FinTech versus FinTalk

I marvel at the brilliance and passion of inventors. Today’s fintech pioneers have it and are challenging convention with ideas that put our old systems to shame. These geniuses can’t understand why the clunky, sedentary “technology” persists when their better ideas are here for the taking.

And yet most inventions never gain commercial traction. There are plenty of demos and many “good meetings” that raise hopes, but they slowly drain away. A kind of “innovation drain” sets in when the effort loses momentum (and funding) and the innovators move on to something else.

I shout to them: “Don’t go! We need you! We just don’t know it most of the time.”

From my point of view, there are a few different reasons why there is no connection between innovation and success. But they are all related.

Houston, we have a sprawl problem
Michael Kitces and his team are brilliant. One of their first major works was the now famous map of fintech and its possibilities. It was a difficult task, but he put it all on one page. As innovation increases, the font size of his map has also been forced to shrink. But the single sheet still captures the landscape. And what a list it is: He counts 186 abilities in 29 categories. There are 24 applications for portfolio reporting. There are 14 financial planning packages. Sure, the universe of stocks and bonds is bigger, but at least that world has been simplified to the S&P 500’s 11 sectors and the bond world’s 14. Even cars have only 12 categories, according to JD Power.

I know executives at large companies who can’t begin to fathom the number of fintech offerings. But most of them also fail to investigate the space. Do they have an active effort to find new ideas? More on that in a minute.

If everything is important, nothing is important
A recent report from a top consulting firm outlines the most important trends in technology for 2022. There are 14 of them! I have never seen a successful business plan chase so many goals. So the management teams must find a goal. Most businesses succeed not by building a new house on raw land, but by making improvements to an existing structure. This means that a process must be in place.

Breakthrough to acceptance
A consulting firm executive was recently asked about insurance technology, aka “insurtech,” and brilliantly observed that most tech companies in this space die on the runway because they spent most of their venture capital trying to buy awareness that they hoped would translate into acceptance among financial institutions, customers or intermediaries. He lamented a large expenditure on advertising web searches. “The only people making money from that innovation are Facebook and Google,” he said.

He went on to say that the industry needs to work harder to identify new technologies and the entrepreneurs behind those innovations. Allianz is one of the firms that has stepped up, creating what it calls the “OnRamp Insurance Accelerator” with Securian Financial, as well as investing in capabilities such as LifeYield.

Why should I buy?
This is another question the fintech companies have to answer. They must be able to show business owners that their products have a direct effect on their users’ bottom lines. There is a cultural divide here. Most fintech firms are obviously populated by technologists. The business people they sell to often have completely different backgrounds and personal motivations. One of the most entertaining moments in corporate life is bringing together the senior team of a functioning business with a team of fintech innovators and watching things get tricky. They often have nothing in common. Even their lunch choices seem strange to each other.

Not an island, an ecosystem
One of the biggest issues all advisors deal with is knowing if the technology they want to buy talks to the technology they already have.

Let’s use the house metaphor again. No company comes to a fintech firm and asks to build the house from scratch. There is a building there already. It’s already connected to a bunch of other pipes and wires. Some of these may work well, others not. The owners of the house can be aware of what is working and what needs improvement. Or not. But connectivity will matter – in fact, connectivity is as important as what the fancy new machine does. You can’t be the only person with the grounded three-prong plug in a workshop full of two-prong outlets.

So if you run a fintech firm, one of your problems is knowing how your device will connect to other technologies.

A design problem
My favorite for last: getting people to adopt. This issue is jointly owned by the fintech buyer and seller.

First, we choose the seller again: Did you design your product to be excellent or to intuitively and naturally solve a problem? It is much more difficult to sell something “better” than to sell something “simpler”. In most cases, a company adopts new technology because it provides greater ease of use and improved results. So adoption is a function of design. It is not enough to throw in an instruction manual.

Now we have to ask the buyer a question: How many times have you bought enterprise software and failed to include training and integration in the budget for that project? How many times have you said “We can figure it out later and save money”? I like to imagine in this case a racing car in the hands of a driver who can’t drive it. It ends up being a waste of money. It’s not enough to say you own one.

So now we have admonitions for both sides of the fintech movement. But maybe we can all get along and start working together. The upside is worth the effort.

Steve Gresham is on a mission to improve longevity and “retirement”. He leads an industry initiative, Next Chapter, and is CEO of Execution Project LLC, a consulting firm. He is also a senior educational advisor for the Alliance for Lifetime Income.