Who would have thought that the public would ever willingly turn their back on their long-trusted traditional banking and financial services? And for something dreamt up by the kind of people you can expect to see sporting flip-flops to the office, no less. Well, that day has arrived.
I guess we should have all seen it coming when a certain Apple CEO began blurring the lines of what classifies as work-appropriate footwear (thanks a lot, Steve). But that's not the only cue your future competition has taken from the innovative tech icon.
TaxTim, WhoZhoo, Ground Flr - they may not be fruit-inspired, but these names represent only a few of the African companies on a growing global list of fintech start-ups. These are the start-ups with the potential to become the Apple of our financial sector in the near future. Many of them are founded by people who dress like they're young enough to be your college-going kids... because in some cases, they are.
However, the traditional finance sector can learn just as much from Apple's venture culture as these young and hungry up-and-comers have. After all, disruption of new markets isn't the tech titan's only forte. Jobs has been famously quoted for saying, "If you don't cannibalise yourself, someone else will." And although this quote has received quite a lot of attention in the past, it has generally been limited to the commerce sector. Now, it's time for the finance sector to prick up its ears and pay attention, because times are changing.
One good product isn't enough anymore. One lone business, operating within the boundaries of a single industry, won't go far (Amazon knows this). And one new tech solution is not going to give established companies the edge over fintech. 'The power of one' in business is dead. Today is all about multiplicity, and how by creating in-house competition, organisations can ensure survival of only the fittest. This is the idea that Apple's cannibalisation theory is based on.
Notice how you virtually never see iPods around anymore? Do you think Apple cares? No, its iTunes-compatible phones are selling better than ever, cannibalising the portable music market. Yet, it won't hesitate to bin these either, if something else presents a similar opportunity. Consider its new LTE-enabled Apple Watch Series 3 (or a later improved model, if the reviews are anything to go by).
Another strong case for the self-cannibalising business is made by virtual assistants. The names Alexa and Siri are now almost as big as the brands that introduced them to the world. In fact, some speculate they may overtake their mother companies in the years to come, due to their ability to integrate with just about anything and everything a person can own. This creation of smaller or secondary business units, feeding off the larger whole until the balance shifts, provides traditional finance institutions with the perfect blueprint to model their fintech strategy.
One lone business, operating within the boundaries of a single industry, won't go far.
On the surface, it looks like banks are really getting this. Old Mutual's 22Seven acquisition is continually gaining popularity and Standard Bank has struck up a partnership to bring the first programmable credit card, Root, to developers in South Africa. The lingering problem is that many of them are still thinking like banks - seeing these as supplements to their traditional revenue streams, rather than the foundation for a whole new business model. It's why my message to these kinds of organisations at the 2017 Strate GIBS Fintech Innovation Conference was: "Get over yourself."
Thanks to the Internet of things, there are no closed systems anymore. Your business isn't in banking, finance, investment or fraud detection. It's defined by wherever you can see the potential to generate creative revenue, by pairing your capabilities with that of other compatible businesses.
Imagine a bank that, in addition to offering traditional banking services, could monitor and assess the data associated with almost every aspect of your life to streamline your spending. Imagine a bank that could use your Internet search history or virtual assistant chatter to determine where you want to spend your money, and then notify you of the best times and ways to do it. Imagine a bank that could see inside your fridge, wardrobe and music streaming account to identify what you're not using, where you're wasting, how to save, and then tell you!
It's all very much in the realm of possibility, with predictions that by 2020 there will be 50 billion devices connected to the Internet, and that means about 200 billion sensors in everything from kitchen appliances to cars and smart devices. You can't own them all, and trying to build the architecture for each and every disruptive opportunity will only leave you exhausted and stretched thin. Meanwhile, your competitors, who know it is smarter to buy into the sharing economy, will be kicking dust in your face.
Like I said before, we need to get over ourselves. It's time to stop viewing each other as our biggest threats. The real threat is stagnation, and to avoid that, we'll all have to admit there are some things we're doing in our businesses that we probably shouldn't be doing ourselves, because there's somebody else out there who can do it better.
Are you trying to incorporate fintech into your organisation? Are you wearing a suit and tie? Well then, you're probably too well dressed to be in fintech, and trust me, you just don't have the stomach for it. There's another way: partnering with, acquiring, or funding an existing fintech company that already has the architecture and talent to do it for you.
While cannibalisation can feel counter-intuitive at first, it's necessary for co-existence. And co-existence is necessary if you want to continue growing your appetite for success in this era. Why? Because it's better to get fat on your own losses than starve, even if it means you have to invite a few more people to the table.
Take a look at my Strate GIBS talk if you haven't already, then tell me what you think about this two-heads-are-better-than-one approach to transformation in the finance sector. Which companies do you think are doing it best?
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