There is no disagreement that technology will enable change in financial services, from banking to insurance. The only uncertainty is timing and the path to the new way of delivering and consuming financial services. At DailyFintech we have been writing about this journey and sharing our insights about where we are heading.
The disruption is unfolding and as Davos took place just last week with the main theme “Responsive and Responsible Leadership”, I couldn’t help but think how this relates to the transformation of the financial services ecosystem which is underway.
In this post, we look at what components of the digitization of financial services result from stakeholders being “Responsive” and what falls under the category of being “Responsible”.
Fintechs and incumbents have been mainly responsive to digital natives and to digital immigrants; from mobile money to the mobile delivery of a wide range of financial services (payments, FX, PFM, wealth, credit etc). Few examples are Acorns, CBW bank, Betterment etc
The design of services and UX that are tailored for specifics target groups is also a result of a “responsive” ecosystem eager to serve clients and prospects as their expectations change. For example, designing hybrid automated savings and investment services for women, or retirees, or students.
Creating customized services by leveraging technologies like Machine learning, analysis of Big Data, cognitive computing; are all examples of more efficient financial services.
Shifting from opaqueness to transparency while delivering more complex financial services and products, is another component shyly present in the digitization of financial services, that has resulted as a response to customers feeling entitled to information around the value of paid services.
All responsive digitized financial services are actually some better, cheaper, faster version of existing ones. Even if that entails cannibalization of existing services,
Responsive leadership of a financial business aims to offer a more efficient service than previously available.
Responsive Fintech leadership started with startups but now incumbents are catching up. Regulatory changes have also been responsive to the new trends and the behavioral changes of consumers (i.e. 24/7 digital and mobile).
This part is juicier because it includes two main categories.
- Responsible Type A: Regulatory Off-springs
- Responsible Type B: Disruption
In few cases there is an overlap either with the “Responsive” category or between type A and type B of this category.
Taking on the responsibility of cyber-security; incumbents are front-loaded with this responsibility, which is heavily coming from the regulatory framework but not only. We are starting to see an overlap with Responsible & Disruptive types of ventures offering immutable, auditable and traceable processes in financial services.
Taking on the responsibility of acting as a fiduciary when offering financial advise or investment management services and at the same time being transparent; in the US this is being imposed from the regulators who have been heavily focusing on the fiduciary duties of advisors (in the UK also). In Europe, transparency will become more the name of the game as PSD2 kicks in.
We are seeing very early signs of overlap from disruptors that offer full transparency in the active investment management space and in response to the broad trend of crowd-sourced actionable insights.
Taking on the responsibility of building the API infrastructure required for PSD2’s full implementation and for the platformification of banking. Examples like Xignite, Kontomatik, or Fidor from the startup ecosystem; Open Bank Project, Capital One, Connet2OBC from the banking system and governments.
Type B refers to all stakeholders that have taken on the responsibility to change things. They maybe filling in a gap, offering a new product, or operating with a different business model.
The standard example would be the application of blockchain technology in capital markets. Imagine the mainstream adoption of a cryptocurrency, like bitcoin, as a currency. In other words, disrupting central banks and governments in their monopoly. Taking on the responsibility of the money supply and its circulation.
Taking on the responsibility of funding SMEs; undertaken by lending marketplaces like Funding Circle. This is an example, of a tech-enabled service that resulted in an economical way to serve a vital but underserved market (banks didn’t know how to analyze the credit profile of SMEs and didn’t have a profitable way to offer credit to them).
Taking on the responsibility of monetizing our personal data; undertaking the responsibility of monetizing our personal data and sharing the revenues while at the same time leveraging our digital assets. Examples are SeccoAura and Experian.
Taking on the responsibility of financial inclusion; whether it is a Digital ID, a basic current account offering to refugees or in impoverished countries, or mitigating wealth or gender inequality through financial empowerment. Examples are ample in Africa, M-Pesa, MyBucks, RainFin etc
“Responsive and Responsible Leadership” in Financial services will evolve. The responsive part is lower hanging fruit compared to the responsible. Tech firms in the West have mainly been involved in the Responsive part and only indirectly in the Responsible part (as infrastructure providers of those taking on the business responsibility). In the Rest of the world, tech firms have earned the “Responsible leadership” role as they are filling in gaps, offering new products, and operating with different business models (e.g. BATs).
The West has been more of a Responsive leader and the Rest has been more of a Responsible leader, in the digitization of financial services.
Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.