Fintech: Moving into the Mainstream
Spotcap Australia and New Zealand Managing Director, Lachlan Heussler
There is a common view that fintech is only ever used by early adopters. It is certainly fair to arrive at this conclusion – after all, the media’s portrayal of fintech is like virtual reality: something straight out of Silicon Valley, and hardly within the reach of your typical, everyday New Zealander.
However I don’t think this view is accurate. Fintech is no longer waiting in the wings for the act of the majority: traditional institutions such as banks have started to partner with fintech startups, bringing affordable, accessible and user-friendly financial technology to more people than ever. In other words, we are now at the point where fintech moves into the mainstream.
Going beyond the early adopter
‘Early adopters’ are often profiled as twenty-something, tech-savvy city-dwellers who have grown up with the internet. Entering adulthood to a soundtrack of anti-bank rhetoric and being acutely aware of the transformative power of the internet, these early adopters were the ones to pioneer accessing finance through their computer remotely, and latterly, via smartphone apps.
In contrast, middle-aged and older people are typically more wary, and as a result less likely to try new financial technology products. For multiple reasons including both a lack of understanding and trust, they tend to stick with more established players for finance products such as their personal banking needs, loans, business transactions and insurance.
Although this has been the state of play for some time, the landscape is changing. Traditional institutions are working with fintechs in order to diversify, understand the online market and as a result, better their offerings. For instance, Spotcap recently partnered with Heartland Bank, injecting a significant amount of funding for our operations. Partnerships and collaborations such as these have encouraged traditional lenders to work together, not against financial service disruptors and fintech businesses, moving these businesses past the startup stage and into more evolved, accessible and credible products for SMEs.
Collaborating Through Partnerships
Increased collaboration between fintechs and traditional players is a natural evolution of the industry. Traditional institutions have the power to deliver fintech products to larger audiences – a key driver in making these types of technologies more mainstream.
To get a piece of the innovation pie, a range of banks have sponsored accelerator programmes for fintech startups, with many more establishing internal innovation and venture capital arms. Fintechs themselves are also maturing – they’re learning processes from traditional institutions, making increasingly senior hires and even applying for full banking licenses. Through partnerships and collaboration, fintechs and traditional institutions are beginning to converge.
Case study: alternative lending
Alternative finance is a significant arm of fintech, notably peer-to-peer and online lending. In fact, growth in confidence and a desire to expand has led NZ SMEs to seek out alternative finance in order to borrow on different terms to the big banks. Alternative finance is filling a sizeable gap in a market that is mostly dominated by banks: estimated to be around $30 billion in New Zealand alone. And it makes sense: alternative lenders have collectively stepped up to bridge the credit chasm which followed the global financial crisis, providing finance to those being left behind – like small businesses.
While I can’t speak for every alternative lending company, I can tell you what I’ve learnt from directing one. Spotcap’s average client has been in business for more than six years, and enjoys an annual turnover of more than $2 million. In other words, the demographics of our average client are nowhere near those of the average early adopter. Spotcap’s reach beyond the early adopter is largely powered by the partnerships we have made with traditional lenders, brokers, accountants and advisors.
For me, fintech moving beyond early adopters is not hypothetical – it’s an actual outcome of an evolving industry. As further collaboration between traditional institutions and fintechs occurs, products like ours are gaining greater exposure to mass audiences. So, while the word ‘fintech’ may still be at the edge of the public’s consciousness, it is certainly going to become more and more a part of the public conversation on how we’ll all do business in the near future.
Lachlan Heussler is Managing Director of Spotcap Australia and New Zealand. Formerly, he worked for Deutsche Bank in Equities Trading and has had over 20 years experience in the finance industry, holding many senior positions at top financial institutions across the globe.