London Fin Tech leading the way

There is some serious disruption happening in the London Tech scene at the moment, and financial services seems to be a core focus for a lot of this disruption. With the increasing popularity of micro-finance, alternative currencies like bitcoin and stellar , as well as P2P and B2B lending, there are plenty of options for startup technology companies looking to get involved.

The larger financial institutions also face increased competition from challenger organisations; like Aldermore, Shawbrook and even Tesco who have set up their own bank and have around 7 million customer accounts.

In the race towards growth and dominance, the challenger banks have two major advantages; firstly they do not share the legacy issues of contributing to the financial crisis, in the way the major banks did. Secondly, and probably more importantly, they do not have the legacy technology footprint the major banks have.

The age old saying of what goes up must come down is true, and for most part this is a sweeping explanation for the role which major financial institutions all around the world played in the recent global financial crisis. For this reason, issues relating to the cause of the crisis may be forgiven over time, however, sleeping at the wheel when it comes to technology advancement will not be forgiven.

A recent McKinsey&Co publication stated; that due to a lack of spending and delayed digitization of retail banking processes, most European banks “have relatively shallow digital offerings focused on enabling basic customer transactions”.

My personal opinion and one of the major factors in my decision to recently move from Australia to London, is that the UK FinTech scene is such a buzz at the moment because there is so much pressure on the oldest financial hub in the world, to lead the way into the new banking and finance era. Innovation support from heavily backed organisations like Innovate Finance are being set up to promote the evolution of the financial services sector into a technology driven industry, as opposed to the relationship and manual process driven industry of decades gone by.

The internet movement has created connectivity, more personalised service, and overall transparency. These are all much needed factors in financial services. To see the combination of consumer demand and startup technologists focusing their efforts on disrupting the control held by so few, will be a very interesting development to watch.

Big business’ fascination with start-up culture

There is a real fascination with the start-up culture today. Some of the reasons are because of the success stories you hear in the media about newly formed technology start-up businesses being bought by giants like Facebook and Google for a billion dollars or more. Another reason we are fascinated with start-ups is because we read about the significant disruption to entire industries they create like Airbnb or Uber have done.

Almost certainly when we hear the word start-up we think of technology companies. We don’t think about the start-up retail store or the start-up cafe down the road (unless of coarse it’s because we heard they made it big because they created their very own virtual cafe mobile app).

My point is that to really be considered a start-up in today’s world you need to be known for doing something disruptive, hence why we think of technology companies in this digital age. Otherwise you’re not a start-up you’re just a new business.

Now you might think this is just semantics and it’s different peoples interpretation of the word “start-up” but when you go into a big corporate environment and someone at a steering committee says “We need to inject a start-up culture into this project” or the marketing team say “We operate like an agile start-up just look at the brainstorming we draw on our glass walls”. They aren’t referring to the underfunded monotonous environment that the local business toiled away in for years.

This is why big corporate business’ who are trying to influence their culture by painting walls red and installing glass to write on, so they can call it a “start-up” culture, are missing the point.

The focus for them should not be to start something new, it should be to disrupt something. They need to act like an evangelist just like Uber have acted to the transportation industry or Amazon did to the…well just about every industry.

This is what customers want to see and it is what they want to talk about. They are not talking about the start-up new business they are talking about the start-up disruptive purpose driven business.

It is not about turning back the clock to once again be young and new and fresh. It is about articulating a mission to disrupt, identifying a path inside your value chain (or if you are bold enough outside it) and putting the entire organisations energy into re-defining how your customers and your industry experiences what you have to offer.

Redefining an organisations purpose to be that of a disruptive force is the perfect platform to inspire employees and create new energy. Just remember that if you want to be genuine the glass walls and video game machines come after the new vision, the clearly articulated growth plans, and the engaging customer presentations.

Re-think, Re-define or Retire

The biggest problem that big business faces in their transition into the digital age, is the baggage they are still carrying from their life existing in the age of the industrial revolution.

That baggage comes in the form of defined processes and outdated thinking around how they hire and retain talent, how they define requirements for new products, how they communicate with their customers, employers and shareholders, and probably the heaviest bag they are lugging around, is the process they go through to define their future strategy.

It is also true that it is not just big business that carry this baggage, and in fact there is an argument that big business is now waking up and putting considerable time, effort and money to adapting to this new digital age. That said, there is a long way to go for most large businesses and the startup generation are living by the old saying “The bigger they are, the harder they fall”.

Take banks for example. They are putting some effort into “going digital”, but how quickly? A recent McKinsey and Company article, published on their website stated that; “Across Europe, retail banks have digitised only 20 to 40 percent of their processes” and “90 percent of European banks invest less than 0.5 percent of their total spending on digital”.

It is easy to pick on banks because they are big, complex and contain significant legacy systems and processes, which require huge amounts of money and time to innovate, not to mention the change management effort involved. But that is the problem isn’t it? Banks are spending money and developing projects the same way they did 5-10 years ago. They are using Waterfall methodologies and designing products with a clear start and end date, with a tightly defined budget and calling it “Process Re-Engineering” or “Platform Transformation”.

Any new business starting up today with a desire to disrupt the banking industry, will place the customer at the center of their world. They will use new technology and be free from out of date legacy products and systems. They will run an agile environment, that is built on defining success via iterative consultation with their market, and inspire themselves via collaboration, fun and the challenger mindset. There is no re-engineering or re-platforming for them, everything is about strategies for growth.

Obviously there are banks whose technology divisions are trialing, or in fact have even adopted Agile methodologies. There are product departments who have started working with Lean Startup product life cycle versions. The question is; which organisations are truly agile? Which banking institutions can, hand-on-heart say that their organisation has embraced prototyping, co-creation involving their customers in their requirements definition, and are working towards creating backlogs of ideas not working towards completing a definitive transformation?

My point in all of this is not that Banks are going to lose, or that they are going to win in the war against emerging technology and passionate startup entrepreneurs. My point is that if they want to continue to grow and continue to evolve in the digital age, then they need to start ditching the baggage they were carrying 10 years ago, or even up to 2 years ago.

Breakthrough innovation and the ability to disrupt, won’t come from process that has worked for years, it will come from giving people the creative freedom to design a new process and new business behaviors, suited to dealing with technology, change and customer demand in the digital age.