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.


Successful Innovation Relies on a blend of desirability and usability

Even though it is easy to say some ideas are “bad”, generally this is untrue; unsuccessful ideas are either poorly thought through, implemented incorrectly or launched at the wrong time. 

 Tablets are a prime example, many people will probably say that the iPad was the first successful tablet, however tablets have been around for years.  The events which ensured the iPad success was not the tablet itself but the launch of the Apple App Store and advances in multi-touch technology.  Prior to this tablets had a very limited use and therefore were not desireable to the masses.  Innovation without desirabilty and usability will not engender mass appeal and Innovation without consumer centric strategies will not ensure continued success.

 If you look throughout history there are numerous companies who have invented products which could have propelled them to stratisferic heights but failed to implement them or change their strategy to adapt to consumer demand.

  •  In 1975 Kodak invented the first Digital Camera however due to having a 90% market share in photographic film in the United States continued to focus on this product stream.  They filed for Chapter 11 bankruptcy protection in 2012.
  •  In 1979 Apple engineers visited Xerox PARC as they had invented a GUI interface.  Apple offered stock options to use this technology and it became the interface used on Apple Mac Computers, Imagine what could have happened if Xerox continued with this strategy and sold software like Microsoft?

 You can even see an interesting twist emerging within the mobile market at the moment.  As all operators are scrambling to purchase 4G licences to rollout out faster connection speeds most of the country still experiences patchy connections at best on 3G.  This is not due to speed but location.   Is the continual desire for speed more desirable that an ability to make a call or access the web on your phone???  WIFI is beginning to offer an interesting twist to this story, over the past few years more and more shops, banks, coffee shops, Pubs and now even Trains and undergrounds are offering free wifi.  What would happen if wifi became more widley available than 3G?  why would you have a contract with a mobile provider to make a call when you could communicate via VOIP or Video on any device for free? 

 The reason most large companies fail to monopolise on  ideas that they already have is the reluctance to cannibalise existing successful product lines and to look at the big picture.  Interestingly everyone forgets that if you cannibalise one product line in favour of another, the revenue is still received is still retained within the P&L.  If a competitor does this the revenues just slip away.

 To ensure that you are not sideswiped by a company who is not your competitor today you need to continue Innovating your current product lines to ensure that you are offering customers products that are both desirable and usable whilst adapting your strategy to encompass technological advances and changes in consumer behaviour and needs.

Sometimes you need to go back to basics to Innovate

As the world becomes ever more connected, a day doesn’t seem to pass where new Innovations are being announced; this is on top of events like CES (Consumer Electronics Show) every January, MWC (Mobile World Congress) every February and the plethora of bespoke individual announcements during the year from manufactures and software providers like Apple, Google, Microsoft and Samsung.

In my view we are now heading towards an interesting precipice where actually going “back to basics” may reap massive rewards. Over the last decade we have seen numerous advances in consumer technology which has increased choice and driven down costs, however let’s focus on Tablets as an example.

We all became interested in tablets when Apple launched the original iPad (9.7inch) back in 2010; we then saw the 7 and 10 inch Samsung Galaxy Tabs arrive and we now have the iPad Mini, Nexus 7 and Microsoft Surface (There have been numerous less notable other products during this period). There is a pending Samsung Galaxy Note 8 and various large form factor smart phones appearing (or to coin the new phrase phablets). You can now get the tablet of your choice from 5 inches upwards running most popular operating systems at a variety of costs.

During the last few years it has been relatively easy for successful manufacturers to innovate as in addition to making their products more desirable they just needed to launch the same device in another form factor every year to stimulate sales as seen above. We are however approaching a saturation point where all size combinations are covered; so what next? Naturally updated versions of IOS, Android, Windows, Firefox and Ubuntu will be a selling point for some, however when we look at the second purchase consumers (i.e. there is a large population of early adopters who purchased the original iPad which is now slowly becoming obsolete as it is unable to upgrade to iOS 6 and popular apps cannot be updated) what will they do next? A reflection point will exist for all of these consumers as suddenly they will have a choice of operating system, form factor and price. When Tablets first arrived they were purchased on their desirability, however now there is choice users, will start to focus on the usability, functionality and cost. This will then drive a contraction in the market as manufactures once again are forced to innovate their product lines rather than just the form.

One company which is starting to go “back to basics” is Nokia. Clearly the market has not been kind to them over recent years with falling revenues and who knows how popular Windows 8 will be, however I think they may have a plan. Over the last few years Innovation within the Mobile and Personal Computer Space has led to complexity of choice for the consumer. Ten year ago the choice was easy, Mobile for Calls, Camera for pictures and Computer for the Internet. Over recent years this all merged with the Smartphone, Phablet, Laptop, Ultrabook, and Tablet all able to access the internet, take photos and make audio and video calls. However I think a few things were been lost in translation. When I am at home I do want a fully functional device that can do everything, so a PC or full fat Tablet makes the grade. When commuting I do like to catch up on emails and surf the Internet so small factor Tablets and Smartphones fit the bill (Most people already have a work Smartphone so if they have a personal phone do not need two), however when I go to the pub or out with the family I want a phone with good camera with limited Internet options, maybe to do a search or look at a map or upload my photos but small enough to put it in my pocket and still sit down. Not having to charge it every few hours would also be a bonus. Where did all the quality small mobiles disappear to that Nokia used to make in the 90s?

The good news is they may be on their way back; Nokia recently announced the Nokia 105 and 301 and as an additional phone have some interesting features:

Nokia 105 – 2G Basic Phone with 35 Days Standby

Nokia 301 – 3G Phone with 3.2 MP Camera including 100 Degree Panorama, Sequential Shooting, Internet and 936 Hours Standby.

In a crowded marketplace Nokia may have found a way to get back its crown. I certainly would try one, and with billions of people worldwide yet to obtain a Smartphone the revenues from a cheap, reliable and functional device could be immense.

Innovation is important however you should never forget the Customer requirements, the overriding feature of a phone is to make calls.

Nokia 301

Will Technology Innovation drive new purchasing models

In recent years manufacturers of consumer technology have continued to accelerate their Product Development and the main players like Apple now have annual cycles for most product lines; which in turn encourages enhanced cycles in their suppliers to accommodate the changes.  The big question however is whether consumers are willing and able to refresh their own purchases on an annual or bi-annual cycle or whether different purchasing models will evolve?

Like most people I was excited to hear what new products Apple was releasing at their recent keynote in addition to the iPhone 5, however was surprised to hear that my dear old iPad 1 (only 2 years old) is now considered too out of date to receive the latest IOS6 Update.  Have we entered a new era where to stay current you need to refresh your technology every 2 years?   It’s interesting to read that even in these austere times Apple was still able to sell 5 million iPhone 5’s in its launch weekend so is consumer behavior reaffirming this fact and that they are willing to refresh at any cost?

Apple and many other premium manufacturers always seem to offer products, which are not only functional but also are durable and desirable.  This however does come at a price, which traditionally you would expect to keep for a few years to get full value of the expense.

With the increasing number of product launches from these companies will we start to see new purchasing models appear?  In other sectors we have been able to trade-in our old items for years; where would the car industry be if you had to sell your car first?  Also in recent years a number of start up companies have appeared where you can trade in Mobiles, CDs, DVDs, however how long will it be before the premium manufacturers start doing this routinely rather than just as special offers?  I recently noticed that this trend has already begun with Apple, Dyson, and Sony all offering trade-in deals.

If a new trade-in culture for electrical consumer goods started to evolve it will benefit everyone including the planet as old devices (could even be 2 years old) would be either recycled saving the planets raw materials or refurbished and sold.  These changes would probably also encourage more people to upgrade regularly as there would be an outlet for old technology at a fair price rather than just placing it in a bottom drawer where it becomes worthless and only suitable for the bin.

Is Innovation outpacing Mobile Infrastructure?

Every time I hear rumours and then see the delivery of new mobile products I am impressed how far we have come over the last few years.  Smartphones are becoming more and more feature rich and the proliferation of tablets is becoming the norm.  However I do get frustrated with the networks that support these, has product Innovation surpassed the infrastructure they rely upon?

I live in London and even within the M25 have trouble getting a 3G or GPS connection some times, so cannot imagine how rural areas of the UK cope. 

Will the growing trend of mobile devices accelerate LTE rollout (4G) or like Europe will more and more cities begin to offer free Wi-Fi?  although existing Wi-Fi networks are not immune as the iPad on average uses 400% more Wi-Fi than any of device so in time these will need to be upgraded too.

The Power Of Brand – How Innovative do you really need to be?

A day doesn’t seem to go by without someone mentioning Innovation in the News, however how Innovative do you really need to be?  Does Brand allow the fast follower to become the market leader?

If you really think about it; how many Innovations are really Innovative?  I would hasten to say not many.  Most Innovations are the implementation of many incremental changes done at the right time.  Think of the Apple iPad, this device is certainly a game changer and is encouraging the post PC era however what is Innovative?  Tablets are not new, touch screen technology has been around for a while, however when you combine these with the extended ARM battery life and add an App Store you have a game changer. Also, If you look at the MP3 market most people think that Apples iPod created the market however Sony had an MP3 player out first but again no vehicle for delivering the tunes i.e. iTunes.

Recently I noticed that one the UK Banks introduced a Currency Converter to the Apple App store and although I already had an app from a different developer I still loaded this and actually removed the incumbent (This type of app is not Innovative or really hard to create).  However it made me think, if you are happy with a Brand would you consume all its fast follower Innovations in the long run? 

So from an enterprise perspective, if your brand is strong and your strategy is set you can still be seen as Innovative even if your choice is to be a fast follower.   This way you will retain your Customer base and can only invest in Innovations which your customers want (You need to ensure however that you don’t take too long to fast follow as you may miss the boat altogether).

Will 2011 be the year of creation?

Unless you have been on another planet you could not have missed that Apple launched their third post-PC blockbuster the iPad 2 last week (2001 the iPod, 2007 the iPhone, 2010 the iPad). The original iPad was a huge success and in its first 9 months of being 15 million iPads were sold in 2010 from April through December, with $9.5 billion dollars in revenue. 65000 apps are also available in the App Store which have been rendered for use on the iPad.

So you may ask yourself how can Apple improve this product so that it can be even more successful than the first…..well they have and I want one.

The iPad 2 has an all new design (in black and white) with a A5 dual core processor which makes the CPU x2 as fast and x9 as fast for graphics. It has x2 video cameras which we alll wanted to see, a 5 mega pixel for video on the outside (still no camera for stills so this may be an iPad 3 feature?) It is also 33% thinner than the original iPad (8.8 mm apposed to the original 13.4mm) and also lighter (1.3 pounds apposed to 1.5 pounds). It will be available in the US on 11 March and 25 March in the UK.

You may however be asking yourself so what? I know not everyone is impressed with new gadgets, however this one is going to be a game changer. The first iPad was fantastic however when running some files it was not that fast (It still is however better than anything out there, apart from the iPad 2) and without a camera you could not Skype so would never replace a Laptop or a Netbook. With the increased power and cameras this takes the iPad to a new place. This may soon be able to replace your laptop (not yet however).

When the iPad first came out there were many reviews and it was branded a consumption device rather than a creator due to it’s power and the applications available. With the iPad 2 Apple is launching a version of iMovie which for the first time will allow you to shoot video and edit it on the iPad. This will enhance some of the original Apple business apps and start to turn the tablet into a creation device. In addition to the Apple apps you can also create documents using the many online creation apps like Google Docs and Evernote. 2011 therefore may actually be the year where the iPad turns into a creation device and becomes a valuable addition to the Enterprise rather than another toy to increase the cost of IT.

Before you all rush to your IT departments to say you have lost your old iPad, apart from the camera the old one is still good enough unless you need video editing and the business enhancements will be in the app world rather than the hardware. Naturally there will be apps the require the new high spec hardware but not yet.

iPads in the enterprise

Even though iPads are becoming more visible in the enterprise they are still more of a luxury than an essential tool as they have two issues.  The first is that they, like all tablets are a media device focused on media consumption rather than a creation with currently lower processing power than traditional PCs and notebooks and secondly if you wish to be connected 24×7 a further 3G card is required to run the device which increases the ROI of the desktop to the enterprise.

However one of these issues may soon resolved with the next release of Apples IOS 4.3 which is currently in Beta.  One of the new features being offered is tethering which means that any Apple device with a 3G card can be converted into a WIFI hotspot and connect upto 5 devices.

This could mean where users currently have a 3G card in their laptop, one in their iPhone and one in the iPad, you would be able to surrender two of them and just have one in the iPhone and connect the other two devices via tethering.

This cost saving could certainly accelerate Gartner’s prediction that “by 2013 Gartner predicts that 80% of businesses will support a workforce using tablets and the adoption of tablets is estimated to grow from 19 million units sold in 2010 to 208 million by 2014”.