With the Fintech scene so disaggregated, Mike Laven shares his thoughts on whether this ecosystem is sustainable…or not.
I have at least a dozen different ways to communicate with people on my phone – three email systems, FaceTime, Skype, Twitter, Facebook, LinkedIn messenger, WhatsApp, Slack, HipChat, Instagram, some in app functionality. Is that twelve yet? Aren’t I lucky, to have so many options, with each one optimized for a specific type of communication? No – my life is worse. Too much choice, and an endless array of notifications and updates means overlooked messages, missed calls, and crossed wires.
My worry is that financial services will fall into the same trap – every piece of functionality is really good, and specific, and optimized, but taken in the aggregate, it makes things worse.
Of course, Fintech firms seeking to challenge the status quo had no option at the beginning, other than to pursue very niche strategies to take over small pieces of the financial services puzzle. In doing so, many have been extraordinarily successful in stealing both market share – and mind share – from banks and card schemes. The 1000 Fintech flowers (and then some) have bloomed – blossomed even – but now, it’s time to put it all back together.
As with any market consolidation, or re-aggregation, there will be winners and losers. It’s not yet clear who these will be in a financial services context, new players or established, but one thing’s for sure – the banks will still be at the heart of it. They will do this, wielding their two greatest weapons. Scale, and customers.
One very interesting trend that emerged from the sessions that I attended at Money2020 in Copenhagen last week, was that several banks have now moved their M&A group and Innovation Labs together within the same group. They have realized that there’s not much of a line between building internally and buying, and are forcing themselves to re-think how they view their own learning, experimentation, development, expansion and evolution.
It is clear that neither consumers nor businesses will tolerate the need to sift through tens of different apps, websites and providers for each of their financial services requirements. Although the fragmentation that we see today is evidence of a font of strong ideas and steep innovation curve, the reality is that there can be too much choice.
The coming months will bring even more intense and meaningful collaboration between established banks and Fintech firms. This will be beneficial for both parties – the first group as they seek to expand their services without long and expensive development processes, and the second in their quest to scale customer adoption quickly. The winners will be those companies that realize, and act upon this, quickest.
The one thousand flowers may soon look more like a bunch.