The future of fintech: change or die

In 2010–2012, something began to change in people’s behavior. The changes happened so slowly and naturally that most of us did not even pay attention to them.

10 years ago, the iPhone 4 was already on sale we used the phone as a tool that performs certain functions: make calls, check the map or listen to songs.

Now smartphones have become our companions, an extension of the hand, an additional part of the body.

Cal Newport professor at Georgetown University and author of two bestsellers Deep Work and Digital Minimalize says our current behavior with our phones would look minimum very weird in 2009.

Why did the change take place exactly ten years ago? Newport has a theory on this. He links the shift in human behavior to Facebook’s spring 2012 listing. Before preparing for the IPO, the social network was concerned with attracting new users.

What happened next?

In 2012 Facebook was about to go public and the company focused on growing revenue per user. And since revenue directly depends on the time spent on the network, Facebook began to maximize it, knowingly or not exploiting all the weaknesses of the human brain.

Inconspicuous, but honed on thousands of A / B tests, notifications, and other design details (our instinctive reaction to stimuli is triggered), a Like button (seeking social approval), and, finally, algorithms that form a feed based on our patterns of behavior.

Twitter, for example, was the first to implement the “slot machine effect” — updating the feed when the screen moves down.

So, change after change, we gradually found ourselves in a world where dozens of applications are competing for our attention, one more interesting than the other.

Now, think about what fintech companies should focus on. Fintechs and neobanks should focus on the customer experience model that requires to go beyond and above banking and finance.

I like calling this model “Experience Banking” or “Experience Finance” but there are a lot of other terms for example “Embedded Finance”, “Ecosystem Model”.

In this model fintechs become embedded in the everyday life of customers whether it is chatting, getting a meal, watching a movie, paying bills, or just simply saving for a car. The focus is much broader than banking and finance alone here, banking is merely transacting the monetary aspects of those experiences because spending, saving, or investing has a lifestyle/stage purpose.

The more time customers spend in that ecosystem, the more fintechs learn about them, and the better they can personalize offers. Here, higher levels of engagement drive greater opportunity to capture wallet share.

Dharmesh Mistry, in his article, “Is the future of banking not open but closed?” on FinTech Futures asks the question the “Is Europe leading the world towards a new direction in banking, is open banking the future?”.

The big Chinese tech players have huge ecosystems that encroach into an ever-expanding range of their customers’ online worlds. Their huge customers base attracts third party developers wanting a slice of the action in a similar way to the iOS app store — seemingly open but yet still a closed walled garden with a single gatekeeper.

Dharmesh says that the future of banking will come in many forms, but Europe and the US have to create their own ecosystems to compete with the East.

I personally grew up in Uzbekistan a Central Asian country where we don’t even talk about open banking because banks missed their chance and we use fintech apps where almost everything is integrated.

The companies in my country mostly follow the path of Eastern fintech companies and they are becoming more and more ecosystem companies by integrating more broader daily life products.

“The ecosystem is a model very different from “marketplace” banking and their focus is much broader than banking alone, they want you to facilitate as much of your life as possible”.

I still don’t know any company is the EU or US that combines several services and trying to create an eco-system model. If it was a game these companies would have lost it to their Asian competitors.

The rules of the game have already changed, it is time to act.