Abstract: FinTech are rather considered as a threat than opportunity. But they can only be successful, if the help someone, i.e. by serving un(der)served or facilitating processes. Thus long-standing rules still apply. Legacy banks appear helpless towards the growing FinTech industry. The majority rather thinks of threats than opportunities and much of in-house innovation is more about „me too“ and an abstractly exercised search for „customer experience (UX) than innovating services for un(der)served needs. But this would be exactly the key to success.
September 26th, 2017
Dr. Ralf Breuer
Excepitions don’t define the rules
Admittedly, sometimes FinTech might lead into a completely strange world not really matching to what we would consider to be an average European mentality. This applies to a case like Digital Green Finance. This exploits all options technology offers today. But things appealing 200m Chinese must not necessarily change the banking world. But it demonstrates the box of tools.
No new criteria for successful FinTech
The blog Guessing on the success of FinTechs was already dedicated to the issue whether or not a FinTech might be successful. The note was inspired by Chris Skinner stating “that…the most successful FinTech firms are not replacing banks, but serving markets that were under-served” (https://thefinanser.com/2017/07/fintech-start-ups-think-can-beat-banks.html/). This applies to markets as well that were intendedly left out such as international retail payment and Private Banking like services for mass retail clients.
Why looking at Africa?
Who would have had Nigeria on the list for FinTech hot spots? Indeed, 56 ones appear on the list: Africa – The Market of unexplored Opportunities. FinTech and things like blockchain may well help to leapfrog the gap in physical infrastructure. E.g. Monetha is based on Ethereum and Worldbank’s Financial Inclusion Global Initiative intends to provide additional access to financial services for 3m people in some of the poorest countries.
Successful FinTech must provide help!
Steve McLaughlin, CEO FT Partners, an investment bank focussed on FinTech said in a recent inverview (Why the FinTech Game Has Just Begun): If you’re not helping someone in a major way, then we’re probably not going to be the bank for you. Obviously some rather focus on gadgets than solutions for real problems.
How can FinTech help?
For Africa it immediately becomes clear: FinTech can bridge gaps in physical infrastructure and distance via mobile devices, smartphones in particular. Thus they can bring (financial) services to the un(der)served.
This basically applies to mature markets as well. International retail payments offer decent margins, Roboadvice can leverage asset management ressources without investing into new expensive advisors.
A big potential is provided for internal processes of the banking and insurance industry. „RegTech“ can at the same time substantially speed up, improve and secure regulation compliance. However, regulatory bodies should consider this before launching new initiatives.
Thus FinTech provide a lot of opportunities to mature markets as well. The legacy industry should turn away from priliminary stressing potential threats and exploit opportunities. There seem to be a lot of them!