Another day, another fintech emerges from the ether. In fact, global research portal, Statista, predicts that worldwide investment into fintech is expected to reach AU$10 billion by 2018, up from the $4 billion recorded in 2013. So much money going into fintech!
But with all these new ventures appearing seemingly out of the blue, and with so many investment dollars being channelled towards these new-fangled products, is there any way to predict which fintechs are likely to fail, and which are likely to succeed?
Probably not, with complete accuracy – but the below five characteristics could give some indication of their potential for success. How does your fintech stack up?
1. Your start-up solves a real problem
The most popular, adoptable and excitement-generating products are ones that solve a tangible problem.
For example, consider a renter who struggles to extract bill money from their flatmates.
Easyshare automatically shares the cost of rent and bills among users, who each set up their own payment method. Great!
Need to get on top of your personal finances but feel slightly overwhelmed by the thought? Pocketbook connects you to banks and categorises all your transactions for you. That’s a relief.
Running a small business and can’t get finance from a bank? FundX assesses your creditworthiness without the huge amount of paperwork banks need, and can advance funds within 24 hours. Crisis averted. Problem solved, and you've got happy customers (and lots of them!).
2. You provide a seamless customer experience
The increasing pervasiveness of digital everything means tolerance levels for physical anything are dropping at a rapid pace.
If it doesn’t use mobile technology, if it can’t be accessed exactly where user need is located, or if it physically interrupts the everyday activities of the user (ie, it can’t be done while waiting for a bus or at the hairdresser), it’s simply too hard to consume.
This is why PayPal is located at the exact point where consumers need it – wherever they make a purchase – and why our QuickFee Online Secure Payments portal is right where our customers want it (on the invoices for their accounting or legal fees).
Minimal effort means maximum uptake because, let's face it, we’re all getting lazier.
3. You're keeping it simple
Some of the most successful fintechs aren’t actually based on creating anything new, rather they’re just a better way to do old things.
As an example, both taxis and Ubers pick up person X and take them from point A to point B.
So why has Uber managed to turn the taxi industry on its head? The simple answer is they just get person X from point A to point B better – their app is simple and easy to use, it ensures the driver is more reliable and much more polite, and cars appear whenever and wherever they’re needed, as if by magic (it’s actually by tech).
An improved experience means never returning to old ways of doing things.
4. It's based on tech – glorious tech
After all, you can’t write “fintech” without “tech”! But seriously, fintechs are competing with a formidable line-up when it comes to our traditional financial institutions.
In Australia, we have some of the largest and most carefully regulated financial bodies in the world, with mountains of client data at their disposal.
However, what these institutions often lack is the ability to harness this data through sophisticated tech mechanisms that make credit (and other) assessments much faster and more accurate, with less need for manual customer involvement.
As an example, consumer finance firm MoneyMe uses an online credit decisioning assessment engine that taps into social media and other online touch points to allow loan applications from a mobile device and personalised pricing for the individual.
5. You have a very thick skin
...because ambition requires it. The road to the top is tough, and you’re likely to fail a few times along the way.
But if you concentrate on meeting the above fintech “success indicators”, you’ll be well on your way to achieving big things in fintech. Good luck on your journey!
Bruce Coombes is the founder and managing director of QuickFee, an invoice financing service for lawyers and accountants.