very long way away from confusing
ourselves and can focus on the three
core aspects of the innovation.
One step at a time
First is innovation in the technology itself. You could be talking about
blockchain, as an example of the
emergence of a set of capabilities
that didn’t exist in the past. Second
is product innovation, delivering
a product or service in a way that
did not previously exist, thanks to
technology that you currently have
at your disposal.
The third is business model
innovation. This could be something like Revolut, an example we
all tend to cite, that offers access to
multiple currencies in a frictionless and cheap way. They do it at
a profit margin, but its fractional
compared with the profit margin
traditional providers would consider normal. Their innovation is in
their business model and how they
monetise that relationship.
Why is this important? Because you can buy them, or you
can emulate them, but you don’t
solve your problem. That in many
ways is the crux of the matter. We
started talking about Fin Tech to
define something that is not what
we currently do within the big
financial services institutions. It is
not necessarily the best name for it,
but actually it identifies that there
is a trend that needs a name. Could
it have a better name? Absolutely.
Will we live with it? Sure.
What’s in a Name?
So problem solved, right? Not
exactly. If you take all innovation,
and the financial technology, and
bucket it in the very specific shape
that looks like a start-up, as many
do when they reference Fin Tech,
it is a misleading thought process.
There is plenty of innovation coming from larger firms too.
So this technology-powered innovation cannot solely mean startups
but it also can’t be a byword for
new technology either. That is
because a lot of the start-ups that
are doing very clever things are not
using emergent technology to do
that. They are using tried and tested technology, but are innovating
through the business model or user
With such a confused term,
invariably, you end up in the
conversations I’ve had with senior
bank execs, where you can’t settle
on anything, because they meander
between talking about startups,
emergent technology, or both. A
large percentage of the decision
makers speak of Fin Tech and
start-ups interchangeably. They
then consign it to the space of
innovation labs and observation, or
potential portfolio-diversifying investments, all of which are hugely
However, it misses the fact that
most of the conversation actually
needs to be about the game-chang-
ers for the business model inno-
vation, the monetisation of those
relationships. There are also the
shifting expectations of clients,
the shifting value assessments of
clients and their willingness to
pay X or Y, interactions, and most
importantly, the configuration of
the value chain.
Move past the technology
With more and more things not
being needed because of technology, and more and more things not
being deemed valuable because of
technology, and more and more
things being possible thanks to
technology, looking at that technology alone is really missing a trick.
It could be that the companies
that have the biggest impact in making that change happen are the ones
that don’t survive. So investing in or
observing Fin Tech is not necessarily
going to give you the information or
the success you expect.
If you choose to use the term
‘Fin Tech’ to just mean startups or
emergent technology, you’re not incorrect, but you have limited yourself to a very, very small fraction of
what you should be looking at.
We need to talk about Fintech.
But we must not forget that this
just one, albeit crucial element, of a
much broader conversation around
value chains and the future of your
There is no financial services institution, no
matter how you define what they do that
isn’t in the business of Fin Tech.”
We react to change
by trying to assign
new things a
specific label in
order to describe