If you go over a list of disrupting businesses in the last decades you will find names like Uber, Airbnb, Netflix, Google, etc. Most of these businesses are not providing new services or products. They are providing the familiar, just done differently.
Uber and Lyft have disrupted the taxi industries in many cities around the world: they are offering point-to-point transportation services, as conventional taxi services do. But differently. They offer an augmented service, low-effort, user-focused experience and tap into aspects of human behavior that make many of us prefer an uber to a taxi. While the taxi offers you a service that starts when you step into the car, Uber offers you a service that starts when you decide to hire a ride. You can stand in the corner and wait for a taxi to show up not knowing if and when it will show up, if the driver will agree to drive you to your destination, or if the cash that you have in hand will be enough to cover your ride. Or you can call an uber in which case you don’t need the cash, you know exactly where your ride is before it arrives, how long it will take to get where you are, and how much it will cost you. Do this exercise with other successful businesses like Airbnb, Netflix or Google and you’ll see this pattern repeatedly.
Moving now to the financial industry, my sense is that many fintech are offering financial institutions what would be the equivalent for the taxi industry to develop an app to automate the dispatch of taxis to requesting customers, and charging them automatically―in fact, in many large cities, in an attempt to battle Uber, it is now mandatory for taxi drivers to accept payment by card. What fintechs are doing is looking at areas that are unserved or underserved where there are customers eager to get (augmented) services that financial institutions are not providing.
But the partnering between fintech and financial institutions is not straightforward. There are coordination problems. For large, global banks the solution has been through corporate venturing and acceleration programs that allow them to identify and invest in user-focused, tech-savvy startups and pilot their solutions. For local banks with smaller pockets the partnering offers challenges that we have tried to address with our program Finconecta, a 10-month program in partnership with a&b to integrate selected fintech from all over the world and financial institutions in the region via a virtual platform.
We have a preliminary portfolio of fintech that have been selected by the participating financial institution―far from a representative sample but informative, nonetheless. The single category that has awaken more interest from the part of participating financial institutions in the region is credit underwriting, followed by payment solutions, and a third group of solutions that provide other services like back-office automation, client profiling, biometric authentication, etc.
In the case of credit underwriting, for example, fintech selected by Finconecta use a broad range of data sources to evaluate the creditworthiness of potential borrowers: end-user’s email inbox, psychometrics, social networks and digital platforms, digital payments. Their solutions are a response to bottlenecks in the credit infrastructure that most countries in the region (and the world) face. But still, these fintech are providing a familiar service―assessing creditworthiness―just done differently.
We are very excited to offer financial institution in the region the opportunity to get as excited as we are about new technologies and tools (from cloud computing, machine learning, biometric cybersecurity, blockchain, mobile apps, etc) that fintech can help them deploy to provide better and broader services to the region. We’ll have the opportunity to see the results of this effort in Foromic, in October 2017.