FinTech has been generating a lot of excited buzz in technology, banking and business circles for a while now. This year we’ve seen investment in FinTech hit a global high. A recent Accenture report suggests that FinTech companies received $5.4 billion in funding in the first quarter of this year. That’s 67% growth on the previous quarter.
Locally, Australian businesses are realising the value that this industry can provide. At CeBIT Australia earlier in the year Danny Gilligan, co-founder and managing director of the Reinventure Group, acknowledged that Australia is catching up with other markets when it comes to FinTech adoption.
‘Australia is still in the early phases in FinTech adoption, but that adoption is happening at an extremely fast rate, and at a much sharper curve compared to the rest of the world. Currently it ranks 5th in FinTech ecosystems globally – a significant jump from 6 to 8 months ago when Australia wasn’t even on the map. There is now also a race between Sydney, Hong Kong and Singapore to see who can be the biggest FinTech ecosystem in the Asia-Pacific region.’
One of the most exciting things about FinTech is that the applications are widely varied. While there is an assumption that it pertains mainly to money lending and investment, it is actually more about technology making financial transactions more agile. For example, we are seeing how technology can:
- Make payment processes more agile
- Remove payment barriers
- Help businesses to mitigate risk
- Manage their finances
As a result of this diversity, it’s not only banks that can derive benefit from this technology. SMEs could achieve enormous ROI as well, because these technologies create a better customer experience.
However like all technology, FinTech applications by themselves won’t just miraculously transform operations. If FinTech is to make a meaningful impact on your business, then it needs form part of your wider business strategy. Before you invest, you need to ask yourself these 3 very important questions.
1. Will it integrate with legacy systems?
When FinTech first arrived on the scene, some of the earliest adopters were banks. However, the banking industry isn’t exactly known for being at the forefront of technology adoption. One of the biggest issues that they faced was how to integrate their legacy systems with the newer, more agile ones. In some instances the technology was not compatible, and the banks had to overhaul their main systems, many which dated back to the sixties.
And this wasn’t just because their customers were expecting faster and safer methods of banking. The insights that data analytics can unlock can prove very valuable.
For example, Westpac Australia has a very sophisticated data setup. Their analytics systems unearthed a set of customers who had purchased the same product, in the same order for the same reasons. They discovered that in this group if one of the three had taken up only two products, there was a great chance they would take up the last product. This knowledge inspired Westpac to create a system alert so that their retailers would know to mention the last product to their customer. This resulted in a 40% conversion rate on that last product.
Westpac admittedly have a very sophisticated analytics setup, but they demonstrate that in order for the technology to have value, there needs to be a financial, cultural and time commitment to adapting the right FinTech for the business.
2. Are your staff on board with the changes?
A significant part of this commitment is ensuring that you manage your staff through the transition. It’s not enough to just implement FinTech, you need to engage your staff in the change and prove to them how that change is going to make their lives better.
In the case of FinTech, that may be about demonstrating how the technology:
- Gives your staff a great insight into your customers
- Makes payments much simpler
- Allows for speedy and agile transactions
- Reduces human error
It is also worth investigating how competitors in your industry are using the technology. What value are they deriving from it and what are the consequences of not implementing?
3. How does will the investment improve the customer experience?
In addition to providing insights into your customers, FinTech can make the customer journey a much happier experience. As The Guardian notes: ‘a financial transaction engenders a high level of trust: the damage from accidentally leaking or losing social media information, for example, pales in comparison to losing someone's retirement savings or having a money transfer stolen by hackers. Many start-ups in this area find that trust is easily won from early adopters but winning over the masses is a very tough challenge.’
How can you make sure that your FinTech adoption engenders trust? Ensuring security compliance is a significant part of making your customers feel safe. For example, if you are looking at an online payment pathway, you need to make sure that it is:
- PCI compliant
- KYC compliant
- Uses anti-virus software
- Has anti-laundering checks
- Uses a firewall
The other side of the coin is usability. It is no use installing new tech if it crashes. Make sure your FinTech provider has a 24/7 help-desk and guarantees 99.9% uptime.
If you would like to know more about the latest in business technology, you should download our CeBIT Australia 2016 SME Summary Report today.