FinTec 2016 – quo vadis? – Part II: Types of FinTech entrepreneurs

After I have described the need of a holistic digital banking approach in part I and after we had to find out that one can achieve an essential USP thanks to technology, I now want to look at those who must enable all that development: The FinTech entrepreneurs.
The good news beforehand: they are back again, the entrepreneurs in banking and finance. In the old days, one had to found an insurance agency/office or a technology company servicing the financial services industry as a b-t-b partner. But: The big points like customer-relation in retail- and SME-banking, transaction-banking, cards etc. were exclusively reserved to the big institutions and their managers. As we know: managers are no entrepreneurs.

That alone is one of the biggest achievements. I very much hope this will be a sustainable development because we already can say today that only the fintech development made banks think and move. But one step at a time. Let us first consider which types of founders we have. Doing that, please be aware:

– The list is not meant to be a 100% serious ;-))
– The list never can be a 100% complete.
– Resemblances to living people are not wanted.  And:
– The whole Fintech scene is a very “male” scene. So I always speak of “him”.

Let me kick it off with the “romantic”: He wants a better world. He wants to achieve t better world with the help of better banking. Very often the romantic is found in the crowd-finance niche, the sphere which he has identified to be most effective for his objectives. Problems can occur with setting up a business plan and its execution because commissions are sometimes seen to be evil. An analysis of success-factors of a crowdfinance- or peer-to-peer-model in the country of origin does sometimes not take place. So there is a high chance of overestimating the chances in the entrepreneur´s home-market. Regulative knowledge sometimes only exists on a low level – maybe regulation is also seen to be evil. Will we see the “romantic” in 2016? Of course. And we clearly need more of them. But please make your homework and not only rely on your self-motivation.

The „successful serial entrepreneur“: He has already made his money. Banks are a pain to the a successful serial entrepreneur. Most recently, having a two-digit million account balance, he was very much irritated by his wealth management suggesting him a „off the shelf“ product as an interesting investment. He also is irritated by the fact that his private bank has an app without any relevance to him. His adviser will not communicate via whatsapp with him. Even worse: His advisor does not really know what cryptocurrencies are. Regulative knowledge of the serial entrepreneuer normally is low and seen as a technocratic homework: “… it cannot be that hard, because simpleminded bankers have understood it”. What will we get to see from this group in 2016? I do hope a lot, because we need those guys within fintech. The danger: self-set expectations of making zillions with trendy issues prevents the entry into a long-term strategy having a high likelihood of an uphill struggle. It looks simple, but it is not easy.

„The attacker“: At the beginning his idea was an easy mostly transaction-centric idea. This idea he had developed himself (minority) or “adopted” it successfully to his home-market (the majority). The attacker did place this idea successfully with an investor because there is a running showcase concept in another market already. His company now is equipped with many millions, profitability and related KPIs are “not that relevant” in the first line. Growth is the only religion, followd by an breathtaking exit. Regulative knowledge sometimes is seen to be “old school”. The contact with regulators, if necessary, he consequently will leave to his lawyers. 2016 will also be a year for “attackers”. Do we need those guys? Absolutely! One can learn a lot how they set up a company, grow it fast, focus on the concept, create a team that builds it and then exit it. Is that all sustainable? Well, that is in the hands of the one who buys that entity then.

„The ex-banker“: Now, finally in the second half of his career the ex-banker wants to do something really useful for people. As he feels himself a little bit to be victim of the “system“ – with way above-average payments – he now devotes all his experience and power to the FinTech movement. And yes, his profound knowledge and his experience are extremely useful and needed in that industry. He thinks: “It cannot be that complicated to set up a FinTech company, because those unexperienced FinTech entrepreneurs have also made it”. But: in most cases he comes to the point that all that does not work at all. For many reasons. Regulation is only one. As a result he searches himself a vineyard or an orange grove instead of a risky fintech business. For 2016 one would like to shout out: Hey “ex-bankers”, have more self-confidence! Be brave and fearless once and finally get out of your “comfort zone”!

„The ex-investment banker“ is a subunit of the “ex-banker” very much alike “the attacker”. It could be regarded to be a frightening development having more and more ex-investment bankers devoting themselves to the Fintech idea. But as always the background is easy: the hope to make more (and quicker) money with a Fintech company than with the “regular” bonus scheme of an investment bank. Would that mean the market is already overheating? Nooo…  Anyhow, in comparison with the ex-banker one has to admit: the ex-investment banker does less likely fail. He knows how to translate his FinTech idea into a splendid powerpoint presentation speaking the language of future investors. Neither the regulators nor customers are understood as an obstacle. Will we see more of those in 2016? For sure.

„The engineer“ devotes himself to a specific process and optimizes that in perfection using only relying on technical solutions. Then an enterprise is built upon it. With that he has excellent chances to become the darling of investors. A problem only occurs if the investor and the “engineer“ have an identically low knowledge of regulation and underestimate the regulator´s reaction to some “rule-breaking” offers. Easy way out: Let us walk into another geography which shows a less strict regulation. There cannot be enough “engineers” for the future because – to me – they are the real disruptive innovators. But: Go and have a look for an experienced banker supporting you in creating a compliant offer. The banker needs you!

The “service freak“ works and thinks extremely customer-centric. He thinks in an almost maniac way that acquisition-cost must be held absolutely low and earned back quickly with an appropriate bouquet of products and services. Because of that he collides over and over again with his (potential) investors who call that approach “non-focused”. His regulative knowledge depends on his former career. Given the current environment driven and defined by investors we will not see a lot of this species in 2016. But we will see that some transaction-centric offerings will start to add additional services to their core-product leaving the arena of a “pure play” – vice versa some customer-centric concepts will sharpen and reduce their product lines.

„The naive“ underestimates basically the duration and the capital intensity of the enterprise he founded and dilutes himself in a terrible way. In particular with setting up a bank this is the case, because this is the most capital intensive and time consuming exercise. That makes it in even more impressive that this character of a founder now appears increasingly in UK – at impressive valuations. According to market rumors there are more than 30 bank license applications running by challenger banks (of what I heard maybe 2 in Germany). We will see who comes on the market or what in 2016. We only can hope that a certain portion of naivety is preserved to all founder’s types. That means: Founders need a good portion of naivity on the one side, persistance, strength and power on the other. Otherwise we will see a slowdown and decrease within our FinTech industry.

This list is by far not complete. This list of characters is also not exclusive to the FinTech scene. You can apply and adopt that to any other trendy industry development. And: None of those characters appear in their pure form. If one looks at it a little less ironically, we founders cover probably several of these types in ourselves. (Take me as an example.) As a conclusion I think that all of those characters together would form a terrific team – in the right mixture. Simply because you need all of that in a successful FinTech startup wanting to achieve a maximum in customer- and shareholder value.


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