FinTech In the Future

The FinTech trends will continue for the next decade and beyond, with increased interest in new/innovative products by individuals from all financial scenarios or investment experience.  New products (whether it be a mobile app, SDK, web app, or browser extension) will continue to be rapidly introduced into our app stores and inboxes, begging for attention and reaching different parts of the investment and financial world.

However, the market eventually begin the natural trend towards centralization.  This is a natural progression towards major market standouts, much like Google has gobbled up search (and beyond), while Facebook continues to gobble up social media and social media marketing / analytics tools.  We’re currently at the stage when various solutions are fighting for a portion of the consumers finances, and this will undoubtedly continue.  Over time, both the consumer and the general tech financial will push for end-to-end solutions.  Companies like Wealthfront may acquire Acorns, Clarity and Final. Big banks like JP Morgan will continue down its path of partnering (ie – their current partnership with OnDeck to utilize their tech to underwrite JPM loans) with the goal of eventually begin acquiring.  Betterment may continue to trend towards a Fidelity-like model, or we could see them  merge with a Wealthfront to become the behemoth they originally sought to defeat.

Regardless of what or how that happens, the digitization of the financial world will continue to empower the consumer, challenge the institutional banks, and eventually trigger a reaction from the regulatory bodies.  Corporations will look to decrease overhead (replace people with tech), banks will devolve to be financial engines as opposed to owning the consumers experience, and consumer adoption as consumer FinTech will reach all facets of our financial lives.


FinTech is Empowering

Modern financial and investment management trends have become a case study in consumer empowerment through technological innovation. I fully expect this to continue.

Through decreased consumer knowledge of personal financial management, diminishing trust in the banking system, radical post-recession government regulations on banks, increase in scope and complexity of investment vehicles, and the mainstream adoption of mobile technologies, the consumer has developed an increasing appetite for financial help. These evolutions in the market have opened the door for the growth to FinTech startups, focused on empowering the consumer.

Early innovation from companies like Mint, with the success of the brilliant marketing strategy by Noah Kagan, began to infuse the value of early FinTech’s into the consumer’s every-day life. The painful world of personal income tax filing has given ways to the astounding accomplishment of TurboTax, taking one of life’s most convoluted responsibilities and simplifying it for the masses. These are major consumer facing platforms, but we can also look deeper into the corporate side of FinTech with Addepar and DST’s technical innovation, or in the multifunctional API technologies of companies like Plaid to drive better security and user experiences for their partnering consumer FinTech companies.

As the scope of FinTech has expanded, the companies can operate more nimbly than large by conducting hyper-focused innovation on a specific problem-set, using commonplace and complex scenarios as the baseline. These are real use-cases that every consumer experiences every day, such as shopping, paying bills, addressing ID fraud, refinancing debt, etc.  The result is both through market penetration, with financial advisor replacement through roboadvising, and market creation, with simple and cost-effective mobile solutions that reach entirely new market segments. Companies like Bread address transaction-based credit, Credit Karma gets you your credit score faster, Acorns allows no minimum micro-investing, and the list goes on.

FinTech entrepreneurs don’t have a daunting a task to convey the perceived value because their generally addressing  every day pain-points and provide a tool that will either generate cost savings or asset growth. By providing actionable details, creating simple and habitual experiences, and solving problems that previously carried a high cost (or at least large potential cost) FinTech are empowering the consumer at levels never before seen.  As the market saturates, the only question is how to stand out and provide actual and habitual value to the consumer.  More to come on this …


Lots of money, less logic

There’s a lot of capital in circulation, but it’s not always in the right places. Sure, an investment is a strategic gamble, that’s the nature of the beast. Maybe I’m cynical, but it seems like investors are overly optimistic and entrepreneurs have delusions of grandeur, at a time when both should be getting smarter. The startup world isn’t the game / fad as it was a few years ago, this is the present and future of global small businesses, this is modern economics.

Magic beans are being sold, investors are outlaying capital, crap is being built that doesn’t need to be built, and companies are eventually getting rolled up that shouldn’t have existed in the first place. Angel investors are less savior and more angel’s of death, giving false hope and unfocused bosses to founders / startups rather than a reality check.  At this point, problems aren’t being solved as much as more layers to the problems are being created.

Startups are seemingly moving in the direction of banking in the late 90’s and somewhat comparable to the subprime mortgage crisis. Everyone knows it’s foolish and too good to be true, but the money is moving nevertheless. Luckily when the rug gets pulled out, it won’t necessarily send the economy in a spiral.

Maybe I’m being overly cynical observing the trends of the startup scene, or maybe this is reality. Regardless, let’s tighten up that investment criteria boys.

Avoid the Comparison

Comparisons can provide a frame of reference, but they can also limit the effectiveness of your message by bringing another entity into the picture.

We operate in an age of unprecedented competition and correlation. Through the beauties and capitalism, easier access to education, lower barriers to entry into markets, and the fad that is saying you have a startup, differentiation is difficult. However, this differentiation can be critical to overcoming the competition and carving out a niche in which to build you empire. This is generally acceptable for the third part to make the generalist remarks, but not for the persons involved in the business.

Unfortunately, trying to explain a new business or technology product to someone who has not used it before is difficult, even if you’re the one who built it. You know how it works, you understand where it fits in the market, but you want to frame it in a way that is easy to grasp.  What do we often do? We compare. How many times have you heard “the Uber for”, “the Facebook for”, etc? A good founder understands the value proposition and uses that to frame their explanation.

While this is an easy way to get a general point across, it also diminishes the value of your product. A pitch is a few sentences opportunity to explain why you stand out, how you’ve got it figured out, so take that opportunity. A good founder has identified the pain points that they’re solving, figured out how to position the brand to address the solution to the pain point, and can explain without comparison.

This is not to say that you can’t start a purely competitive business to operate in an existing market. That find, but you can still generate a solid value proposition. Don’t compare, because you’re just devaluing your business and providing free marking. Understand who you are, what you’re solving for and why you’re better than the rest. Stand out, win emotions and appease intellects. How would you sell yourself?

Developers are not a commodity

Developers have been commoditized to a degree, but they are certainly not a commodity.  This dangerous reality puts the startup world and its many nascent businesses at serious risk of failure.

There are two types of players in this dynamic. The US based developer and the foreign developer. For all intents and purposes there is a divide, but at the same time code is code no matter where it’s written. The break comes with the quality, the thought and the leadership, but for this argument, let’s focus on the leadership and quality.

During the advent of the internet, a developer was someone viewed as a nerd who worked in the dark and had trouble socially adapting. However, as the technical and digital world’s grew, these people became rockstars and the access to the ability to learn these technical languages has increased. These developers have been able to ascertain large salaries, industry defining responsibilities, and a seemingly endless supply of jobs. It is a good time to be a developers. Quality drives value, as well as the technologies chance of success. Investment in quality code, no matter where the developer is, will be a deciding factor for the products future.

The need for developers has increased as more nontechnical and also unqualified founders enter the market. This has given rise to what I perceive as the secondary market for development. This has no geographic boundary, as it could be some chop shop type of operation in America or an outsourced service in Mumbai. As supporting cast members led by a quality team, there is somewhat of a chance of success, but without leadership and architecture, failure is the only reality.

This secondary market is what feeds the scalability of the startup industry, considering the limited supply of rockstar coders relative to the demand. This is the gray area where non technical founders, fair weather entrepreneurs, and the ill advised often make their perceived strategic plays and cost savings. However, they aren’t exactly realizing cost savings as much as they are increasing future cost outlay.

My argument is that the low quality founder has given rise to the perception that code is a commodity and therefore so is the tech talent behind it. At the end of the day, “nickel-and-diming” you own business without the proper infrastructure establishes a lackluster precedent and is indicative of the founders lack of foresight. If costs need to be decreased, then consider minimizing the scope of the MVP to get to market sooner and validate the market. This is most definitely the more strategic solution than building more at a lower quality.

Developers are not a commodity. Code quality is king.