In an increasingly turbulent world where our context is awakened geo-politics, rising income inequality creating staggering relative poverty in developed countries and the looming transformation promised by the automation to come, it perhaps feels like redressing these imbalances is every technologists dream. Hard problems, big impact.
And what is needed to create change? Money. It makes the world go round, after all.
Many of the notable Fintech successes have been iterations; digitalisation of existing business models that broadly speaking disintermediate or provide better experiences, at lower cost which eats away at the traditional industry. Evolution not revolution. A new feature is unlikely to create the metamorphosis that fintech still inherently promises. Many of the doors remain steadfastly patrolled by those reluctant to let anyone new pass.
We’re still making progress; whatever the pace that is exciting. Payments, banking & platformification, wealth management/savings/“robo”, blockchain, Big Data, AI/ML applied to financial services, crowdfunding, P2P, banking licences and all the rest are all noteworthy advances to be applauded. However, these are the foundational “how” infrastructure components, the building blocks of new financial services, of business models to be imagined into existence.
Technology adoption shifts gradually then at a certain point, suddenly. We will do well to remember that pattern.
No one left behind
Perhaps it’s hard for the general public to care about the underlying innovations we are seeing without a clear value to them, now. They don’t — as yet — broadly help people overcome the real barriers to wealth creation over time. For example, financial or investment literacy and mindsets, their ability to save (for example: debt, low income, high outgoings, simplicity), attitudes towards risk, or a distracting consumer culture that entraps through instant gratification (which also drives the current economy). These are challenges for fintech adoption – and therefore how much real transformation happens in finance – as much as they are for society.
The continuing potential of building financial technology for the 21st century is more accessible, transparent, and embedded ways to make money work for people, presented in a way that fits with their lives, that creates better behaviours and removes the haze of complexity that can engulf traditional financial services.
Saving or investing for the future isn’t a nice to have. For people of my generation and younger it’s a necessity.
So, how do we hack wealth? The next stage of fintech needs to aim at building wealth for everyone, over time. Failing to tackle this and we won’t deliver on the inherent social promise of reimagining financial services with technology.
Emotions, Building Balance & New Asset Classes
It feels like a fact that people are bad at long term. It’s therefore quite an anomalous mentality, building wealth over a lifetime. It flies in the face of consumer culture — that buy-now-pay-later urge we’re told to embrace.
It’s interesting to ponder what “wealth” means. It often gets used as a synonym for “money”. Yet doesn’t wealth also include a much broader spectrum about stability, life quality, work/life balance and ultimately more personal choice about how we spend our finite time?
If you think about how wealthy people and institutions consider wealth creation and growth, it’s often about deploying capital with a long time horizon. It’s unemotional; devoid of the aspirational status nature of money. It’s also an opportunity to take calculated risks.
In terms of fintech perhaps part of the point is to help prospective investors navigate to this frame of mind: long-term, unemotional, deploying capital efficiently in varied asset classes.
However, there’s never been so many choices, or risk profiles, of asset class to consider. How do investors of all experience levels know they’re investing wisely — in a balanced way — in a way that isn’t exposing them to more risk than they would personally like? How do they balance traditional wealth-creating investments with newer fintech ones? How do they balance the subset of their portfolio that is comprised of emerging products and services?
Creating balance is a key consideration going forward within the investment side of fintech. It’s also a responsibility to take seriously for the industry. If new asset classes are going to be more mainstream they’ll need to slot into the existing spectrum of wealth generating assets, be able to robustly demonstrate why they deserve to reside there, and do so fairly quickly.
In a world where it’s not quite clear what is a safe investment, what is or isn’t “risky” per se, new asset classes have a tangible opportunity to become established.
The Great Dream is still alive
The great dream of every technologist is to make something of value to many people. To transform a malfunctioning thing into something that has real impact beyond the reach of the original solution.
Considering the benefits that wealth can bring individuals; how, over time, it can transform people’s lives, free them from making life decisions based on making money to forever pay more bills. Decisions, which, may be sub-optimal over the medium or long term for them. In turn creating balance and purpose with wealth as an enabler at the periphery, rather than the centre.
Some of the open questions remain for me about fintech’s progress:
How do we “hack wealth” through technology?
How impactful will our efforts to educate, inform, incentivise and reward people about building their wealth over time be?
How do we help them understand risk or mitigate and rebalance it for them?
How do we put people in control of their own destiny to tap into wealth and the freedom it provides those with it?
How do we all support those less well off than you to see the benefits?
Are we collectively (whether traditional or emerging) doing enough?
Products and services that address this, will, in the long run create enthusiastic customers as well as having a long tail societal and human benefit. Who knows, if we succeed perhaps fintech will help our transition to a highly automated economy quicker and with less upheaval than has been suggested. It’s the monetary equivalent of whether we’ll have a highly automated listless world where there is huge wealth inequality, opportunity disparity; or is it a world of plenty, packed to the rafters with creative people doing creative things, in a state of perpetual reinvention and learning. We all get to choose by our actions now: how staggeringly amazing and inspiring.
The next stage in Fintech, one might suggest, should lean towards the underlying “why” and less of the “how” technologically the pieces function.
Why will people want to use new tech for their money management and wealth creation?
Why will new tech increase financial literacy, wellbeing…happiness?
Why will it reach wider and then mass adoption?
Why will people want fintech to embed itself in the behaviours and financial mindset now and, in particular, the younger generations to come?
Finance, like computing, should fade away into the background over time. A background function, requiring minimal active management by individuals.
Hacking wealth for all has to be at the core of fintech. We need a magic wealth machine that’s available to everyone. The war is for the world of tomorrow, to help define it – its shape and its texture. Fintech is winning battles but the war is far from won. That’s the crux of the challenge we still have.
Of course, we all know this in our hearts. The true potential and promise has yet to be realised. That’s exciting. That’s the opportunity. Think big, it’s all still to play for. Nothing is set in stone forever.
That’s the point of fintech.