The FinTechs are coming but its different this time

If you ask anyone about Fintechs they will inevitably refer back to the Dot Com bubble (1995 – 2001) which fuelled the rapid growth of the Internet.

However, back then the investment was funding the building blocks of web technology with the most of the money going into Web Infrastructure, Security, Portals, Consulting, Marketing and Content. Unbelievably during this time there was no broadband and we were all having to deal with “Dialup” (In the UK Broadband was first introduced in 2000 and even by 2006 it only had 13 Million users compared to 2016 where 87.9% of adults have access i.e. 45.9 Million users), no real smartphones or tablets existed (The first iPhone arrived in 2007 and the iPad in 2010) so the main access to these technologies was via the desktop. The frenzy also saw massive investments in companies who were filing for IPOs without any revenue.

If we skip forward over 15 years we are now seeing an enhanced level of funding once again in FinTechs however this time its very different. In 2015 we saw the total level of Global deals reaching $14.8Bn and by Qtr. 3 2016 this had increased by 27% (this is in sharp contrast to only 5 years prior where only $2.59Bn was invested (2012)). In the UK $191m was invested in 2012 and by 2015 this had also increased to $1Bn (60% of investment in the UK are going to Challenger Banks, SME Financing, Money Transfer, FX, Digital Currencies and Blockchain).  Also companies filing for IPOs are now showing revenues in excess of $100m.

So why is it different this time? There are numerous reasons why a perfect storm is brewing and I will explain a few below.

  • FinTech Technology – During the Dot Com Bubble you needed to procure Servers, understand security and have funding to support and develop your offering. Now with the rise of Cloud Service like AWS, Azure, Google etc. anyone can build an application with a credit Card and pay by the hour.
  • Building Block Technology – Fintechs no longer need to create everything as you can plug and play the payment, billing, map software etc. (Think UBER)
  • Consumer Technology – During the Dot Com Bubble the barrier to entry was also on the consumer side as you needed internet connectivity (Dial up) and a Desktop. Now technology is widespread and its commonplace for people to carry multiple devices all with Internet Connectivity (Tablets, Smartphones, Wearables etc.)
  • Generational Changes – During the Dot Com Bubble 40 Million Gen Xers came of age. Now there are 85 Million Millennials, all of whom are digital natives.
  • Global Social Community – We are all now a global community over one world wide web
  • Regulation Changes – The regulators are now embracing emerging technologies and offering sandboxes and incubation to start-ups
  • Data is King – With the emergence of data Science and open data initiatives, Big Data and new modelling techniques are changing how we cost propositions and offer/sell insight.

In a recent report from McKinsey & Company entitled “Bracing for seven critical changes as fintech matures” they cite 30 emerging areas which are seeing Fintech growth.

So what should everyone do? Another article from Mckinsey & Company Cutting through the noise around financial technology suggests to some of the capabilities Banks should be making.

It’s all not doom and gloom though for the incumbents. Anyone can adopt FinTech methodologies and the Financial Services industry still needs regulation, oversight and to engender trust.  Everyone therefore needs to become fighting fit, embrace change and not forget a lot of these new technologies will come with a lower price point and enable greater automation with insight for the future.

Digital Hoarding is the biggest blocker to change

Digital Hoarders

Every month new predictions are made by technology analyst companies however most assume that everyone has a preference to use Laptops for more complex website transactions.  Even though this is technically true I do raise the provocation that this is only the case because Mobile Applications currently do not need to fill that gap and most non millennials are happy to live in a world where the main reason to have a laptop is to support their Digital Hoarding addiction (also known as e-hoarding and surprisingly has its own Wikipedia page).  Prior to the advent of streaming and cloud storage the only way to access your library of Music, Pictures and  Videos on the go was to digitise them and store them on your laptop hard drive however this has created a situation where everyone has terabytes of storage and the majority of the Music and Videos that are held so dear are never accessed again.  This habit however has created a real barrier to the removal of the laptop and created a blocker to Innovation.

If we ignore the music and video conundrum as these are easily replaced even if you have to buy them again or use a streaming service the only problem needed to be solved to remove laptops is how do you back up your photos in case the cloud providers loose them.  If we can finally solve this in a way that the consumer would be happy with and eventually break the cycle; laptops could be retired from the majority of homes and we would see a marked shift in technology predications for the Mobile/Tablet world which would ripple through everything we do and touch.  This new era would force websites to be more responsive and have usable apps for every facet of their interactions and in turn radically change the way consumers interact with technology.

Therefore back up those photos, embrace mobile, dump the laptop  and enjoy the ride.

Don’t just think about Gen Z what about Workplace G+1

workplaceAs technology continues to advance at a pace, conversations around the different generations always lead to the conclusion that different operating environments are needed in the workplace to satisfy the different expectations especially as it is projected that Millennials will be the largest demographic by 2025 and 61% of current employees expect to work beyond 65.

However before we all start adopting standing desks and conducting our business on mobile devices consideration needs to be given to the workplace mix and what the organisations generation of tomorrow (G+1) will look like i.e. %Gen X, Y, Z etc.  Millennials may become the largest demographic in the next 10 years however will this be across all industries?  As governments globally decide that the pension burden is too large to fund and push out retirement dates as far as politically possible will there suddenly be a spike in ageing workers with completely different needs which have never have been experienced before?  Will their requirement be an increased need for comfy ergonomic chairs, large screens etc. rather than standing desks and bean bags?  Although I am sure technology will start to address this issue we must accept that we are now entering a period where one configuration will not satisfy everyone and variable technology stacks and furniture will be needed in the workplace.  Workforce planning will become as essential as technology planning in the future to ensure organisations are successful.

The Sharing Economy: The Sleeping Distrupter awakens

ShareOne of the emerging sectors which is raising its head across the Internet is the Sharing Economy. There is a growing trait in the younger generations (Gen Y now and Gen X in the future) where the materialistic need of previous generations has gone and they are happy to borrow, rent or lease the items in their life.

Although these types of sites have been around for a while, the change from physical to consumption models originated with the music industry with sites like Spotify and Pandora however this has recently spawned across other sectors where you can borrow or rent items from others. In addition to Music there are sites where you can share a car, bike, a lift, a parking space, a room in your house and even a dog J. Due to this increase in sharing the UK government is starting to look at the personal tax allowances given to these activities to reflect this growing trend. Even BIBA (British Insurers Brokers Association) has started to take note and has created a guide on the benefits and risks of the sharing economy. This sleeping disruptor is certainly going to change the way people consume goods and the answer is no longer if but when this disrupts the marketplace, once the big questions around insurance, legality etc are solved we will find that we are all setting free our materialistic urges and sharing the things we need.

Form Factor will be the next Customer Battleground

Over the last few years every enterprise has become obsessed with becoming Digital albeit the majority of IT systems are already digital. Most digital endeavors are really ecommerce teams looking at App development rather than digitising paper processes or redesigning the Domain Architecture landscapes to monopolise on technological advances based on the organisations strategy and vision. Although the rise of App Stores is Innovative they are only a new Customer engagement medium due to the evolution of mobile technologies and limitations of web browsers.

Customers are a fickle breed so just creating an App because you haven’t got one isn’t a good enough reason if you aren’t prepared to research the target audience and do it right. With the advent of Web2.0 everything an organisation does it visible and commentable. In this world sometimes it is better to wait and do something right than to launch too soon and have your client base realise you do not understand their needs. Plus they will certainly tell everyone else if they do not agree and you get it wrong.

In the past the decision was easy, mobile or tablet App (Single Size). There wasn’t any need to have variant flavors of interface or operating system as the offering was just an extension of the existing browser experience. However this has now started to change and as different form factors emerge just rendering the screen in a different way with some ad removal will not cut the mustard. This technological revolution will certainly expose the teams who are creating apps with no overlay onto a strategy or Customer Product Roadmaps.

These Form Factor Changes will force all enterprises to revisit their Customer personas and encourage everyone to consider li fecycle mapping before any development commences. This will ensure that any work is targeted at the right customer, at the right time of life with the correct spending pattern, as without these characteristics mapped how can you possibly satisfy your target audience by deploying onto the correct form factor with the right amount of tone of voice and interaction.

Today you certainly need a digital strategy which covers all form factors and is closely linked with the Business and Customer Strategy. Soon the app landscape will have to include mobile, phablets, tablets, laptops, smart watches, TVs plus Google glass and that is without the new trend of wearable tech.

Form factor is going to become the next customer battleground and more customer persona intelligence will be needed. Just knowing your customers preferences and age will no longer be sufficient, knowing their life stage, financial standing and what devices they are likely to purchase is just as important if you want to offer an App they will actually use.

Form Factor

Generation X: The Digital Hoarders

Even though a tremendous amount of research is available comparing the traits of the Generations and how the Millennials (Generation Y) approach work in a different way to the previous, due to their differing technological requirements and needs.  My supposition is that prior generations are already on the road to digital adoption and will soon have the same desires and requirements as Generation Y and these Interestingly fall in line with Moore’s Law* estimation of a levelling around 2020.

If we focus on the digital adoption of Generation X, many have lived through various technological evolutions but all will have experienced the evolution of Audio and Video.  i.e. When Vinyl Records migrated to cassette then CD and eventually MP3  and from Video Tape to DVR.    Over the last few decades as these technologies evolved the marketers spent a lot of money in the aesthetics of these products so having a collection was encouraged / desired.  However since the mainstream adoption of ever more powerful home PCs where the Audio and Video files could be uploaded and consumed on a multitude of portable devices this generation are now copying their collections onto their PCs (Even though they may never listen or watch these again) and then either store the originals in the loft or give them to charity. This behaviour has therefore encouraged the manufacturers to produce PCs with bigger and bigger hard drives to satisfy the consumer need i.e. Moore’s Law*.

However if we look at Generation Y they are more inclined to purchase the odd songs they like from a Music Provider like Apples iTunes and download it straight to their MP3 Player / iPhone via the cloud or subscribe to a provider like Spotify or Netflix where they can consume Music / Films to their hearts content without ever owning any products or needing the hard drive space required to accommodate a collection.

Generation X (the Hoarding Generation) are starting to realise this fact as the amount if data they need to backup is becoming increasingly unmanageable especially when most is dormant and will never be accessed ever again.  This realisation falls in line with the 2020 prediction in Moore’s Law where storage consumption may begin to slow down.

Luckily in line with this realisation is the acceleration of the provision of Cloud Storage (mainly free) by software vendors which the Generations can use to backup those memories (be they photos, videos, songs etc) which may only be accessed  once in a blue moon, require backing up and even passed onto relatives as a keepsake.  At the time of writing this, there are numerous vendors offering free cloud storage ranging from the known i.e. Microsoft with Skydrive, Apple with iCloud, Google with Google Drive to specialists like Drop Box and Box.net.  In addition to these are Social Sites like Friends Reunited have realised this trend and are offering an ability to create a private memory boxes where you can store all your keepsakes (You can also create one that is shared with individuals or public), they are even offering libraries of material you might like to add.

The use of secure storage is not limited just to the personal space as recently Commonwealth Bank in Australia announced an Australian banking first, Commonwealth Bank are piloting to customers an online virtual safety deposit box – NetBank Vault.  Customers will be able to save important documents such as pay slips, contracts, scanned copies of passports/drivers licences, receipts and product warranties etc., in their online bank account, backed with the greatest online security.

As these behaviours continue these traits will also start to move in into the Enterprise space (Business environment) and all Generations will begin to rely more on open collaboration systems like Sharepoint, Enterprise Social Networks and Collaboration tools, rather than the costly storage based network drives, personal hard drives and onsite hosted email.

From a technology perspective once all the generations become digital natives this will be a pivotal moment in history as if this then drives all technology to become cloud based and upgraded in line (i.e. everyone gets the latest upgrade when its available) all future generations will all experience the same technology as the previous generations are using which will mean the differentiators between the generations will no longer be digital but cultural, tribal etc.

*Moore’s Law is based on a paper created in 1965 which predicted that Chip Performance doubles every 2 years (which in essence means every 2 years you can get a device twice as powerful for the same cost) – This has proved surprisingly accurate and is estimated to continue until at least 2020.