – and even financial advice, or money – directly between any 2 people on the planet is now a distinct reality, that may or may not involve a large, trusted and central organisation like a bank.
The system then ate itself and the chickens came home to roost
Then came the big whammie – the global financial crisis at once rocked any trust we had with consumers, and revealed the seedier side of the realities of the system – products we’d never heard of, managed by bankers and organisations we’d never knew existed, were mismanaging and losing our money. Of course, Australia avoided the majority of this financial impact, but the industry had been changed forever, despite any admiration, and possibly relief, we may have felt for those banks running cleaner, less exposed balance sheets. Those management cultures that may have been detrimental before had at this time been proven, but it merely masked a deeper culture issue.
All in all, a confusing time to be a retail banker. At once you had to regain trust, recover your operational abilities, get to know customers again in a new way of interacting, be aware of new entrants cutting your lunch and then invent a new future-proof future. For many, its been a tough time to bear.
Spat out of the industry were many customers wondering if there was surely another way; also spat out were bankers looking for something new to work on, and out came institutions looking for that idea or technology that might help them adapt to the brave new world.
Thus the fintech industry was born. Or more simply, the term fintech became commonly known.
In truth, fintech is a false term. As Chris Skinner puts it, we are merely a new form of value exchange in banking, often facilitated or enabled by technology. Fintech itself is not a practice, but a new form of value presented to customers in new ways.
Still, there is no doubt fintech is utterly white hot right now, globally. There are centres of fintech innovation happening on a deep and wide scale as far away as Seoul to Santiago, Barcelona to Beijing and everywhere in between. Economic centres like London, New York, Singapore, Hong Kong and Sydney are vying to become the ‘centre of fintech’. But there are also huge pockets of activity and innovation in less prominent countries in Africa, South America, Asia and Europe. Our Next Bank chapter growth is directly reflective of that – we have had the most recent demand for the brand in Ghana, Bangladesh, Chile, Zimbabwe and Pakistan.
That this transformation of the industry is occurring in both every significant market centre, and at the same time in every emerging or developing economy is the real shift here.
It may have been obvious to many that the industry would at first embrace a digital future, then a more deeper digital-first business model – this is already under way.
But for it occur on almost every socio-economic scale, in every market, affecting the biggest and smallest market players, means this change is here for good.
Long may it last!