As a few fintech companies like Lending Club, Betterment, and others have run into some rough patches lately, it has been interesting to note some of the reactions, especially amongst bankers (that’s just shorthand, I’m looking at you too, credit union leaders).
Some have taken this news as indication that fintech was just a bubble after all, and it is finally popping.
I think a more pragmatic view is that fintech (and “innovation” in general) has simply moved down from the dizzying heights of the hype curve. That’s a good thing. It’s the natural progression of maturing technologies and sectors. It means that fintech is moving from wild, pie-in-the-sky fantasizing to actual application with customers. Real companies are learning real lessons in the marketplace.
Some will make it and some will not, but technology– financial, and otherwise– will continue to be an increasingly important part of our financial lives. As fintech companies navigate the hype curve, bankers seem to be navigating their own grief cycle about fintech and the need to innovate:
The Bankers Fintech Grief Cycle
The first stage is Denial. It is hard to comprehend that the things that have brought us so much success are beginning to be less effective. Denial is a powerful reality-distorting mechanism that can persist for a very long time (and it has). We’ve been doing it this way for years. We’re at the top of our peer group. Financial services are different than just selling books or videos. The industry is too big, too established, too well regulated, too politically protected, too important to the economy, too whatever, to be disrupted. We’re in financial services, and we have technology like a core processing system, some ATMs and a website– we already are a fintech company!
The second stage is Anger. Frustration sets in when reality begins to bevoke harder to deny:This is unfair competition! When are the regulators going to take a look at these companies and smack them back to the real world? I could do more if only I was allowed!
The third stage is Bargaining. Compromise seems like an easier path than change, and we become willing to make trade-offs now that we should’ve made earlier: I know we’re going to have to do something different someday for those millennial (never mind that the oldest of this demographic group are already in their mid-30’s), but we can just stay the course until I retire. Maybe if we just clean up our website a little and update our mobile app (or just come out with one), we’ll be OK. What if we just add the word “innovation” to a couple of our people’s job titles?
The fourth stage is Depression. As the new reality persists in the face of all of the other coping mechanisms, despair sets in. Why bother? The industry just isn’t the same anymore. Maybe it’s just time to sell.
The final stage is Acceptance. The inevitable is finally accepted, and for some, even embraced. You know, beyond the threats, there are actually quite a few opportunities in all of this. Some of these companies have some pretty good ideas, maybe we should work with them instead of fighting against them. This could actually be good for us!
Fintech is the new normal, and the bankers who move from Denial to Acceptance faster and step up their own innovation efforts will reap the benefits in this new era of digital disruption.