Kerry Rheinstein – @kcrheins
Over the past couple weeks I have analyzed how the taxi and fitness sectors have been revolutionized by start-ups tapped directly into (sometimes latent) consumer needs.
Today I am going to analyze the finance sector. Fintech has been a term that has tearing up the halls of VC firms around the world and simultaneously causing nightmares for every mainstream bank.
Why has Fintech taken off both in funding and early stage consumer uptake?
To me, Fintech has taken advantage of a perfect storm of collaborating factors:
- There are still large-scale aftershocks from the 2008 global economic crisis. Although many of the big banks were bailed out, consumers have largely stayed within traditional financial institutions. While innovative new financial options have so-far been only been experimented with by early-adopters, trust in these alternatives is beginning to grow moving them into the mainstream.
- Although large banks have active M&A operations, true innovative solutions usually spring from adaptive parents – and large banks are having a hard time being adaptive and lean enough to truly revolutionize their services.
- The Financial Services sector is a critical epicentre for the consumer and many surrounding industries. Hence there are mega big bucks there.
- Control is no longer nerdy, it’s chic. Today’s consumers (and in particular, millenials) are embracing control. Being visibly in control is now a powerful aspiration as consumers want to show how they are making the most out of every opportunity in their personal and professional lives. Fintech start-ups are allowing consumers to be more in the driver’s seat through more transparent, intuitive, on-demand solutions.
The conventional financial services industry is facing such a Perfect Storm; I wouldn’t be surprised if George Clooney was poached from Nespresso to steer the industry towards smoother waters.
But, we’ve seen casualties on both sides of the start-up and corporate teams. Though the prize is a hefty size, competition is fierce and it takes not only fabulous developers but also an understanding of the preeminent consumer trends and needs to stand out in this crowded room.
So what are the big consumer trends in Fintech? Well, since you asked…
- Tech-enabled budgeting – I’m not talking about your Dad’s spreadsheets, but tools that make understanding and optimizing your spending in real time easy, and sometimes even a game. Control is fun?
- Peer to Peer – asking for a loan doesn’t necessarily mean dressing up for an interview at a bank. Both demand and supply sides have been revolutionized by new start-ups that use technology to offer alternative financial solutions. A viable way to create financial solutions for not just the top 70%, but the bottom 30%.
- Cashless – no more driving around to find an ATM or the right ATM, cashless is coming like a tidal wave. But cashless isn’t just Apple Pay – it’s revolutionizing the payment options from monthly rent checks to bus journeys. For consumers it’s all about convenience with security.
- Predictive – Control not just in the moment but in the future. Consumers seek out personal foresight tools that enable users to understand the impact of specific financial decisions. Fintech mass produces personal crystal balls.
- Artificially intelligent – Expert advice has always been important to the finance industry, but with AI customer service agents integrated into remote services, you don’t have to leave your couch to access top-notch personalized financial advice.
- Automated – Sometimes the best decisions aren’t made by us. Along with predictive analytics, consumers are using smart algorithms to automatically select the best option for us. The best option without lifting a finger? Sign me up!
In a crowded marketplace such as Fintech, the onus is on Fintech investors, the Fintech start-ups themselves or corporate banks jumping onto the Fintech bandwagon to solidify their offer and differentiate their offer.
One key way to stand out in a crowded field? Get to know your customers – their lives now and their future lives and make sure all innovation speaks to them.
Fintech is not just taking off in advanced economies. Some of the best innovations and hottest Fintech marketplaces are in developing countries where there is the potential for leapfrogging to innovative futures.
Interested in learning more about the consumer and the biggest key and emerging trends shaping their spending decisions? Check out nVest Ventures’ sector and nano-sector reports.
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