• Clare Walsh, Consultant at City-i


• 15.06.2016 08:00 am
Fintech

Fintech continues to dominate the news the world over, with India and Singapore joining the growing band of countries who have already put a stake in the ground, eager to grab a piece of the action. Fintech is exciting and possibly life changing on many fronts, not just because of the wealth creation opportunities it offers, but also because of it’s potential to help transform the way financial institutions operate. However, the burning question of today is: Do the growing army of new, and sometimes even the more established fintech leaders, truly have the ability to make these businesses both successful and sustainable?

Despite all the present day hype, fintech really started in the late 70s, long before the word had even been invented. It was in a time when the new world of ‘real-time, integrated, modular banking systems’ based on mini computers, which matched, and quickly surpassed the processing power of the once mighty mainframe, was born. These disruptive upstarts took on the all-powerful IBM and against all odds, won. Firms such as Midas (now Misys) and Arbat Banking Systems (now Cor Financial) to name just two, really shook things up back then. They, and others like them, were instrumental in opening the fintech flood gates and throughout the 80s, 90s and now well into the 21st century the industry is awash with fintech firms, all claiming to have found the nirvana which will help to solve the multitude of problems the banks still continue to struggle with.

But where are the great white hopes of yesterday now? How many fintech firms, both old and new will ever truly succeed? And why do so many constantly fail to fulfil against the promise that they can help to change the world of global banking forever?

Don’t get me wrong there are a number of well established, successful companies who have stood the test of time. Tibco, Misys, Markit, Calypso, FIS and probably Temenos all spring to mind. Whether today are still considered to be visionary is a matter of opinion, but they all seemed to have appointed competent management who have guided them through some very turbulent times and managed to maintain leadership positions within their respective fields.

What happened to the likes of Algorithmics, and more recently Powa and NetOTC, the much feted golden children of the supposedly game changing fintech squad? So many of them have gone spectacularly bankrupt, been swallowed up by conglomerates such as FIS, Markit and SS&C, or simply shut up shop and went home. What is even sadder though is that a good number of these ‘lost’ businesses undoubtedly had great technology or great products with committed customers who lamented their passing. So why didn’t they survive and prosper as independent businesses and what lessons can the new breed of fintech leaders learn from the experiences of their groundbreaking forefathers?

In my view, there are three vital components necessary to the continuing success of any business, these are; Visionary leadership, A great management team and Great marketing…And yes there is a very clear distinction between being a visionary leader and a great manager. Over the years, I have witnessed firsthand how these crucial requirements have been cavalierly dismissed by an array of inexperienced founders, who then learnt the hard way, that very few individuals (including themselves), have neither the time and the ability to be a visionary leader and a competent manager all at the same time.

The demands of establishing a new business, creating new product, and building a team as well as getting your message to market is onerous and incredibly time consuming. To get it right requires a variety of skillsets as well as laser sharp attention to those all-important administrative business details which are too often an irritating distraction from what a founder typically loves to do – which is to develop new technology or new products.

Despite what many people still think, the late Steve Jobs, Bill Gates and Mark Zuckerberg did not single handedly build their global businesses. They had armies of extremely competent people each bringing a variety of expertise and experience to the party, and were in the background supporting these visionary leaders, every step of the way, on the road to unbelievable success.

I have been in this business since 1980 and have worked, or been associated with many of the fintech firms who have passed this way. And sadly the path to building a sustainable business often has less to do with the banks taking bloody ages to make up their minds on a technology purchase (although this is often the most significant factor which determines the success or failure of every new player) but it is just as likely to be the inexperience, and sometimes blinding arrogance, of a new founder who thinks he or she has all the answers.

Unfortunately I have also had personal experience of exactly this scenario where the CEO created a hostile, fear laden environment, and as a result, snatched disaster from the jaws of success. The consequence of refusing point blank to collaborate and ignoring valuable input from the team was disastrous. Unfortunately the customers were also treated with the same disdain. And guess what? Those precious early adopter clients very quickly voted with their feet and the business folded. It was very upsetting to see a couple of years of very hard work, peoples livelihoods and significant investment dollars being squandered so unnecessarily. Arrogance and fear does not deliver good outcomes, motivated staff and happy customers are your key to future and sustainable success.

The profile of a truly visionary leader
Recognize your strengths and your weaknesses. Then play to those and hire people with the skills and experience you probably lack, specifically marketing and operations. Get an external mentor. Someone you trust, these individuals provide an invaluable service as you will be able to speak openly with them about issues and concerns you may not want to discuss with your colleagues. Act like a grown up company from day one, establish a board of directors and implement robust policies and procedures as soon as possible. Your reputation is everything. Integrity cannot be compromised. Don’t be threatened by smart team players, smart leaders hire smarter people. Embrace them as they will be an integral part of your success. Don’t procrastinate – make decisions and encourage collaboration and ideas sharing – and most importantly listen. Keep your ego under control and always give credit where credit is due, publicly recognize and reward great ideas and contributions by individuals and teams alike. Be nice, being nice is not a weakness, if you treat people with courtesy and respect they will reciprocate. Don’t hoard your money, but be prudent and invest in services that will help to build your business. Sales and marketing are the cornerstones of business growth. Take advice from Mr Bill Gates, one of the greatest marketeers and visionary leaders of our time who famously once said that if only he had one dollar left to spend he would spend it on marketing. Oh and by the way if you happen to experience cash flow problems, don’t short-term fund the business with your colleagues PAYE or pension contributions. It’s cruel and illegal. If you have got to this point, it’s probably game over anyway.

Fintech is no Field of Dreams.
This is a tough and highly competitive environment with hordes of firms vying to capture the attention of the banks and the other external influencers. Building a new product and then sitting back waiting for the orders to flood in is never going to happen. If you believe in the famous ‘build it and they will come’ quote from Kevin Costner’s wonderful film, Field of Dreams then I fear you will be waiting a long time for a stream of people to turn up unannounced at your door. In the real world you need to get up from your computer, walk out of the office and market the hell out of your game changing idea. Chit chat in the market is your secret sales force as your users always talk amongst themselves. And people buy from people, your business needs a personality and presence as well as a great product or service. Invest time in getting to know your customers personally and in understanding what they need both from a technology and business user perspective. The business users are most often the budget holders and sometimes have limited understanding of the actual technology you have on offer. Feel their pain and learn to speak their language to create peer to peer relationships, they will appreciate this approach.

It’s a well-known fact that building any new business requires masses of hard work, long hours and attention to detail but without great leadership and great communications what’s the point?