The FinTech Challenge? Trends, what’s needed & future.
What’s the most innovative sector these days, I am sure it is Fintech. All the FinTech is facing the same big Challenge which is of scaling to the next level, become the next Uber or Facebook may be.
Today I resigned from my company with no Job in my hand and I was thinking of what to do more precisely what I really love to do. Sometime back I had developed a love for Fintech & have some deep interest in the innovations which people are bringing across the world. But will these amazing people who are innovating will succeed or we need more. let’s discuss.
Study the top 50 FinTech (Finance-Technology) start-ups and none of them is a subsidiary of a bank or traditional companies, does that mean innovation is dead in the traditional ecosystem or they are just observing to buy one of these companies when the right time comes or they are now worried at all.
Traditional brick & mortar banks have never really recovered from the major set back they received after the financial…www.datadriveninvestor.com
Primarily the Fin-Tech sector is innovating in few spaces.
1.Lending & savings (Wefinance, Digit)
2. B2C Payments and transfers (Alipay, Paytm, Revolut)
3. B2B Payments and transfers (Stripe, Payu, Wepay)
4. Comparison or Ecosystem collaboration (Policy bazar, Du Xiaoman)
5. Investing (Stash Invest, Robinhood)
6. Others: (Oscar Health, Forter, Square)
Something like the below segregation, I have added comparison or ecosystem collaboration
What’s common for all FinTech startups?
Data+AI=Convenience=can be Sold
What’s common in all these innovative companies is AI/Automation led convenience. The companies rely on a huge amount of data crunching, Machine learning, and AI-based decisions to make everything seamless. Customer convenience is the core of Innovation and that’s the primary benefit every Fintech start-up/unicorn is selling.
Free Entry = No barriers = Micro Finance
The entry barrier is slashed to a bare minimum or sometimes there is no entry barrier. Automation is at the core, no customer doesn’t have to worry on financial planning, the App or the service will take care of things and there is no need for active participation in the process of the finance which earlier seemed to be complicated. Microfinance is the future of finance. Startups are making it so easy for everyone that initial value doesn’t matter and people can begin with few dollars of investments, savings or credits.
Why traditional ecosystems or companies still strong?
Because they are Big and they run the world and people trust them. That’s one of the reasons, why people aren’t switching to these companies and still sticking to traditional banking methods.
One of the key reasons of this could be convenience is not a great selling point for Fin-Tech or may be the sector has been over-optimistic in people switching to their services or the switching costs per consumer is much higher than early estimated.
FinTech startups have raised the expectations of the people on how things to be done but still, they haven’t been able to create new Ecosystems. Looks like we have some road to travel to a destination.
Data sharing+ Cost sharing +Profit sharing
The FinTech world has to understand the collaboration is the key to success. The companies who will collaborate and are willing for data sharing, cost and profits to create a whole new ecosystem within a particular niche is most likely to succeed.
The huge amount of data which is generated from tracking consumer spending, lending or Savings needs to collaborate with the existing ecosystem & regulators. Startups don’t have that kind of power or ability and that’s where Big players are needed.
- Infra: The Fin-tech world will need huge infra from companies like Amazon, Microsoft, HP and others to store & compute the data for the company.
- Access Control: It will need Government or Regulators to jump in and control the access and use of customer data.
- Platform: This will need support from platform providers and data analytics by companies like JP Morgan Chase or Credit Suisse.
A mind-boggling & unprecedented level of automation is required to provide services when everything is connected. We will need Big companies like TCS or IBM to write new software, automate and manage the huge level of operations.
What’s in for Future!
Globalization of Banking: Banks across the world and within geographies will begin sharing the relevant customer data and more. Which means I can open a bank account in the United States and may begin stock trading or enjoy other global services or innovation. It could be that my bank account gives me access to global financial hubs & markets like Hong Kong, Singapore, London, and NY. Credits, transfers, and lending will be integrated worldwide and will be more seamless.
Integrations: FinTech Innovators may integrate with the front end or the back end of the Finacial majors or banks. The innovation they bring will be used to services existing bank customers and others. The banks may outpace each other in bringing these innovations, however very likely that convenience they would be offering will be copied soon by others.
Integrations within FinTech: FinTech innovators may merge will each other to provide better services to the end customer. Savings and lending companies may merge to provide a one-stop solution and leverage each other innovations. Customers will look for one solution for all financial worries than multiple.
Digital Banking: People will soon rely only on the Digital mediums to connect to the bank. This will be from opening a bank account to seamless operations of the bank account. The companies or Banks which will not go digital will soon see the market adopting digital as the only method of servicing and may close down their operations. The companies will see Bank branches closing down and taken over by intelligent ATMs and machines.
New Sectors: New Sectors will emerge to be included in Fintech. They may stand alone and may become unicorns or new big players in the ecosystem. Some of the examples.
1.Tax savings (Clear tax)
2.Credit for start-ups (Brex)
3.Social spending (A company which may automate all digital media buying)
5.Prediction (Predicting when you will need money by looking at your spending habits)
All this will change the FinTech and the world with it. The benefits in the short term will be for consumers and merchants as companies will incentivize the services for quick adoption and later everyone in the ecosystem will benefit from higher and better financial inclusion.
Summing up with one of my Favorite innovators: Brex
Brex is unique in that it offers a credit card facility designed specifically for startups. But rather than the credit limits being based on the personal financial stability of the founder, Brex underwrites the company, not the entrepreneur. What Brex tells us about the future is that we’re about to pass the stage where entrepreneurial businesses are always deemed risky and we’re heading towards a time where banks may begin to favor innovative startups with good ideas over less-agile established businesses.
It is startups like Brex which will help change the world around you and may bring more innovators to bring a positive change.
My best wishes to all the amazing people who are innovating and putting their hard work for people like us. I am Pleasantly surprised by the kind of innovations people are bringing and in every possible sector, ready to touch and change the lives of millions of people.
It would be great to collaborate and offer what I can. Connect with me: