FinTech Innovation in the Worst of Times and Best of Times

Lower valuations, increasing costs of accessing funds, and a general sense of slower growth are putting pressure on FinTech firms.

Generative AI also adds an interesting twist, a remarkable triumph of statistical learning over logical decision-making that dominated computing for decades. At this point, as many of my industry peers pointed out, perhaps more is said about Generative AI than known. Adoption with cautious optimism and risk containment seems to be the consensus.

As we have recently launched several FinTech-powered digital capabilities to improve customer experience and business process agility, there is cause for optimism regarding FinTech firms:

1.?????Regulatory pressure?will intensify competitive pressure for banks to innovate at higher speeds and lower costs, while investing heavily into governance risk and compliance (GRC), thus looking more favorably toward FinTech adoption.

2.?????A humbler FinTech?community has become more attentive to bank’s 3rd?party risk management, data protection, and operational resiliency obligations

3.?????Lesser “noise” in the FinTech?landscape, as firms with lower value propositions exit the market, making it easier for banks to make the right partner choice

As I reflect on the evolution of our FinTech strategy over the past 2 years, 3 core ideas stood out as key pillars to our accelerated FinTech-powered business transformation:

1.?????Simplifying FinTech Execution Strategy from 20 plus steps down to 4 steps:?The simplification allows us to discover more ideas, validate business cases early, and eliminate FinTech candidates early, thus allowing us to commit more time to a smaller and more focused pipeline.

2.?????Shift-left to Test early:?We borrowed this idea from the Agile SDLC. Instead of testing taking place toward the end of the implementation lifecycle, we test early right after discovery. Testing in this case includes evaluation of alignment to current business priorities, business value validation, and risk review, beyond the traditional technical due diligence at this early stage. This approach allows the technology team to align with the business earlier and more often. Instead of buying technology and then chasing problems to solve, we engage the business early and often to pursue a balanced opportunity and risk decision-making process.?

3.?????Democratizing Innovation:?Innovation is a team sport. Some of the best ideas are obvious once known. These ideas often come from colleagues in frontline servicing functions that are usually not the highest paid in the organization. We launched a user-friendly innovation portal that businesses and technology both use to listen to our colleagues. We also ran an “Innovation Is” video campaign to listen to how our colleagues define what innovation is. Results indicate a majority of the high-quality, innovative ideas came from colleagues belonging to the immediately adjacent business teams that are not overly close to the day-to-day, yet close enough to offer improvement ideas. This is the power of the broader concept of teamwork enabled by democratization of innovation.

In short, these seemingly “worst of times” for FinTech are also the best of times for FinTech as market trends encourage innovation and banks simplify and democratize innovation to accelerate adoption.

What is your view of the FinTech?