It’s time to disrupt “disrupt”
Fintech as an industry has a problem with language: namely, we don’t have one
As any successful entrepreneur will tell you, language and messaging are crucial to long-term success. Being able to deliver the right value proposition to the right audience at the right time is a skill that frequently separates those who get funded (or close their first customer, establish a key partnership, etc) from those who don’t.
Fintech as an industry, though, has a problem with language: namely, we don’t have one.
The word “fintech” itself illustrates the problem. It’s a combination of the words “financial” and “technology”, and while the two words blend nicely into a shorthand slang word that rolls easily off the tongue, the two different groups that it joins together frequently have trouble communicating with each other.
It’s not difficult to see where that disconnect comes from. Innovators who come from a technology background (particularly young innovators who create start-ups) are pushed to adopt the language that venture capitalists like to hear. They are rewarded for creating pitches that sound similar to the pitches other successful technology companies have used in the past, regardless of whether those success stories operate in finance or other areas altogether. An elevator pitch that includes words and phrases like “disrupt”, “hockey stick growth”, “gamification” or “the Uber of X” tends to play well in the tech community. Even if some people roll their eyes at the obvious use of buzz words (Finovate Bingo, anyone?), enough companies use this type of language to describe themselves that it’s clear that these words and phrases still resonate with those who decide what companies get funded and what companies don’t.
The financial industry, needless to say, has an entirely different set of language that stem from a very different source of motivation. For one thing, banks and other companies that move money from place to place are much more heavily regulated than most other areas that have seen dramatic technological disruption. If a new company starts putting electric scooters on sidewalks that can be rented by anyone for short periods of time, for example, they may eventually face some sort of legal repercussions as municipalities respond by adjusting their traffic laws, but this type of innovation typically moves faster than governments can, which minimizes the company’s exposure to risk. Banks, though, face very real and very well-established risks for non-compliance, which means that they can’t operate with the same “it’s better to ask forgiveness than permission” mentality.
Another major factor is that banking as an industry is necessarily much more risk-averse than the tech industry. Venture capitalists (VCs) can afford to chase unicorns because they know that one big win can make up for a large number of investments that didn’t pan out. For a financial institution, though, a failure rate of 1% is unacceptable. A small misstep can quickly erode customer trust, and an untrustworthy financial institution won’t be an institution for much longer.
These fundamental differences mean that technologists are implicitly coached use a very different kind of language than financial professionals are, which leads to a disconnect in the fintech industry.
To some extent, this disconnect can be seen as a holdover of the early days of fintech, when innovators were really trying to disrupt the banking industry in the most literal sense of the word. Innovations that were ready to “put the banks out of business” were common, and many companies believed that a fintech company could succeed by going directly to consumers, without needing any help from the more traditional areas of finance. There certainly have been some notable winners that have been able to do that, but the vast majority of companies haven’t been able to dislodge more traditional FIs, who enjoy an immense institutional advantage. Fintech innovators have responded to that reality by creating products that sell through traditional financial institutions rather than selling past them.
This fundamental strategy shift, though, hasn’t brought with it a fundamental shift in the language fintech technologists have to use. A fintech start-up now finds itself in an awkward position of having to pitch VCs using language that is likely to disturb the companies who are their intended customer base.
No word highlights this dichotomy better than “disruption”. To a VC, disruption represents an opportunity, a correction of an institutional inefficiency. To a banker, a disruption is a major problem, something to be avoided at all costs. This is a problem that is unique to financial technologists: in no other technology arena do the disruptors need the complicity of the disrupted to function.
It’s important to enter some caveats here. There will always be fintech companies that seek to bypass established FIs and go directly to consumers, and that’s a good thing. That kind of direct competition keeps the industry honest, and will ultimately help end-users have better products and cleaner experiences. It’s also true that there are more and more venture capitalists who specialize in fintech and have a strong understanding of the unique challenges facing the financial industry and the motivations of the people who operate inside of it. And finally, there has always been room in fintech for innovative companies that bring together a team of people from both banking and technological backgrounds. The lines between “innovator” and “banker” are blurry, and they’re getting blurrier.
Those caveats don’t change the fundamental truth about the language of fintech, though. There is still “fin” language and there is still “tech” language, and until those two languages blend together, there are always going to be uncomfortable disconnects between the major factions within the industry. At best, those disconnects are an annoyance, a small distraction that needs to be corrected for when reading information from a specific source. At worst, though, this disconnect can lead to missed opportunity on both sides, and a failure of two parties to find a common interest that serves them both well.
“Fin” and “tech” don’t always get along, but the more they can speak the same language, the better they’ll both be served. The time has come to disrupt “disrupt”.
This article is also featured in the FinovateSpring 2019 Supplement. Click here to read the supplement online – it is free and no registration required. Just click and read!
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