Binu Paul, founder of online KiwiSaver comparison business, SavvyKiwi, recounts his journey into the Valley of Disruption where he met with elders of the fabled Fintech Tribe…
Financial technology, better known as ‘fintech’, in its simplest form refers to making financial services more efficient than it is today, by the use of technology.
‘Disruption’ is used to refer to anything and everything that means a fundamental shift away from how we do things today. Typically, it is used when the new way of doing things is so fundamentally different to how we do it today, that at times it catches us by surprise and ‘disrupts’ how we do business. Almost invariably, this makes current practices and providers of those services redundant.
The past decade has seen technology disrupting a number of industries, such as the hotel and accommodation sector (think, AirBnb), taxi services (think Lyft and Uber) and music (think iTunes, Spotify). In the last three to five years, this trend has been gaining momentum in the financial services sector as well.
Survey results from global research indicate that in 2015 investments into fintech ventures jumped 75 per cent to US$22bn. It is estimated that within the next few years the global annual spend will be closer US$150bn. In 2015, North America saw a 44 per cent increase in funding for fintech initiatives, while European ventures doubled in terms of funding received and those in Asia quadrupled.
The inside view
A recent trip to Silicon Valley to congregate with over 100 other fintech companies from around the world, gave me the opportunity to start to come to grips with what’s emerging globally. With 1,600 in attendance from over 15 countries, including New Zealand (SavvyKiwi, of course!), what was on offer, on the rare occasion, was riveting but mostly some pretty cool use of technology, and a small handful which left me scratching my head a bit as to their relevance (or, perhaps I belong to the ‘yet-to-be-initiated’ tribe!).
While dominated by digital solutions that disrupt the traditional banking and payment solutions sector, of the many other evolving trends that I managed to pick up on, here are a couple that really stood out:
There were a few ventures (less so than I expected, to be honest) in the automated wealth and portfolio management space, known more popularly as ‘robo-advice’. As esoteric and ‘new-age’ as it sounds, the term was coined way back in 2002, though made more popular in the last five years.
In its simplest form, ‘robo advice’ simply means the use of technology to automate the provision of financial advice. Obviously, there are varying degrees of automation possible. The common thrust is the ability to automate a large part of the traditional advice process that simply is time-consuming and not value-generating for the client.
Going one step further, these solutions execute portfolio positions and rebalance them automatically. Integrated into the solution are also client-engagement tools that effectively streamline client-interaction and reporting.
Customer-engagement solutions tackle how best to onboard and engage customers – the objective being to create a seamless user experience for clients.
Starting with identity verification and fraud detection tools these set of really smart digital solutions take away the perennial pain point created by the Know Your Customer (KYC)/Anti-Money Laundering (AML) obligations – requiring users caught between physically having to turn up at a branch and/or wading through tons of paperwork.
While still in its infancy the concept of ‘chat bots’ is catching on. Chat bots are artificial intelligence (AI) based computer programs that allow machines to carry on an intelligent conversation with users as if they were interacting with humans.
You could classify a couple of ideas as ‘creepy’, but effective – essentially programs that trawl through users’ online profiles and behaviors to identify likely future behaviors and actions and needs, using predictive analytics. Talk about targeting your customer!
A focus on omni-channel interaction was another recurring theme across a number of fintech businesses.
While there was much to take away, in summary some of the other digital technologies revolved around consumer lending (mortgages and car loans), robo-advice for peer-to-peer lending, private credit and private equity, use of virtual reality for client portfolio reporting etc. Similar to the route that SavvyKiwi has taken, there was a dominance of mobile-first strategies across most digital solutions on show.
By far, I was most inspired by BanQu, which tackles refugee poverty by using biometrics to create unique identities for displaced populations. It’s worth checking them out.
Later this year, SavvyKiwi’s fintech conference. will take a deep-dive into the latest and emerging trends in technology and innovation in financial services and how it impacts you.
Binu Paul is founder of the pioneering, independent KiwiSaver comparison tool, SavvyKiwi