On Tuesday Prime Minister Malcolm Turnbull, declared: “there has never been a more exciting time to be in fintech,” – but in truth, there has never been a more exciting time to be in any kind of innovation.
We can’t deny that technological innovation came late to financial services but it’s here now and it’s booming. Fintech has become a multi-billion dollar consumer driven industry globally and we’re on the cusp of something great here.
As we grow as an industry, we’re making mistakes and learning from them – after all, that’s what innovation is all about! Thankfully, there is much to be gained from this learning process, not just for fintech but for any industry facing disruptive change. Here are the top five lessons fintech can teach a business, or an industry, staring down the barrel of innovation.
Collaborate, don’t alienate
While it can generate buzz to take an aggressive stance toward incumbents, the time will come when you need them on-side.
Instead of fighting for market share, fintech companies and banks are building relationships for the benefit of both parties. Fintechs can build products and solutions outside of the bureaucratic, administrative and regulatory burdens incumbents face but many lack the distribution capacity to deliver their products and services to market. This is why collaboration makes perfect sense.
According to CB Insights Data, six major banks in the US have made strategic investments in more than 30 fintech companies since 2009. Even in Australia, where fintech is in its infancy, banks are moving in that direction and we’ve seen collaborations between fintechs and a range of established businesses. Spotcap recently announced integrations with six established accounting software providers and First State Super just pledged it will invest $250 million in fintech startups through H2 Ventures a fintech accelerator.
Find your niche
Fintech startups are not only innovating traditional banking services but also creating new business models to better suit the needs of consumers. Many fintech companies have found a niche catering to special interest groups – online lenders for example exist to fund small businesses when the banks can’t or won’t.
Capitalise on the power of your peers
Fintech was quick to jump on the accelerator train and there are already more than 40 fintech incubators worldwide. An incubator can provide support in the form of resource, mentorship and relationship building – all attributes the fintech community is hungry for.
Earlier this year more than 330 entrepreneurs from 120 companies applied for a spot within Stone and Chalk, Sydney’s fintech hub. Since launch four months ago, resident startups have raised more than $12 million in capital and have collectively hired more than 70 new staff members.
Lobby for regulation and policy change
Fintechs quickly recognised the importance of government support to help build consumer trust and encourage growth in the sector and have been frontrunners in lobbying for regulation and policy change to support the industry.
Earlier this month 32 Australian fintech startups, including Spotcap, H2 Ventures, Reinventure Group, Stockspot and Ratesetter banded together to call on the Government to use the innovation statement to prioritise the development of a thriving fintech industry.
Working with regulators and embracing compliance gives fintech startups a tremendous competitive advantage.
Persistence is key when growing a sustainable business. It takes patience, a lot of fine-tuning and complying to make it to the top. Trust from customers can be lost very quickly, especially in the finance industry after the 2008 global financial crisis.
Lending Club, the industry’s biggest firm in peer-to-peer consumer credit decided to pause their operations in 2008 to make sure it complied with all regulations. The company sold shares for 27 cents in its first year of operation in 2007, which are trading at $14 a share today. It is said to now lend around $757,000 every hour.
About the author:
Lachlan Heussler is the Managing Director of Spotcap Australia and has more than 15 years’ experience in financial services, both in Sydney and New York. He has witnessed the profound impact technology can have on financial services and is passionate about using technology to support Australian small businesses.