I speak with early stage FinTech founders and project owners on a daily basis. FinTech wasn’t sexy when I started at figo in 2014 but is surily now for many people. The movement of digital transformation has arrived with a slight delay in the banking industry. This has many reasons, and personally, I believe PSD2 is one of the crucial ones. PSD2 and Open Banking in general is providing a complete new level playing field that attracts many industry outsiders. This is beneficial and supportive for FinTech, as banking has been an industry where most of the people have a long track record inside the industry. This is not negative in general, but it surely limits innovative efforts overall.
This week I haven’t found the time to write a proper fintech focused blog post. Easter is usually a good time to refocus and recharge. And that’s exactly what I’m doing these days. Mostly while enjoying the good weather in Berlin and finish reading “Principles” by Ray Dalio. Even though I haven’t finished the book yet, I can already highly recommend it.
I hope you’re enjoying your Easter days too and making the most out of it.
In the early days of FinTech, I remember quite a few people talking negatively about the potential impact of FinTech. The reasons were plentiful: missing investors, incumbents not interested to collaborate, high entry barriers, no mass market interest… Just to name the most popular ones. In their eyes, FinTech was just a hype and will disappear in the near future. Quite de-motivational opinions for anybody who was considering to switch from traditional banking to a FinTech player.
Hopefully these people still did the switch, as none of this turned out to be true. Just going through the biggest news in this still very young year, you will see plenty of indices to disapprove the statements from above:
It was just a funny autocorrect but somehow so fitting. I tweeted about an article describing Google’s efforts to collaborate with banks in regards of PSD2 and that Google intends not to compete with banks. In that tweet I raised the questions if banks knew what they are about to get into.
Tomi replied to this with this tweet:
'we come in piece' 😃
— tomi gelo (@tgel0) March 15, 2018
Actually, he wanted to write “we come in peace” indicating that Google wants to work with banks together in a peaceful way. The quotation marks leave already some room for interpretation that this might just be a deception maneuver of Google. The autocorrect which changed the tweet into “we come in piece” made an even stronger emphasis on the potential real intention of Google: entering banking slowly and easily, and potentially grow these efforts into a bigger offering if/when banking turns out to be a promising field. And thus, definitely become competitors to banks in some ways (most likely in frontend / data analysis).
Even though some people are still trying to ignore the trend of “FinTech”, it is already a pretty crowded space. In the early times (the wave I am talking about started around 2013/14) we saw that new services were rather focused on the “outer circle” of Financial Services. In these outer circles were traditional offerings that were relatively (!) easy to attack from outsiders and these new players were able to gain some kind of momentum (in worst case only media attention). Today, there is not a single area of Financial Services that is not exposed to weekly news about a new player entering the sector. Or even more extreme: there is no news about it, because new players entering the space is not a story worth anymore.
But how can new players can get their share in the redistribution of FinTech pie? Attracting consumers in Financial Services, especially with a B2C business model, is expensive and requires a pretty long breath. These players have to figure out how they can go through this valley, survive and prosper in the long term.
I have just finished reading my second book this year (so I am nearly on schedule with my personal one-book-per-month-rule) and thought of giving you a glimpse of it . The book is called Startup way by Eric Ries. Many of you will know the famous book called “The Lean Startup” by Eric Ries and actually the Startup Way is continuing this story. Focusing on the models and ideas of Lean Startup, Eric Ries provides practical examples about the challenges while implementing them into (big) corporates. Eric has been consulting GE after publishing Lean Startup and helped the company to transform. Thus, why many parts of the book are about GE’s story.
All in all, Eric Ries is describing that corporates have to empower Entrepreneurship as a separate function internally, create internal startups on an ongoing basis that are looking for new breakthroughs with a result to rewrite the company’s DNA over and over. It is a great insightful read with many practical examples. In this blog post, however, I want to focus on the steps of how to transform a traditional company. Eric describes this process as three steps: laying the foundation, rapid scaling and deep implementation.
I was hoping to finish a blog post today that I was working on this week, however, as the piece turned out to be more time consuming than expected I will have to postpone it to next week.
But in order not to skip this week’s blogpost, I will not write about a FinTech topic but rather a small personal change I have made in the last weeks. I have started to give more structure to my week than usual. I was not really unstructured before, but I felt there was still room for improvement. When I moved from Hamburg to Berlin in December 2016, was a greater call to incorporate some work structure as I am usually only two days per week at figo HQ in Hamburg (usually Tue & Thu). This resulted that internal meetings were only possible on these days but certain longer tasks were moved to the days when I was working in Berlin. But everything else – usually calls, emails or other tasks – were just happening whenever they fit in.
What will be the biggest impact of PSD2: Increased competition? Pushing the bank-as-a-platform model? Forcing startups and banks to work together? All of them are applicable but in my personal opinion PSD2 can have a much bigger impact: if it is the beginning of a movement to provide access to data that has been historically inaccessible for third parties. PSD2 is focusing on payment accounts in the European Union, but if other countries and/or industries are following, PSD2 is just the beginning of a whole movement.
Just two weeks ago I had written here about the impact of PSD2 on services implementing payment functionalities into their service. And in each of the last two weeks there were stories about companies exactly implementing this functionality. Surely, these services are not powered by PSD2 APIs (because we are still waiting for most of them), however, it is again another proof that PSD2 is just one puzzle piece in the open banking movement.
When I am talking about un-bundling and re-bundling of Financial Services you probably know what I mean. If not, you probably know this screenshot of the Wells Fargo homepage where a FinTech logo is added to any service Wells Fargo is offering. This screenshot is easily the most shown graphic at FinTech conferences and explains what un-bundling is: Thanks to many entrance barriers banks were able to offer dozens of products and services without competition with non-banks. This screenshot is now showing how FinTech services unbundle these offerings while offering only one product but focus on being the best in the market for this one product. Re-bundling is the next step, where a player tries to combine different offering into one front-end. Basically re-bundling is like Wells Fargo in the old days, but just that the “re-bundler” is not developing each and every product herself but is cooperating with many different partners to achieve this. Good examples for the re-bundle process are many challenger banks such as N26 in continental Europe or Starling Bank in UK. But also other players are and will be trying to become a re-bundling hub for financial services. The question is who will succeed?