It’s not fintech coming of age, it’s the incumbents

On Oct 13, 2022

I saw an infographic not so long ago marking 2005 as the year ‘fintech’ started.

Use this time, this space to learn and think. Use the rest of the year to act.

It’s an arbitrary moment, of course, but it feels roughly right.

In 2005, it said, Zopa launched in the UK. Were they the first small tech company? Of course not. I worked at a tiny tech company way before that. So did many others. We were all in fintech before it was famous, it turns out.

Did I think of them as ‘fintech’ when I met them back then? You know… I don’t remember.

Were they the first peer-to-peer lender?

It actually doesn’t matter.

The moment in time when new business models enabled by fairly new digital capabilities and championed by smaller, younger and less formal business vehicles… happened roundabout then. And then the iPhone landed and it all started going gangbusters.

But going where?

It wasn’t really all that clear for us as an industry for such a long time.

Banks at first looked for things to buy.

We all said ‘change is the new normal’ but we didn’t anticipate what actually happened. We said it sort of meaning that we expected some evolution in the way we achieved our aims. But we didn’t expect drastic change to those aims, if we are honest. Or to us… and that is important.

We didn’t expect to need to transform ourselves. We expected to need to transform the tools we used. And that was hard enough, but at that early stage… nobody imagined this couldn’t be ‘addressed’ through acquisition.

Investments are things we understand after all. Balanced risk is a thing we understand.

I remember being at Sibos all those years ago and the first start-ups making their appearance in a setting that was perfectly curated to give off a vibe of university meets high-end store. Because the banks were super keen to talk to the start-ups for one of two purposes: to learn from them or to buy them. Sometimes both. Sometimes they bought a bit, a minority stake in the little start-up. Sometimes they didn’t do that at all and all they did was take. Time and energy and ideas.

Then it started dawning on us that if all those start-ups that we invest in were to be successful, that success was to come from somewhere… right?

So the zero-sum narratives of disintermediation began.

Are the start-ups going to eat our lunch?

Back to Sibos, with these questions top of mind.

And the lesson this time was around partnerships. About learning together and allowing your incumbent ‘shop’ to find acceleration in your new endeavours through a targeted partnership with the right start-up.

And the right partnership is key, we heard year in, year out at Sibos. Absolutely key. Because the economy is shifting. All the learning we’ve been trying to glean from the start-ups. We don’t need a bit of it. We need all of it.

It turns out it’s not enough to understand what an API is. Because once you understand it, you need to price it. And fund it. And it’s not just the one API either.

And the service you deliver? It doesn’t just look different. It is different. With new operational realities, costs, risks, SLAs and new competitors. And a newly demanding and highly informed set of customers. Not to mention the regulators who seem to be learning faster than anyone.

And back to Sibos we went, year after year. And each year the way we engaged with ‘this space’ matured a little.

And the size of ‘this space’ grew a lot.

Because, if 10 years ago there were a couple of start-ups talking about ways of working and partnerships and payments for the future and this thing Bitcoin… with every passing year new horizons were there to be faced. What started as a digital toolkit and an opportunity became, year on year, a profound, complex, mature digital landscape. The economy. All of it.

It turns out we didn’t ‘run’ that. As bankers, I mean. As GSFIs (globally significant financial institutions, for the uninitiated), we serve it, but we don’t run it.

Don’t you tut me.

Don’t you dare tell me ‘we know’. Let’s be honest with ourselves. If we, the banks, didn’t think we ran the economy, then we certainly acted like we did. We were not deluded enough to assume we will run, police or own all technical innovation. But, for our early Siboses since this transformation started, there was a palpable sense of being in control of timings and direction in the way all FIs engaged with the topics. Of having a choice of ‘what’ and ‘when’ and ‘how’ when it came to ‘digital’.

Start-ups were not just pitching their business.

They were pitching the future.

We needed to believe in a life of always-on fragmented attention before we bought into the value of services designed for interruption.

We needed to believe there was something ‘in it’ for the institution before giving our blessing to spot FX transactions for the masses.

When did we realise that was a chimera?

I can’t put my finger on it, but if I look back at past Siboses, there were definitely some sessions that can retrospectively be grouped under the collective heading of “the ‘I told you so’ series”.

No excuses. All the learnings we needed have been here. And the urgency. That was here too.

So here we are, back for another year. To learn. To think. And why not? To buy.

But above all, to think.

Because we are not in control of the why, the what or the how. We are only in control of what we do in all this. And how far we play our own hand in order to have an impact on the why, the what and the how: collectively, as an industry, at the institution or indeed individual level.

Not as the single author of a digital future but as an actor and active participant in an economy we serve but not own. In an economy that is evolving faster than our industry’s learning. Which is bad both for our ability to serve and for our commercial relevance, frankly, so we are incentivised to pay attention. For our own sakes and that of our organisations.

And this year, Sibos says yeah OK, well done, you’ve learned a lot in the past decade and a half but the world is not waiting for you. It keeps shifting. So use all the things you have learned so far to think about your role in a subscription economy. In an economy that keeps shifting along the lines we’ve already discussed but faster than ever.

Another one? I hear the bankers’ unspoken groan.

Another thing to learn?

Sort of.

It’s the same thing. It’s the next thing.

All the things we’ve been learning over the past decade and a half are absolutely useful for you to even begin understanding this here thing and your place in it. But don’t dawdle because the next thing will be upon us before you know it. So use this time, this space, this week to learn and think. Use the rest of the year to act. And we will meet again for the next step, as an industry, to think and learn together as we do each and every year.

God, I love Sibos.

#LedaWrites