Tobias Neale, Head of Delivery, Contis
There’s no shortage of FinTech provider success stories. Consumer brands like Monzo, Starling, N26, Revolut, and Finimize have made a big impact by tackling the bugbears of banking and finance and bringing new ways of managing money into the hands of everyday individuals.
Businesses looking to solve these same conventional challenges – for example, speed their financial activities and keep the cashflow moving in the right direction – have also been able to do so through some lesser-known but equally powerful choices.
The trouble is, many brands have taken a long time to build and their successors may well be nipping at their heels much faster than expected. In essence, the FinTech innovation cycle has massively reduced, and it’s important to establish why.
Creating a service or application for commerce and connecting with a payments provider like Visa used to take months and years. However, nowadays there are schemes that can have an app connected to a global system and ready to make, move and receive payments in drastically reduced time. The FinTech fast-track initiative is but one example, enabling companies to launch in as little as four weeks.
These initiatives have tangibly disrupted conventional standards by removing the traditional barriers faced by start-ups in banking and payments. Today, such programmes enable businesses to test new concepts in secure and fully API-configurable environments, helping to remove guesswork and laborious development cycles, so that the barriers between idea and market are not the mountains that the current big brands had to hurdle.
Inevitably, this presents more opportunity for new market entrants to arise and battle incumbents with greater regularity. The market is opening, and we’ll be able to see a much purer rivalry of ideas and services which, ideally, may be beneficial to all as it forces improvement and competition on any number of metrics: customer service, speed, agility, cost, service quality, and so on.
Making it happen
Aside from adopting schemes like the FinTech fast-track, a business would need to invest greatly in development and coding talent in order to achieve agile response times to emerging market trends and keep up with competitors. Increasingly, this is not seen as a winnable battle, and so it looks like the FinTech space will be split between those companies who have already invested heavily in their own infrastructure and talent (and can afford to keep this up, i.e. the traditional banking sector to a great extent) and those who come up with the ideas and take a partnering approach to upskilling and growing ‘smartly’.
For the innovators and brainboxes behind great apps that are simple and easy to use, it is a sad truth that consumers don’t appreciate the complexity and the labours of love that went into their creation and still go into their upkeep. But as payments and e-commerce evolves as the world becomes ever more digitised, the plethora of options and features must be presented in a simple way. To do that requires not only the business knowledge to spot a challenge to solve, and the technical knowledge to understand how a solution should work, but also the customer awareness of the psychologies and expectations that they bring.
New digital experiences that allow consumers and merchants to engage in seamless, simple and secure digital commerce don’t just grow overnight – but to compete, they need to make a splash and grow, and grow fast.
Most businesses don’t have a limitless research and development budget, hence the rise in programmes fast-track. Partnerships in FinTech do seem to be the way of the future and how small challengers leverage their big idea to tackle big opportunities. In fact, PwC’s ‘Global FinTech Report’, 2017, stated that 82 per cent of those surveyed expected to increase FinTech partnerships in the following three to five years. They can see the writing on the wall: The report also stated that 88 per cent of incumbents were increasingly concerned they were losing revenue to innovators!
The other big change behind the rise in faster FinTech innovation is the UK’s pioneering use of the regulatory ‘sandbox’, not so long ago in 2015. An approach now copied by many other countries, these sandboxes sped up FinTech the product development and launch cycle by allowing a safe period of testing of financial instruments.
The UK also jumped into Open Banking in 2018, making great use of the EU’s PSD2 directive that aimed to inspire Europe to open banking systems to more innovative online and mobile payments and improve services for consumers across the market.
These various regulatory pushes have helped create a fertile market for start-ups. Now, given these have been in place for some time, it could be that the pace of change creates an even faster tempo as some brands have paved the way and it still remains to be seen who will follow.
Now, when it comes to cutting the fintech innovation lifecycle, there are plenty more choices, but much less time to make it happen – and the winnings go to the most responsive players.