I’ve talked a little about TechFin in the past but, in my presentations, I talk more and more about TechFin versus FinTech.
FinTech is doing what we’ve always done, cheaper and faster and better with technology. TechFin is reimagining everything with no idea of what’s been before with technology. It’s a very different approach.
A good example is the fact that Chinese internet giants like Alipay can offer loans for minutes and hours. The only reason we had annualised products was due to the fixed overhead of our physical structures. In a tech-first digital structure, there is no need to be working on 12-month cycles. We can work on 12-hour cycles.
That’s the reason why Alibaba gives Taobao merchants loans for hours and minutes rather than days and months. It’s why Trov can insure you for the next 120 minutes. Who needs to think months and years?
For the traditional banks, this is a mindset shift that’s hard. When I talk about TechFin to banks, they often ask: who wants insurance or loans for hours? Their mentality is stuck in annuity contracts and traditional product structures.
How can you unthink everything you’ve always thought?
It’s a tough ask.
I’m intrigued however with firms that think TechFin rather than FinTech. Most of the start-ups in the USA, Europe and developed economies are focused upon FinTech. They’re trying to take away redundancies and frictions of traditional banking. They may be neobanks, challenger banks, API and Open Banking firms, but their raison d’etre is primarily upon removing old banking issues and doing old banking cheaper and faster and better with tech.
The TechFin firms ignore banking. They have no idea what a credit card or mortgage is. They just start with the idea of tech and tech platforms. How can I connect you to money? What is it you’re trying to do? How can I help you do that?
In fact, we’ve had this conversation for years. No one wakes up thinking about money. They are rather thinking about what money can do. No one wakes up thinking I need to make a payment. They are thinking I need to buy this. No one wakes up thinking I need a mortgage. They are thinking I need to get that house.
How can we think past money and product and focus upon need and requirement? And if we can shift our focus to the latter, how can we deliver that with today’s tech rather than with yesterday’s finance.
These are the questions I’m grappling with, and have done for years. It amuses me for example, that we’ve talked for decades about no one needs a mortgage as they’re actually trying to make a home. What bank understands the home making requirement? What bank is delivering the need around that recruitment, and not just focusing upon the 25-year, fixed-rate mortgage lock-in? What bank is truly thinking about customer need rather that the product sale?
And there’s the rub. If TechFin firms can deliver against need and not sale, then there’s the opportunity. I think you could truly disrupt large traditional banks when focused upon customer need rather than product sale. The only downside being that, if you do, you will probably get a very good offer from a large bank to absorb you into their universe. But then, that’s no bad thing is it?
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...