The world of FinTech is exploding. Here in the UK we are right at the epicentre of a revolution in the financial services. There has been a lot of speculation regarding how this young sector has disrupted one of the most stable sectors in the World and what the future might hold. But as an SME what lessons can you learn?

What is FinTech?

When I talk about Fintech I am often asked – what is FinTech? FinTech or Financial Technologies are new financial business models and disruptive innovation. Put simply it is the hybridisation of technology with traditional financial products and services.

FinTech can be anything from a mobile banking application to a peer2peer lending platform. As long as technology is facilitating a financial services transaction that’s FinTech. When you think of the number of things you can now do online, with mobiles and the new introduction of wearable technology it is not hard to see how this is a booming industry (with $12.21bn of investment globally in 2014 alone). In the recent report ‘FinTech Futures: The UK as a World Leader in Financial Technologies’ Sir Mark Walport, the UK Government Chief Scientific Adviser, says:

“It is already clear that FinTech will disrupt existing business models. It creates huge opportunities for development and delivery of better business models. It creates huge opportunities for the development and delivery of better business and consumer services and to promote financial inclusion for people who are currently excluded.”

And that has really been key to success of the FinTech sector – they have decided to go for markets and segments of society who have been previously been ignored by the traditional banking system, the proverbial low hanging fruit.

So as an SME what can you learn from these new giants of industry? How can you think like a FinTech company and disrupt your own industry?

1. Use the technology available

One of the advantages that FinTech has is that it isn’t actually looking to necessarily invent new technology to change an industry. In fact most FinTech companies start out looking to implement and use technology that is already out there to benefit:

• Customers
• Businesses
• The Financial sector.

The continuous new discoveries in technology and how to use it are allowing rapid adoption of new services and products. For example:

• Advances in Cloud computing mean you are able to scale your businesses quickly and integrate your management systems online.
• Open source technology is allowing the easy facilitation of collaboration between smaller companies to build on a bigger idea.
• Crowd funding and peer2peer lending platforms are helping companies who traditionally wouldn’t meet a bank’s lending criteria launch new products and services.

(Image courtesy of GotCredit)

But it is not just that, technology allows you to reach customers that have never been served before. Across the globe there are 2.5bn people who do not have a bank account for a variety of reasons such as geography, societal situation, ability to pay fees etc. Previously traditional financial institutions have ignored some market segments as the cost to service them was too high. However, digital banking means that as long as you have internet access you can make financial transactions anywhere in the World. That, combined with the reduced cost to serve customers digitally, means that companies can serve previously unprofitable or unreachable market segments.

So think about your own company. What technology is out there that you could use? How can you take advantage of systems and devices that will allow you to:

• Reduce the cost to service your customers?
• Scale your business?
• Reach new market segments that you have previously ignored?
• Collaborate with others to build a stronger proposition?
• Get funding to launch new products, ideas or build your team?

2.      Disrupt your own sector

Disruption sounds like a negative thing to do, especially if you are an incumbent in a sector. But as FinTech has proven – if you don’t disrupt yourself someone else will.

Classic examples of FinTech disrupter include:

Square:

“Square aims to simplify commerce through technology. Buying and selling should be simple.”

They do this by allowing companies to take credit card payments anywhere using their SmartPhones. The true success of this company is not just using the SmartPhone tech to place orders, take payments, manage stock and share information. In fact, the reason Square can work for merchants and the company itself is that by taking advantage of the cloud they have managed to reduce the costs of completing these transactions allowing them to make a profit and still provide a low-cost, easy to use system for the merchant.

Transferwise:

“TransferWise allows people to send money abroad at the lowest possible true cost. Using only real exchange rates and small fees.”

Set up by two friends who believe that money should flow freely, they again have taken advantage of the speed of computing and transactions to allow the users to get the best rate available. Currency exchange rates can fluctuate hugely throughout the day and traditional banks use an ‘adjusted’ exchange rate which may also include a fee in order to make sure that they maximise their profit on the rate. Transferwise uses the real mid-market rate and a small, transparent fee for the transaction resulting in savings to the customer of upto 85%. They are so confident that their system allows the cheapest transfer of money that they offer to match any competitors rates if the customer can find a better deal elsewhere – now that is a compelling proposition!

Kickstarter:

“Less a technology site, more a socio-cultural movement, Kickstarter is changing how we make things, how we turn dreams into reality and make ideas come to life”.

Kickstarter is one of the many crowdfunding platforms out there. But what I particularly like about it is that it is helping a previously under-served or ignored market segment. This platform is designed specifically for creative projects such as film, music, art, theatre, games, design and photography to name a few. It works in the same way as most funding platforms do the project creator sets up a specific page to their project, a funding goal and a deadline. The  ‘backers (people who pledge money to the project) are offered tangible rewards and special experiences depending on the amount for example a print of the art work, ticket to an exhibition etc. If the goal is not reached by the deadline the funds are not collected and the project does not go ahead. Kickstarter makes money by taking a percentage fee from anyone who manages to get funding. As they have a low cost to service a huge volume of projects taking a fee from just the successful ones is a hugely compelling business model. In 2014 alone they facilitated 22,252 projects receiving more than $0.5bn between them, equating to $1,000 of pledges per minute – so that percentage is lucrative on that scale. But what I think makes Kickstarter truly disruptive is that the creative sectors have been previously underserved with a large volume of artists and creators all applying for the same limited, restrictive funding. Kickstarter allows you to get any project funded and whilst it does result in true frivolity such as sending pizza to space, it also has backed some great projects such as building real-life, working hover boards.

But what about your own disruption? We run workshops for companies who are thinking about how they can disrupt their own business or industry. They are based around a thought experiment that you can do on your own:

If you were starting your business today: how would you set it up? Forget about what you already do and how you do it, leave all your legacy systems and processes behind. If you were to going to enter into your market today what technology, funding and customer behaviour can you take use to provide your products and services faster and more cost effectively? What market segments can you reach now, both locally and globally?

For example, if you are a retailer – do you need a shop to serve customers or just an online store or both? If you are a coffee shop can you reduce waiting times by offering an online ordering system or reduce costs by making your reward cards (buy 9 coffees get the 10^th free) an app?

By pretending to start again or work as a competitor you can quickly identify wastage in your own business and also new models that you can cost-effectively adopt. This way you can disrupt yourself and your own industry before a new entrant can, and you have the advantage that you already have a reputation and a customer base that you will can now either grow or serve better.

3.      Make the first impression a great one

One of the most successful things that FinTech companies have done is understand the fickleness of consumer behaviour. Society is more connected and savvy than ever before. This means that whilst you have the opportunity to reach more people those people are less forgiving.

When you are asking a person to adopt a new product or service, especially one that they are already getting elsewhere, first impressions really count. First impressions are all down to the user experience and a bad first time experience will more often than not be that users only experience of your company.

For example, if you are used to transferring money through your online account and you move to a mobile banking app or transfer app. It is imperative that the experience of using the new application is as good if not better than the old way. It must take the same number or less clicks to achieve the same goal and take less time to do so. New products and services are only adopted if they are allowing a user to do something they could never do before or if they can do something that they are used to doing quicker, easier and cheaper than before.

One tactic by FinTech companies to ensure that they provide not just a good but awesome first time experience is by focusing on doing one thing and doing it really well.

Let’s look at Transferwise again: they provide one service – transferring money abroad. By ensuring that works well they don’t need to worry about having more value-added services, they don’t need to try and compete with traditional banks or money transfer and exchanges. They know that they build the most cost-effective way to transfer money today and that is what they do. This allows them to focus on providing the best experience of transferring money rather than trying to tie together multiple platforms and systems that do many different things into one cumbersome online experience for the user with confusing options. Doing one thing only and doing it well allows new users to test the system with minimal risk and decide for themselves if they prefer it to their old way of doing things.

Another tactic used by FinTech is to test their user experience in various ways. Testing FinTech can be hard to do with real users as the risk to their money and finances can often be too high for a user to agree to testing. To minimise these risks FinTech companies will test in a virtual environment first. That could be using paper prototypes or low-fidelity wireframes at first to ensure that the user flow is correct for the tasks that need to be completed.

Once they have refined the way that the product or service will work they can start to work on the technical build and create a ‘sandbox’ or lab environment where users can trial the product or service in a real world situation using dummy accounts. This way the users can identify blockers, issues and ways to optimise the service in as a realistic environment as possible whilst minimising risks to themselves and customers.

So what questions do you need to ask yourself about your first time impression? When we test out the experience of a product and service we ask ourselves the following questions when we land on a website or open an app:

• Do I believe that this is a trustworthy, credible and reputable company?
• Within 5 seconds of landing on the home page or start screen can I understand: Who they are; what they do; why they do it; how they do it; and why I should use it?
• Do they provide the product or service that I want at a price point that I can afford?
• How many clicks does it take me to complete my top task (e.g. sign up for an account, buy an item, find a location etc.)?
• When I click on any button does what I expect to happen, happen?
• What might stop me from completing my task today?
• If I get stuck or lost – what help can I get?
• Do I have to input the same information twice?

By looking at your own websites and apps through this lens you can identify where there are blockers to people engaging with you online and opportunities to provide a fabulous experience not just to make the right impression first time but also to keep them coming back time and again.

Key takeways

Essentially there is a lot that a SME company can learn from the FinTech.

For me the key takeaways for an SME are:

• Use the tech: find new uses for old technology or the developments in new technology to create savings in time and money and to reach new market segments.
• Disrupt your own sector: think about how you could do different, be different and what new markets you can reach – if you don’t disrupt yourself, someone else will!
• First impressions count: make sure that people can complete their tasks more easily than the alternative solutions out there and test this is the case in safe environments before launching new products or services.

The more I learn about it the more I can see how the development of this new sector will effect not just banks and traditional finance but business as a whole. I am excited by this revolution of business and how we can serve our customers better. If we can take lessons learnt in this competitive and heavily regulated environment and apply them I think that it may transform the way that we do business not just here in the UK but across the World.