A glimpse into the past, present, and the future. Fintech is a huge opportunity to consider if you are still deciding where to put your skills or money.
The fintech revolution began in the last decade around the 2008 financial crisis with companies like Affirm, Credit Karma, Betterment, Kickstarter, Avant, Kabbage, Square, Stripe, Venmo, etc. Recession, in general, is a good time to create startups. Whatsapp, Groupon, Instagram, Uber, Pinterest, Slack, GV, Cloudera were all founded between 2008 -2010 timeframes.
Fintech startups came with new ideas to solve existing problems, took risks, filled the vacuum of innovation in banks, and created products that had far superior customer experience than traditional banks. The pervasiveness of cell phones accelerated this growth in the years to come. Today banks are interested in Fintechs and are either trying to build or buy their capabilities.
According to Digital Information World, the United States is the global capital of FinTech, with 1,491 startups and a massive $58.8bn investment in the industry. There is a resurgence of investments in Fintech startups when compared between different quarters this year. We are in a time when many think they have the power to innovate a product and start a company on their own. It is much easier now compared to a decade ago to start a new fintech venture. Amazon Web Services brought all of this infrastructure as a service and has reduced costs and complexity. Startups can launch faster, cheaper, create new products quickly, and have less spend on IT maintenance when compared to traditional large financial institutions.
In the post-COVID world, we will continue to have several Fintech companies for every financial service. However, their differentiator will cost, value it provides over an existing solution, transparency, customer experience, and more importantly superior design. There is enforced digitization happening across all industries and this has accelerated innovation in Fintech. A report by Fleishman Hillard predicts fintech will be instrumental in the global economic recovery because it will remain profitable, and provide new opportunities for SMEs and M&A. More businesses will continue to move to a cloud-based approach to manage their business and use Fintech services.
The virtual nature of the Fintech business model is well-positioned to thrive in the new environment where there is a reduction of in-person interaction across society.
Fintech is everywhere
Each company in this world derives some portion of its revenue from financial services or uses a finance service in its operation. Practically everything from someone buying a book on Amazon, milk from a local grocery store, paying a bill to trading stocks on Robinhood has a fintech software behind the scenes doing these complex actions.
History has shown that wars, plagues, and acts of terror have led to positive changes in society. COVID crisis too has a silver lining. It offered us a chance to question the old way of doing things and try out of box thinking.
Innovation in the financial industry is more difficult than in other industries. Many existing financial institutions have been around for more than 100 years and have a large customer and financial footprint. It is difficult for any startup to compete with them, find new customers, and navigate its way in a highly regulated industry.
Fintech has been able to weather the storm of the COVID-related financial crisis and help small and medium businesses minimize the damage. The Fintech industry holds many ideas to help with economic recovery. This makes Fintech attractive to investors.
Companies that innovate on their product, as well as the go-to-market strategy, will win in 2021. As a response to COVID social distancing and isolation, social products- have more utility and will become attractive to customers. Companies like Stir, Braid, Common Stock, Public, and Yotta are driving this change today. These are multi-user products that make interactions around money, fun, and engaging. It is proof that user behaviors around money matters are changing today. The next wave of fintech products will create a network effect between customers so that they can have a social exchange, learn, make recommendations, referrals, create business connections, and transact at the same time.
Alternate asset classes
We could also see new platforms where alternative asset classes, both virtual and real, are available to customers. Application platforms will create a community for engagement with the product and other owners of the same product. Imagine co-owning a painting with many other people and rotating it for display in homes for a specific time period between owners. Or consider an Airbnb-like financial platform where customers can co-purchase properties across several vacation destinations and get to live there at different times of the year or rent them to share profits. Retail shop owners can offer a certain percentage of their shop equity online and share profits each month. This infusion of investments from online investors will improve the local economies. All these ideas would allow investors with small checkbooks to start investing in alternative asset classes that have been inaccessible till now.
VR/AR/Mixed technologies have a lot of future potential in fintech and are fast-growing. They will not replace existing channels and platforms like mobile phones but will become a popular side channel. The VR/AR experiences of today need to be simplified for mass consumption, made consistant, and have a better message delivery.
As a result of the pandemic, business models are being rebuilt and new ideas are being explored to solve problems. Fintech is in a unique position to be at the forefront of change. Cutting edge technologies are needed in all aspects of finance from data analysis, investment management, forecasting to managing customer relationships. We should expect growth of digital-only banks, digital payments, finance management tools, crowdfunding, peer to peer lending, better mortgage and loan experiences, an increase in Robotic process automation, greater expansion of the cloud, 5G, ML, and AI. Intelligent automation is being seen as a major disruption in fintech, with Robo-advisors addressing industry pain points, reducing costs and risks. Banks will see more business in lending and lenders will see business opportunities in banking. Accounting applications will become more integrated with other financial products to better manage invoices, online payments, bookkeeping, collections, manage cash flows, etc. Fintechs could also cross their boundaries and enter other businesses to better optimize their processes.
User experience design
Design is not the surface but it is the very depth of the product. Technology has given us many opportunities to shape our ideas. Designers today are under pressure and the responsibility to understand their potential and figure out unique creative ideas and execute them using these technology solutions. Fintechs need to create superior experiences and not just functional digital products.
Customers expect pleasant, enjoyable, and even fun experiences from all online experiences. We have traveled from the marketing age to the digital age and now this is the experience age. Good customer experience is going to be the differentiator in a noisy crowd of products that will be very similar to each other in their offerings in the future.
It seems very logical that digital products should work for customers and not against them. But many large banks still have difficult user experiences. More and more people, especially the millennials, are leaving traditional banks for fintech firms that offer convenience, a positive emotional experience, and an appealing brand promise. New fintech firms today focus on unique and innovative design that communicates and highlights their well-crafted brand identity. The product designs are also tailor-made, fresh, and create an emotional connection between the brands and their customers. Tailor-made design is a new trend today that differentiates fintech brands despite the plethora of design patterns and libraries available in the market. The future is for fintech firms that dare to break the existing taboos and invest in bold, modern designs, aimed at increasing customer loyalty and engagement with the brand.
Behaviors have changed during COVID-19
Families have reduced their discretionary spending during COVID-19. Industries too are trying to cut costs in every possible way and investing in better virtual user experiences in all their consumer touchpoints. User behaviors and expectations have changed in the last few months. Consumers have spent more time online. This awareness has increased expectations in customers from all online experiences. Designers will be in demand more than ever across the board to improve digital experiences.
The design language of 2021 will lay more emphasis on the balance of simplicity and security in the fintech app designs. The key design considerations for better fintech product adoption per Cornerstone Advisors study- Fintech adoption in the US is easy to set up an account (43%), More attractive rates/Fees (15&), Access to different products/services (12%), better experience (11%), the better quality of services (10%), more innovative products than available from banks (6%), the greater level of trust than traditional institutions (2%).
Do not ignore the mobile
Mobile centric experiences will become mandatory for both B2B and B2C users. Today many applications are still built for desktops and have poor responsive frameworks.
Time for minimalism
Minimalism will become a design requirement by 2025. Pop-Ups, alerts, cookie messages, discount ads, and animations have exhausted our attention and users are missing details in data-heavy application interfaces, especially Financial products. Minimalism is an efficient way of designing using a limited number of choices of colors, design elements, and written content.
A new design style will be born
Designs will be more human in the near future. They will not look perfect or machine-generated. A little bit of imperfection, asymmetry, subtle introduction to art, hand-drawn illustrations, etc can make any application look interesting and elegant. Design grid systems may need to be broken a bit, design elements may overlap each other, and typography rules have to be slightly broken. This unusual way of placing elements on the page cannot be random. It needs to be thoughtful and guide the user’s eye as per a plan to focus on important information.
The UX copy will need to be more conversational and put users at ease, maybe create smiles along the way. Terms and conditions, legal documents will need to be simplified and easy to understand. Why do lawyers write this legalese that nobody understands and are forced to agree to in an application before proceeding? Check out this interesting project by Dima Yarovinsky. Customers will refuse to feel small, helpless, and harmful against giant corporations. Corporations will devise new ways to instill trust in their users and listen to them, or else users will switch to other options in the market. ‘Human design’ will make a brand more memorable.
Fintechs lack good designers
Fintech firms are desperate for good design talent irrespective of how high national unemployment rates are. Many designers around the world today lack the education and skills required to become a valuable contributor in fintech startups and be a part of this change. UX, CX, and Design thinking, especially experience building in a SAAS model are in great demand by financial institutions today. Unfortunately, some financial firms hire a couple of designers and think they have done their part of the job to improve the product experience in a highly competitive product landscape. Design is a way of thinking, not a tool. It is a consciousness and one cannot simply throw bodies at a problem. Unless a fintech is 100% focussed on user experience, it will be difficult to win the competition in the future.
The industry needs full-stack designers
Designers are still seen as ones creating a visual layer over a product. There is also a schism between UX and UI designers. The divide between form and function is concerning. Many UX designers don’t have a good sense of aesthetics and UI designers are not strong in architecture, research, and strategy. Many design practitioners after a few years of experience want to be just managers over designers and lose their hands-on design skills. The industry needs full-stack designers, and these designers should love to design, irrespective of their seniority.
Users are people and People have feelings
Our users can have all kinds of diverse emotions, and unpredictable reactions that cannot be judged in a simple user research session. Our focus should not be to simply design the financial services that are transparent, user-friendly, and simple, but also to understand that finance is a very emotional subject. People can have dramatic feelings and emotional reactions when their financial information is in either of the two extremes. As more customers use online applications, extreme emotional reactions would need to become part of user journey considerations.
Many designers today have become numbers centric. They trust data so much that they ignore the emotions of their users and ignore their gut feel. Numbers can never be more important than people. Empathy with the users needs to be put into practice to understand user needs, expectations, pains, and struggles.
Design leadership needs to step up
Designers coming from large and traditional financial institutions experience tend to hold back themselves and are afraid of stepping out of the box. Due to working in organizations with many layers of hierarchy or with clients, they are used to pleasing their clients and managers and sometimes ignore the customer’s voice. Design leaders in fintech firms need to play a very important role in training employees and give them a secure environment to think freely. While enough has been said about Henry Ford not doing customer research to find out what users wanted, Steve Jobs, Jack Mae, Elon Musk, Jeff Bezos, and Mark Zuckerberg are visionaries of today who understand what users need even before users realized it. Designers should be inspired and learn to have such a vision to execute innovative approaches that cause customer-centric disruption.
We need more design-centered fintech firms
There is a need to build financial products using ‘reverse engineering’. It is a top-down approach that begins with defining the value for the user and ends in a build plan. In the industry today, we typically see business requirements and a backend coding plan in place even before designers get engaged. The research and strategy process is either missing or severely truncated. The design process is on the chopping block when working within shoestring budgets. Designers are thrown into sprints and expected to deliver designs within a limited time frame. In such a product process, designers are mere packaging designers where they try hard to convince a user through a visual layer to use the product. Innovation is impossible in these circumstances. Designers need to do their fair share to get recognized and have a seat at the management table in fintech firms.
Good fintech firms will get their house in order
Fintech firms have to work hard and build their cultures, create delightful product experiences, and make the design their competitive advantage. Design centered product firms will surely attract good talent. Today many fintech firms are either led by technology or product managers that are not design centered. A good structure is one where product management, technology, and design are three independent pillars with full recognition of the value of all three and support from senior management.
A human-centered approach may not work
In the post-COVID era, designers should evaluate their focus on ‘humans’ and only ‘humans’. COVID has taught us some valuable ecology lessons. It is time to think of more inclusive approaches in design.
Social distancing and the harsh realities of life and death have made us reflect on our priorities and become more sensitive to everything around us. It is time we humans address earth’s needs, respect its environmental boundaries while delivering our human-centered design products and services. The human-centered design needs to better fit into the social and environmental context in which we exist.
COVID 19 is a very important non-human stakeholder in any design service or product around the world today. We are unable to ignore the reality we live in and make all decisions. In the same manner, how about making pollution, deforestation, species extinction, droughts, global warming, societal problems like hunger and poverty as stakeholders?
Human-centered design tends to overlook the environment and non-human factors in design concepts. Usability, ecology, and sustainability science should be a part of any design discussion. In fintech, such considerations may create a trend of conscious capitalism, eco-friendly investment decisions, or simply an awareness of others in need around us.
Designers should be asking questions on how each product and problem being solved could impact the environment. Fintechs that have ideas of sustainability or simple care for the environment will be more attractive to investors and employees. Customers have become more sensitive and aware of sustainability. We debate on the positive effect on the environment since we have slowed down due to COVID, to thinking deeply about the source and process in which the food is prepared. Designers are talking about how each design decision will impact not just users, but society in general, how behaviors might be affected, how designs can protect against the next crisis, how it impacts the environment and can do a greater good. This theme is likely to touch Fintechs and many industry verticals in 2021.
Fintech to Insurtech
Financial infrastructure transformation and fundamental changes in banking services are happening today. Fintech is driving the next evolution of vertical SaaS and opportunities have only multiplied. The pandemic has highlighted the need for us to protect our wealth, health, and assets. Many financial services firms soon will seek to expand. They will look at other related offerings. Today 1 in 10 Fortune 500 companies is an insurance company and many of them were started before World War 2. Our current insurance system is outdated and inconvenient for users. The customer experience in the insurance industry, in general, is below satisfaction. Any new insurance company finds it hard to acquire customers, or compete because of the high customer acquisition costs and the fact that insurance decisions are typically made at the exact moment when they need to buy insurance after a product purchase. If financial firms can embed an insurance product at the point of purchase the customer acquisition cost can be minimized. Financial firms can use their platform data for underwriting and provide quick decisions. This symbiotic relationship between fintech and insurtechs could improve in the coming years.
Fintech is a link between tradition and the future. It is now like the internet of things needed to bring a revolution into the restrictive and outdated systems of today. New ideas and changes could help businesses respond to and absorb any future financial crisis better.
2020 has shown us that it’s impossible to anticipate everything. Nature or events can alter any man-made plans. So we can only speculate positively based on available information and trends. By 2025, customers will be more aware, demanding, and discerning. Many of the current startups of today would have become giants with deep pockets. Smaller startups will have a hard time fighting back simply on the strength of their ideas.
More superior technologies, that are both invisible and ubiquitous beyond AI and machine learning will be needed to deliver a superior customer experience. Expect biometric and voice technologies leading the pack of startups in 2025. Voice chatbots and virtual assistants are a leading trend today.
The race to the success of startups from 2021 will be won by the ones that invest in winning customer trust. With everything going virtual, applications need to be grounded in security. Users will have to trust banks and their data in a weakened digital world where cyber threats will grow each year. Fintechs will have to keep evolving, come up with fresh creative ideas to expand digital trust.
Large established giants will also launch many financial products. These companies are in a better position to win significant market share due to the trust they have built over the years.
I wouldn’t be surprised if companies like Google and Apple go beyond Apple Pay and GooglePay and offer bank accounts with lending and payroll solutions.
Money is complicated but also very important. Every company has the advantage today to shop for various fintech solutions, leverage their financial services to better serve customers, better retain customers, and drive more margins. With competition from the upcoming startups, existing services are also going to improve. Due to complete digitization and virtual access, very soon in the next few years, every financial service will be available and affordable to everyone irrespective of geographies and socio-economic demographics. Fintech is a huge opportunity to consider if you are still deciding where to put your skills or money.