From PoC to Production…Don’t tell me. Show me!

Imagine this…hundreds of fintech startups selling to banks…promising fascinating, and in some cases unrealistic results. Bankers standing confused between a dream that might finally come true and a stubborn skeptical resisting nature that was spoon-fed to them the hard way. That was the view from one global fintech event I attended last year. An overwhelming buzz of energy…yet little clue on how to deliver real results. 

Let’s be honest here…it takes two to tango. Bankers (and IT teams for that matter) need to rewire their brain to think outside the box and innovate through external partnerships. And fintechs, most of them inflated with a false ego, are shooting in the dark. That’s when…partnerships halt, or in most cases, fail.

Last year Fintech Galaxy ran 19 innovation challenges by 11 financial institutions across various MENA markets, attracting more than 400 global fintechs and resulting in 10 PoCs, out of which at least 4 went to production. These PoCs were solving for multiple use cases, from payments to supply chain financing, giving the banks an opportunity to test a solution in a ring-fenced context and in restricted time. Since they are framed as an experiment, with a limited budget – failure is usually as good an outcome as success.

At some point however the training wheels needed to come off, and the banks had to migrate from PoC to production, to address a very real business proposition, support live business transactions, and meet strict regulatory policies. And that’s where it all went down the drain. Gartner has recently advised that of 398 consultancy service engagements reported to them, fewer than 4% resulted in a production deployment. A proof of concept, with an external partner i.e. the fintech, is very unique and needs a specific mindset…an outside the box thought process.

 “If you want something you've never had, 

you must be willing to do something you've never done.” ― Thomas Jefferson

It probably sounds intuitive, but innovation and experimentation in the financial sector involve too many concerns of functionality, integration, confidentiality, and ROI. In the end, it will come down to having a clear value proposition that allows the bank to drive higher top and bottom-line numbers, be it from increased revenues or decreased expenses.

Here are some tips and lessons learned over the course of last year:

1. Fintech innovation is like a love relationship…date with dedication and patience before you officially tie the knots. Find the right partner to collaborate with. Many startup founders and CEO’s spend weeks chasing the wrong financial institutions that do not have a digital strategy, don’t need their solution or don’t have the leadership decision to take things forward. Banks in return, go on a treasure hunt, meeting tens of fintechs every day, attending all exhibitions and sitting for product demos until they forget the business results they were initially looking for.  
2. Fintechs, get off your high horses please. Assume the world doesn’t know a thing about you and prove yourself. Getting a meeting with a bank or winning an innovation challenge is only the beginning, it gets harder. You need to know the bank and the decision makers, the budget, the business, its problems, and its procurement process. You even need to know everything from the CEO’s daily diet to his promises to shareholders…every bit of information counts. 
3. Banks, don’t get sucked into the PR game. The world our there is smart and can easily detect BS. Set clear success measures, KPIs and define goals for every PoC or experimentation. One of the main challenges teams face is failing to measure success, return on investment and the potential impact on the business. Focus on the internal detox, not the superficial botox.
4. Fund the PoC process; don't kill them softly. Banks should be reasonable in their expectations from fintechs, in terms of time allocated and resources. Fintechs are mostly bootsrapping, so get easy on their budgets and their resources…avoid the scope creep and ping-ponging back and forth. Three months at most is a reasonable time to conclude a PoC.
5. Fail more and fail quick. Conduct as many quick PoCs as you can…even those unsuccessful ones are lessons learned. Once done with this phase, take it to Prototyping and MVP stage. End to end process shouldn’t take more than 9-12 months to hit the go-live button. Beyond a one year timeline is a sign that the project has hit a deadlock. 

While innovation so far has been largely focused on the front-end and customer experience within financial services, fintech startups are increasingly unbundling banks, offering niche products or services and concentrating on doing them with excellence. We don’t anymore have the luxury of exploring and learning…this year is about hard core execution of innovation.

Not if, but when, regulators start issuing digital banking licensed across the MENA region, traditional banks won’t have time to play catch up. But do we still have time still to go dating ?? Only those who have learned from the mistakes of the old guard will win the game. Isn’t it the same in any love relationship?

At Fintech Galaxy, we have rolled our sleeves and dug deep into the field. That helped us create a better knowledge of how the ecosystem functions, what is the startup mindset, and what banks expect and look for. How about we set up a MENA PoC Fund intended to propel innovation and intellectual property, while taking a calculated risk on startups and helping them get to the other side of the “valley of death”? We owe it to our kids...

Isn’t it time to see more players tying the knot?