The financial services industry has traditionally been one of the most technology-intensive industries. But the speed of technology change, and the business developments this has fostered, has left many companies even in financial services floundering and struggling in the face of a rapidly changing landscape.
Whether you are a bank, an insurance provider, a credit card company, or payment provider, technology is driving fundamental change in your sector. Hedge funds for example are now poaching technologists from Silicon Valley. As one financial headhunter recently stated, “traders used to be first-class citizens of the financial world, but that’s not true any more. Technologists are the priority now”. Financial companies now focus on hiring individuals with the technical and computer science skills that will enable them to create the algorithms that underlie an increasingly complex environment.
The above dynamics have led to the emergence of what has become known as “Fintech”, or financial technology companies. Fintech start-ups, as well as a few incumbents financial providers, are today characterized by an agile, data-driven analytics approach to financial services. Companies include those such as StreetShare, which offers peer-to-peer lending for small businesses, or TradeRiver which provides an online platform for cross-border financial transactions.
The emergence of fintech is also resulting in shifting competition for traditional banks, with companies ranging from Klarna to Square, as well as more established companies such as Apple Pay and PayPal, challenging existing and mainstream notions of finance. This new world has seen significant stakes being made: global investment in private fintech companies totaled $5.7 billion in just the first quarter of 2016, representing an increase of 96% compared to the same quarter one year earlier.
Although at the risk of overly simplifying a dynamic and changing situation, we see three main areas of Fintech challenging existing financial companies:
The above aspects of fintech help describe some of the core trends playing out as we head through 2016. But underpinning much of the success of fintech is a renewed focus on the customer experience. New players such as Square have a very different approach to technology and creating compelling user experiences, than their traditional banking competition. For banks, they face the challenge of shifting from a physical branch-model to a digital-first model, characterized by a seamless digital interface and customer experience.
Transforming old legacy systems and processes to becoming a digital businesses is the major challenge facing financial organizations in 2016. For young, digitally native organizations, this represents a much simpler proposition. For those organizations with a hodgepodge of systems (banks for example with a proud 120-year history) it represents a major upheaval to business as normal requiring significant investment. As a result of this upheaval, financial firms are increasingly looking to help from external providers who can provide fintech development services.
As the well-known financial expert, Chris Skinner, has been quoted as saying, “banks are fully aware of the threats and challenges posed by fintech companies, it’s keeping up with them that is the problem”. In light of the fundamental changes which technology is bringing to the financial services sector, increasingly these companies must look outside of their own walls to find the specialist technology expertise which can help them navigate this new environment.
A leading financial services organization was looking to develop new ways for customers to access their cash from an ATM. Belatrix was tasked with creating a mobile app that would enable a customer to withdraw money from an ATM in less than a few seconds using their phone, not a credit card. With such an open brief from the client, how could we best come up with a solution?
Design Thinking. Belatrix Software was one of the first companies in Latin America to start using Design Thinking in its engagements with customers. And it is actually here, when a problem or goal is not strictly defined, that Design Thinking is at its most powerful. It enabled us to wear the shoes of ordinary people regularly using an ATM, and helped us to come up with fresh ideas about what was possible. Belatrix, together with the customer, were then able to iterate through different possibilities, create prototypes to see what worked and what didn’t – and how to overcome challenges from the technology, to connectivity issues, to the user experience.
The result was the development of a mobile application which could be used instead of a credit or debit card to quickly access cash – so-called “cardless cash”. This concept was developed via close collaboration with a nearshore development team. The teams utilized two week iterative cycles, to ensure the development team could take into account quick and immediate stakeholder feedback. The result was increased customer convenience (the time it took for customers to receive cash went from 40 seconds to 10 seconds) and increased security (by lowering the risk of the skimming of credit cards).