Fintech has huge potential. We also have some major problems that are not under control. Problems we don’t like to talk about. Problems that tend to jar with conference ‘high-fiving’ and the general mood of self-congratulation.
Firstly, we have a big competition problem. It’s inherent in the current structures and will not “just get better with time/hard work”. The public has been told that fintech will help make banking more competitive. It’s a declared aim cited regularly by various governments. It has been implicit in securing much-needed support, but it doesn’t reflect the current reality. Behind the scenes, the biggest banks are having a great time using the cover of collaboration to repair ailing back-end systems and incubate smart, new tech.
The real impact of all the billions invested, tested and launched so far has been at worst anti-competitive and at best net neutral. The cards are still stacked firmly in favour of the incumbents. In fact, there’s an argument to conclude that they’re stacked more that way now than ever before. Fintech in its current form is having a sustaining effect on established oligopolies, and it’s a great shame because the banking market (as opposed to its biggest names) badly needs more fight.
Secondly, we have a big self-awareness problem – people aren’t impressed, yet we can’t see it. The difference between reality and rhetoric is widening, not contracting – we just can’t see it … which is kind of the point. This seems to be most pronounced in retail banking with current or checking accounts. Enormous conglomerates advertise themselves as ‘challenger banks’, products not innovative 10 years ago are promoted as groundbreaking, and brands barely free of shocking scandals proudly pronounce how integrity is our core value. The public isn’t even remotely fooled. Meanwhile, boardrooms cheerfully report customer apathy as customer approval. And when it comes to customer insight, we seem to have become institutionalised into finishing people’s sentences for them to fit our KPIs.
So what do we really have? What progress has actually been made? Well the honest answer is … a bit. Some product innovation, some technical platform innovation, some clever and creative people rightly shifted into leadership positions. It’s good and important, and unremarkable. But the self-congratulation has become so amplified that we can’t hear the real world any more. The confirmation bias has become so strong that the opinions of two thousand friends easily replaces the true views of the tens of millions yet to cast a vote on the work so far.
(I suppose we might ask for their view at some point, but not now. They may not be enlightened enough to appreciate what we’re doing for them. In which case, presumably they’ll need to be ‘educated’ to our point of view.)
So what needs to be done?Tell the truth. We need to have a sustained and honest conversation (or even argument) about who holds the power. Competition matters and we can’t keep sidestepping it extolling the virtues of product design. Address the value chain imbalance. We need to address the lack of customer-facing startups and figure out ways to encourage more. Slash some process. We need to make it easier for truly independent startups to get banking licences. Eradicate competition vetoes. We need to double-check that any projects set up to help foster competition haven’t unfairly allocated governance influence to the biggest incumbents. Listen better to the majority of people. We need to accept that many millions aren’t impressed with the progress we’ve made. We’re the ones that need educating, not them. Finally, we need a fintech fight club. Someone (a lot tougher than me) needs to train startups on how to fight rather than collaborate. Scenario planning needs to shift away from win-win towards win-lose. It’s the only way for the customer to truly win.
It’s very hard to go into battle and mean it with someone who has directly or indirectly funded your product; your ability to hire a great team; someone who helped turn your vision into a reality. Working together is always going to seem like the best option, even perhaps ‘the more mature’ or ‘sensible’ or ‘balanced’ path.
Yet, the uncomfortable truth is that fintech entrepreneurs need to start thinking specifically about how they can make incumbents lose. If the market is to truly get better, this is the under-attended area, the under-developed muscle, the skill where startups really need our help.
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