Article

Neocova.Com Header

The Disruption We Need is Not in Technology

When fintech officially entered the scene, many came with the intent to “put banks out of business.” The plan was simple: go direct to consumers and supply a better experience at a lower cost. As expected, high customer acquisition costs, barriers to entry, and regulatory scrutiny seem to have forced a ‘pivot’ of sorts. Fintechs realized that technology, as a standalone, doesn’t disrupt anything. So they began looking to banks as partners vs. competition, and partnerships took center stage. Banks offered distribution to an existing customer base and regulatory know-how, and fintechs had the products and engineering expertise. Even the ecosystem infographics reflect a different perspective now, as Point72 recently published in their piece, “It’s time to disrupt financial technology.”

 

Version 1 – Fintechs Attacking Bank Services (e.g., unbundling)

No alt text provided for this image

 

Version 2 – Fintechs Building the Bank (e.g., embedded)

The new "re-bundling" or building blocks of banking

 

Perhaps it’s obvious, but I agree with Point72’s diagnosis:

Legacy technology must be replaced. We can’t build the future we want on the infrastructure we have today. 

Even banks are starting to get on board with this concept.

However, perhaps instead of focusing on disruption, the next stage is instead about collaboration — and being better, true partners. 

Where We Are Now

If you look at deal activity over the past 24 months, connectors are king. Quovo sold to Plaid, Plaid to Visa, Finicity to Mastercard…Synapse, Galileo, Bond, Marqueta, all entered the scene.

Fintechs started as competitors because banks wouldn’t connect. They believed that closing themselves off was safer, and existing vendors in their stack echoed this sentiment. Alas, perhaps one by one, they came to realize, you go farther together. Partnerships and collaboration were proven to be a win-win, and if media buzzwords are an indicator, open banking is our future. It’s all about API’s, embedded finance, and digital transformation.

But we don’t simply need technology and “open API’s”, we need an open mindset. What good is an API if you can’t access it?

As the saying goes, “Technology is easy. Humans are hard.”  

To create true industry transformation, what we need more than anything is a shift in mindset. We must move from “me vs you”, “us vs them” and scarcity to abundance. We need connection and openness, transparency and collaboration, not *just* the technology. 

The Story of LEGO

We can look outside of our industry, perhaps to other “building blocks” for inspiration of what it looks like to build a better future. In fact, who better than the “World’s Favorite” building blocks themselves, LEGO.

For those not familiar with the story of LEGO (as I wasn’t until recently), the company nearly went bankrupt in 2004. Why? They tried to innovate away from their core competencies and only looked internally to do so. They were fearful of the rush to digital and video gaming, and they wanted to stay relevant. 

Sound familiar?

Thankfully, their turn around story has been remarkable. 

LEGO turned a $300M loss in 2003, and came dangerously close to complete bankruptcy. But by 2014, they surpassed Mattel as a top toymaker in the world. How? They invested in innovation…smartly.

LEGO created what is called its “Future Lab”. They encouraged crowdsourcing for ideas, an Open Innovation Policy, rapid prototyping, and inserted more diversity into their product lines (Toys designed for girls! How innovative!). They paid for licensing agreements. If they failed, they did it in a way that could learn from (and without significant investment). They didn’t try to do “all the things”!

Perhaps most importantly of all, they never stopped innovating. They borrowed ideas working in other industries, found motivation from their competition, and kept their culture to be focused on purpose more than profit.

Fast forward to this week and LEGO’s newest collaboration was unveiled — a collaboration with Nintendo — and a true, digital/physical hybrid product. Watch the video…I was amazed!

So why am I sharing this?

Fintechs Need to be More Like LEGO

In the past, banks and incumbent technology companies have operated from a defensive mindset. One of scarcity, suspicion, fear, and pessimism.

Fintechs have tremendous opportunities at their fingertips, and I think the most exciting of all is the opportunity to lead the charge by showing the power of an opposite approach — One of abundance, optimism, collaboration, and transparency. It might sound corny, but across the board, we’ve seen proof that genuine partnership wins any day.

Sure, not everyone can be a direct partner. Competition will still exist, and that’s a great thing! It keeps us all motivated, striving, and drives our purpose: to keep doing better.

scarcity = dependence = control vs abundance = choice = freedom

 

We founded Neocova with the idea that banks needed a solution that was more interested in their successes than locking them into multi-year contracts. We are developing solutions beyond our core, but we are not restraining our banks from going elsewhere. If we aren’t the best, let them choose otherwise! (and let’s keep working to be!)

We are partnering with best of breed fintechs, and allowing banks to prioritize the relationships they want to keep. We are empowering community banks to decide their future. And I hope we will continue to exemplify this, even as we grow. If more follow suit, that is success to me, too. 

I want to be a part of something greater than myself.

I want to be a part of a better future. Real transformation.

Don’t you? 

 

Written by Chief Innovation Officer & Co-founder Kelsey Weaver.