What’s the customer benefit of fintech?
This week, I was invited to take part in a panel at the annual Innovate Finance Global Summit (IFGS) here in London.
For me, the level of funding going into a market is not a good measure of success
Held at the Guildhall, there were over 1,500 attendees from over 50 countries. Speakers included the likes of the ‘Queen of Fintech’ Charlotte Crosswell (chair of CFIT), Janine Hirt (CEO of IFGS), Ann Boden (CEO of Starling), Mark Mullen (CEO of Atom Bank) and many more. Needless to say, there were many fintech/banking luminaries.
Coming into London, it was busy, and the buzz at the conference was palpable.
Janine Hirt opened the conference by reminding us how much money was invested in fintech in 2022: over $12.5bn in the UK, second only to the USA. Janine also flagged that the UK accounts for 10% of the global fintech market share.
These numbers are indeed impressive, and whenever we read about fintech we hear about funding levels and companies that have achieved unicorn status. Admittedly we’ve not been hearing quite so much about unicorns this year as the economy suffers from higher interest rates and other macroeconomic factors, and so instead we’re hearing more about “down rounds”, cutbacks and sadly closures.
However, is fintech success a foregone conclusion and is success measured by the amount of funding received? These numbers are often driven by a handful of “success stories” from usually the same companies.
This raises the question, for all the money that’s been spent, how many people’s lives have actually improved and has the money been worth it? Certainly, the likes of Monzo and Starling, which both now have millions of customers and recently reached profitability, are deemed to not only be successes, but have customers that have benefitted from lower charges and better customer experience. However, at less than a decade old, they have a long way to go to reach the balance sheets held by traditional banks like Lloyds and Barclays. These balance sheets enable a far broader product set, far greater reach and a level of stability that even after the banking crisis of 2008 has meant they have largely kept their customers despite the threat of digital challengers.
Going back to my question, what I’d really like to hear more about as a measure of success for fintech are things like:
- How many more people are banked now that we have fintechs and neobanks addressing inclusion (something that traditional banks also claim).
- How much money customers are saving.
- How many more businesses are getting the finance they need.
- How customers’ lives have improved because of fintechs.
- How fintechs have proven to be more sustainable than traditional financial services.
I could go on, but you can see my point is about the material benefit to the end customers. Even though I’ve been on this journey over 20 years, working with numerous banks and fintechs, I still question how much my own financial life has improved. I still use an open banking app, however that is a choice based initially on user experience and now on the fact that I really prefer to check my balances/transactions on an app that is not transactional. I could do this on my banking app, but the security is much stronger on the open banking app (which I prefer), so I only use my banking app when I actually need to make a transaction.
I tried apps that try to help me save money and quite frankly after over 25 years of “personal finance management” since the inception of Yodlee, I can’t say the customer experience is much better or beneficial. Other apps that aim to help save money on spend with vouchers and supplier switching deals have become monotonous and limited in their saving potential, especially now that many energy distribution companies have folded as they couldn’t reach profitability with thin margins and low customer engagement. Does this sound familiar for many fintechs?
We know that as many as 80% of all start-ups, not just fintechs, will probably not make year three. I know from personal experience how hard it is to start, to grow and to scale. I’m not knocking fintechs, but for me the level of funding going into a market is not a good measure of success, and yet that is how we seem to measure this space. This week, I’m just saying that I hope soon we will start to see numbers that make us proud of the impact fintech has made to improve customers’ lives and not just the pockets of investors.
About the author
Dharmesh Mistry has been in banking for more than 30 years and has been at the forefront of banking technology and innovation. From the very first internet and mobile banking apps to artificial intelligence (AI) and virtual reality (VR).
He has been on both sides of the fence and he’s not afraid to share his opinions.
He is CEO of AskHomey, which focuses on the experience for households, and an investor and mentor in proptech and fintech.
Follow Dharmesh on Twitter @dharmeshmistry and LinkedIn.
Read all his “I’m just saying” musings here.
