Will most 'fintech' innovations stand the test of time?

This set me thinking about what are fintechs? And, have they just arrived?

According to the US Chamber of Commerce, fintech, or financial technology, is the term used to describe any technology that delivers financial services, with a primary objective to change the way consumers access their finances.it

The fact is that fintech has been around much longer than people think and can possibly be traced back to the earliest credit cards. However, today they boast a host of offerings that include payment apps, mobile wallets, portfolio recommendation platforms, stock trading, or insurance providers. And like all things digital, fintech is the buzzword of current times.

Emergence of fintech is an indication of a new wave of innovation and counter-intuitive thinking. To use new-age technology to provide an ‘experience’ and ‘service’ that encompasses ease, simplicity, choice and speed, at the click of a button. Its rapid rise is possibly fuelled by access to seemingly unlimited pools of capital.

Fintech business models don’t necessarily follow conventional markers of business performance that financial services firms do.

But the fact today is that both the traditional and fintech co-exist, possibly vying for the same share of every wallet. Just like, using the IPL analogy I started with, how test, one day and T20 cricket co-exist.

Interestingly, the way they go about their consumer connect and brand building are possibly distinct, in more ways than one.

First, conventional brand building in financial services was around trust. And this trust was built over time. And under the umbrella of the familiar and trusted brand names, products were bought on faith. The heart (trust) was the route to the wallet. And the start of enduring relationships, with as large an audience as possible.

Fintechs operate differently. They recognise a customer need, sometimes niche, build an entire experience around a product that addresses it, and a customer journey that delivers service. They demand smaller sums of money outlay. It is this sharp customer proposition and ease that attracts a prospect to sample the offering.

And it is the ‘experience’ and ‘service’ that is a hook to a customer’s wallet. Having done so, then attempt to build relationships and trust, along the way. It's trial, first and then trust—reversing conventional marketing thinking. Today’s young customer is more risk- taking, ready to experiment and hence this model works, more so for this audience.

Second, fintechs are bold in selecting their brand name. Ranging from name, place, animal or things, at one extreme, to similar-sounding names to their competitive set.

“Pay”, for example, finds its place in many names of many payment apps. This is done perhaps to make the brand sound friendly and be descriptive. Again, reversing conventional financial services marketing thinking of branding that rides on cuing trust and expertise.

Third, though fintech brands target online customers for their online offerings, they use conventional mass media and invest heavily in the offline media. Something, historically, traditional financial brands have felt hesitant to use or used intermittently. Fintechs are one of the highest ad-spend categories, today, on TV and print. Their strategy seems to be, first sow and then look to reap later, patiently. And, to use strong traditional media to build recognition and trust, while conventional financial service companies now depend more on offline presence to do so.

Finally, fintechs use cash backs and promos to attract customers and their usage. Much against conventional brand wisdom, with the entire category trying to attract customers and differentiate themselves through such offers.

Attracting trials through experience, seems to be their current model. Going forward, the key will be building a sustainable business model around this offer. Currently, it seems they are based on a large number of customers doing, at best, many transactions of low value with high costs of managing technology platforms with so many freebies, and huge ad spends. They have to work towards building a loyal base of high value customers or a large base of repeat customers delivering a threshold value of business regularly.

Having lived through a dotcom burst era in the early 2000s, I wonder if today’s euphoria may die tomorrow. And like an aerated drink, soon lose its fizz. With the rapid pace with which new technologies emerge and disappear, and are accessible to all, there is a threat of commoditisation. Aggregation and consolidation may be forced by the customer’s evolving needs, or that of investors.

Peter Drucker said, the purpose of business is to create and keep a customer (and grow her value, I believe). Fintech brands, having acquired a large customer base, need to now take the next step.

While many, today, see themselves as tech companies in finance, I see the opportunity for a new proclamation. “We are a ‘Finserv’ company. We believe in delivering world class service in finance. We ‘serve’ the customer an ‘experience’ that she never expected but deserves. An experience that is normally associated with the service and hospitality industry. We do so, using world-class technology.”

It is important to see technology as a means and enabler to deliver memorable experiences through service, rather than an end. It’s for them to then evolve into building brands, loyalty and value, to have a sustainable future.

I started with the IPL, so let me end with IPL.

When IPL was launched in 2008, it seemed a game changer. But purists feared it could be a bubble that would burst. However, fifteen seasons later, it continues to thrive because it has evolved and sustained itself to become an iconic entertainment-business-property without losing its competitive quotient. Fintech brands are at a crossroad today. Only time will tell if they can be the IPL of financial services, by creating an enduring brand.