Putting the Fin in Fintech

Here’s a question: Which kind of innovation has the most impact? Is it the delivery and broad-scale adoption of a single product, a killer app if you will, that alters user habits, then inevitably gets replaced by a different tool? Or is it a series of technology-driven process changes that take hold incrementally and have long-term ramifications benefiting many aspects of the operation?

This is one area that richly illustrates the difference between the banking and technology industries.  Emphasizing the fin in fintech means taking a longer view than might be popular in the Silicon Valley mindset.

It seems like a relic from another era (and maybe it is) but back in 2000 celebrated author Michel Lewis documented what passed for innovation in that innovation-centric time in “The New New Thing: A Silicon Valley Story.” His primary focus was on entrepreneur Jim Clark and the founding of Healtheon, a bid to revolutionize another industry long on stability and often resistant to change: healthcare. The idea was simultaneously simple and radical—bring together physicians and technologists to create tools that would drastically transform the moribund practices of a vital industry.

So did it work? Well, Healtheon technically doesn’t exist—in the 16 years since its founding, the company has undergone multiple transformations, most recently rebranding itself as Change Healthcare. Some of the old dreams of revolution faded rapidly, as did its initial stock market promise. However, the data-driven advances envisioned at the time have certainly taken place, and Change Healthcare is now “the single largest financial and administrative healthcare network in the United States, reaching approximately 750,000 physicians, 105,000 dentists, 60,000 pharmacies, 5,000 hospitals, 600 vendors, 450 laboratories and 1,200 government and commercial payers.” Services include actionable insights and collaboration on mission-critical information exchange—exactly the solutions dreamed of in the late ’90s.

None of this happened overnight, and none of it was a panacea. But innovation did come, and it did engender transformation.

That might be one way to look at fintech innovation. Consider, as just one example of many, the ING innovation studio’s accelerator program. Ten start-ups pitched their ideas late in July, four are in the final stage, and each shows great promise.

Axyon AI for example, is developing artificial intelligence technologies for multiple business sectors. Gekko offers administration tools for small businesses that hate administration. Startup Insight features a platform for entrepreneurs that eases financial and legal issues. Surance, meanwhile, proposes a blockchain-based app for capital growth.

Each of these concepts is squarely in the zeitgeist, and deserves support. (We’re particularly intrigued by artificial intelligence, a topic we’ve discussed here before—it’s a concept that’s both tantalizing and elusive at the same time.)

But the bigger issue has to do with what fintech innovation truly entails. If it’s the next killer app—a single tool that redefines a given aspect of our industry—then we’re already there.  Thanks to the horde of developers focused on financial services, there’s a steady stream of mobile apps and even platform upgrades that find an audience (or not) and do their part to benefit institution and customer alike. It’s actually refreshing to see institutional openness to technologies that customers embrace, even if it means the bank’s IT department has to scramble to keep up.

So let’s set the bar higher. It’s impractical to set specific parameters, perhaps, but technology-enabled innovation should now be measured in bigger terms. Has a given piece of software not just cut costs but changed the basic nature of operating costs? Has a particular technology effectively mandated a change in regulatory mandates? Is the transformation relevant only till another tool arrives, or will it matter even more in the long run?

We’ll highlight some particular innovations here in the weeks and months ahead. But given the success rate so far, it’s time to think bigger than we have before.

Written by Jack Dougal

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