Financial climate change: FinTech
It’s long been said that just the flapping of a butterfly’s wings could cause a hurricane, suggesting that spectacular outcomes - for good or ill - can result from the smallest disturbance of large, apparently unrelated systems. If we apply this to the FinTech phenomenon now spreading across the world, tens of thousands of quite separate starting points are causing permanent change in the financial services climate.
There are five key elements at play in the success of FinTech that contribute to this change in the weather.
Whilst banking may have been FinTech’s initial focus, hard on its heels have come the insurance industry’s Insure Tech and the regulatory and compliance community’s RegTech. Other techs proliferate with more specific focus, such as Proptech for housing finance. Cultural diversity is also a constant. FinTech thrives on the different perspectives that talented people bring to financial centres such as London, New York and Singapore.
Just as internet natives created consumer commerce in an entirely new mould, so NewTech companies think and create from first principles, without being constrained by established assumptions and with the end customer at the heart of their digital design decisions. This attribute has, perhaps more than any other, contributed to a steady shift in the direction of industry travel.
No start-up can last for long without a distinctive, compelling value proposition. NewTech companies are no exception but, to their lasting credit, they have displayed a particular ability to turn early, rapidly delivered propositions into something the market wants through a process of constantly learning and adapting. This can often result in a significant change of direction and redefinition of the business model to lock in the value that has been discovered
Just as Bitcoin started life within a countercultural community, so FinTech had – and still has – its vocal standard bearers. But what is now happening is a steady increase in the pace and quality of collaboration, with growing confidence about which models of collaboration work best having been tested and refined extensively in practice.
Industry experienced heavyweights are now just as likely to be coming to market with a start-up FinTech business proposition as a twenty-something with a vision and digital development skills. Banking executives working in ‘transformation’ have started to dress down as younger FinTech veterans have started to dress up. A CEO of a FinTech is as likely to be an industry experienced ex-career executive as a newly-graduated lawyer. A FinTech venture capitalist or non-executive director is as just as likely to bring non-financial experience to the table as a FinTech COO is to bring an unrelated discipline, whether academic, sporting, military or technological.
While FinTech has taken at least a decade to reach its current state, it was identified quite early on as a distinct movement. InsureTech, by contrast, burst onto the global stage after fewer years of relative obscurity and appears to be going through its maturity cycle far more quickly. RegTech, a term and initially an outreach exercise created consciously by the UK’s Financial Conduct Authority, captured something which was not new – regulatory compliance – but which was on the cusp of transformation enabled by the convergence of a number enabling technologies; supercomputing, cloud, predictive data analytics and machine learning.
As these NewTechs have appeared from different starting points and grown at different paces and in quite different directions, so the financial services industry has moved from indifference, through denial and imitation to something approaching informed advocacy. This itself is broadening its appeal, stimulating adoption and changing the financial services climate permanently – and for the better.
Digital Vision for Financial Services
This blog is part of the Atos Digital Vision for Financial Services opinion paper recently published in the UK, where we explore the challenges and opportunities in a newly disrupted space for banks, insurers, FinTechs and technology incubators, who are today experiencing an unprecedented rate of technological and regulatory change.