There is a great new paper out called “The Fintech 2.0 Paper: rebooting financial services”. You can download it here.
The paper has been created by Santander InnoVentures, in collaboration with its partners Oliver Wyman and Anthemis Group.
It is mandatory reading, and it resets the bar on what innovation in financial services should be all about.
Maybe some history first. Sean Park (@parkparadigm) from the same Anthemis was probably the first who mentioned the idea of Bank as a Platform with a nice Prezi presentation http://www.parkparadigm.com/2009/10/29/platforms-markets-and-bytes/ in september 2009.
Since then we all have seen that story unfolding, up to some months ago where the slides from CB Insights went a bit viral.
This is looking at the home page of Wells Fargo, but i have seen versions for HSBC and others. The message here was that we witness the disaggregation or uberization of financial services and that the new capability is to be able to horizontally source pinpoint functionality and mix and match these into new experiences. That was Fintech 1.0. It’s a vibrant startup space, and for sure full of investment, accelerators and incubators. But it’s boring and missing the big picture.
The new paper helps us seeing the big picture. From the foreword:
“Many fintechs have succeeded but today they are still operating only at the edges of banking. To help engineer more fundamental improvements to the banking industry, they must now be invited inside, to contribute to reinventing our industry’s core infrastructure and processes. That can succeed only as a collaborative endeavour, with banks and fintechs working together as partners.”
There are many examples in the paper that illustrate that. Here is an example of streamlining securities settlement:
However, many financial institutions are still stuck in the pre-Fintech 1.0 era: they just start to see the light that Sean Park was shining on the vertical disaggregation of financial services. That is seven years after the first signals were clear in the market. They simply have not adjusted their clockspeed to the 21st century economy speed.
Other institutions were more pro-active and created corporate investment funds (some of them 100-200M USD or more) and/or partnered with accelerators and incubators. Probably most of that money is gone now. And to be honest, i don’t see much innovation that is actually shipped into the market. At best we ended up with some well advanced prototypes and we struggle to get them out of the sandbox. To quote myself: “Innovation that does not ship into the hands of a paying customer is fantasy”
The new paper shifts the innovation agenda. All the problems and opportunities in the paper are of a collaborative nature. Maybe not in a way that the authors intended.
- It looks from the paper that the conversation with startups has moved on from competing with the banks to collaborating with the banks. I can subscribe to that, it’s a clear message i have heard from the startups and the banks during all the startup competitions i have been invited to for coaching and judging.
- But many of the problems and challenges in the paper can only be solved through a collaborative effort by the industry at large
Just a couple of days ago i was in a meeting with heads of innovation of major financial institutions. One of the messages was that we as an industry have to be more bold, set our competitive agendas asides and join forces to compete with the next generation of competitors that are not the startups at the edges but big technology companies with very deep pockets and with the super disruptive capability of becoming ecosystem/platform orchestrators where banks will rather be the slaves than the masters.
| FinTech 1.0 | FinTech 2.0 |
| Products | Processes |
| Tactics | Strategy |
| Doing the existing better | Do brand new |
| Efficiency game | Value creation game |
| At the edges | At the core infrastructure |
| Key Performance Indicators | Key Capability Indicators |
| Vertical | Horizontal |
| Competition | Collaboration |
| Prototypes | Shipped Products |
| Transactions | Enable Commerce |
The new paper inspires me. I got somewhat bored of hearing the startups doing the same standard pitches, and attacking/leveraging/whatever one particular area of financial services. I am hungry to see startups wanting to play the big game. The game of infrastructure. Of re-inventing processes rather and putting lipstick on or around the pig.
In that sense FinTech is dead. The game is up. It is about enabling commerce. It’s about better banks and better banking with a greater societal awareness to enable commerce and supply chain. Not just transactions in the back-office.
Petervan Studios 