Jun 21 | 2017

What’s Happening in FinTech?

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Top FinTech LearningsThe spring season brings a lot of activity to the financial services space in Canada. It’s one of the busiest times of the year for typical “money out” campaigns from our banks and coincides with strong activity in listings, transactions, and ultimately closings.

More recently the spring season has also come to signal the start of FinTech conference season across Canada. The size and scale of these events continue to grow while our own homegrown talent is taking center stage. With over 250+ FinTech companies across Canada and $1BN in cumulative venture capital investments, Canada is well on its way to solidifying itself as a global center for financial innovation.

As Head of Product at FCT, one of my primary responsibilities is understanding how the needs of our lenders are going to be changing over the next 3-5 years. Internally, we’ve been aggressively transforming our own product portfolio and expanding our focus on hybrid solutions that leverage the best of our financial technology, business process outsourcing (BPO) capabilities, and insurance expertise. As I have been working through the process of how we align our own product roadmaps to these opportunities, I wanted to share more broadly what I’ve learned on the conference circuit throughout the year.

Developments in FinTech

Opening up financial services data:

  • The European Union is already well ahead of North America when it comes to FinTech penetration. In an unusual role reversal, we actually see governments across the globe leading the charge to create an environment that is conducive to FinTech growth and innovation.
  • Initiatives like the European Union PSD2 open banking API, where by 2018 all lenders will be required to open up transactional data (with user permission) to enable third parties to build new types of financial services is one important example. While Canada is definitely lagging in this area, there are several opportunities to target key data as a starting point and use that information to re-engineer how financial services are delivered to customers across all segments.

While cash flow will always be king, managing identity in the digital age is close behind:

  • Online identity is the next cycle of the internet and as we see more and more digital lending platforms that don’t require in-person interaction, there is more of a need for identity management applications that simplify and perfect authentication/verification, early detection of fraud, and are adaptable.
  • Contextual commerce is the next major area of growth in the financial service space. This area deals with making payments through internet connected devices that are not a smartphone or laptop but rather devices like Amazon Echo, Google Home, Oculus Rift, and even your connected car. Thinking through the connected car example, how would you know the driver of the car is the right driver to offer a service?

Homegrown products will find greater product-market fit than global imports:

  • Canadian built and managed FinTech solutions will have the advantage over more global or regional efforts that try to ‘Canadianize.’ Rethinking financial solutions from the ground up will provide another advantage. The underlying point here is a true need to take a product-driven approach to building new financial services as opposed to a clone strategy from other markets.
  • For example, at FCT we believe understanding your customer segmentation in FinTech is critical. Existing companies overly rely on safety, security, legacy as the bread and butter of their solutions. Those features are table stakes but do not do enough in isolation to capture the wallets of the millennial, and eventually Gen Z segments. Great user interface and user experience, smart use of data, and transparency are at the top of the decision matrix for these segments and are causing radical reinvestments in technology talent across existing companies of all sizes.

This is the year of blockchain….or maybe its Ethereum… but it’s time to see RESULTS

  • By now everyone has heard of blockchain and the power of the underlying technology in financial services, but the conversation is FINALLY shifting to the business opportunities and that will be the catalyst for blockchain-infused products to gain traction. Experiments like Project ‘Jasper’ which is a Bank of Canada + Big 5 proof of concept with blockchain to reduce reconciliation efforts in payments systems are examples of the results and value of using distributed public networks.

We strongly believe that we are less than 12 months way from seeing the first mainstream pilot for tools like smart contracts and we are even bigger believers in the truly disruptive nature of these technologies.

I’m incredibly interested in your opinions and welcome comments. If you are passionate about thinking differently in the financial services space, I’d love to chat and can be reached at rlambert (at) fct dot com or through LinkedIn.

Jul 6 | 2016

Here comes InsurTech

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FinTechThese are interesting times. The insurance business is the next frontier for FinTech, the tidal wave of digital businesses that’s already remaking (and hollowing out) the big banks all over the world. As mobile smartphone apps on the one hand and online banking at home on the other disintermediate—blow out of business—all manner of middleman functions, banks are poised to lose the money-spinners they’ve had for decades.

In a remarkable presentation in London, England a few weeks ago, InsurTech (FinTech meets the insurance world) experts from the European Union (EU) and North America spent an hour looking at how insurance companies are even more vulnerable in some respects than the banks themselves.

The headlines?

  • Personalization to the point that your insurance app will practically be a lifestyle app, like MapMyRun or Sleep Cycle. The insurance product cycle will be far shorter than it is presently, with customization driving far more specific premium strategies.
  • Customer-centric service design—user experience—will rule. Convenience and speed are already remaking what InsurTech specialists call “inside out” product design, where value is more important than price; and engagement, more critical than transaction. This is contrary to traditional financial services thinking, which focuses on designing the product that delivers the transaction with “outside in” thinking.
  • Here come the robo-brokers, on-demand, on your mobile phone app, from Germany to the United Kingdom to the United States to Canada and Australia. Self-service and video claims processes are setting new standards for customer satisfaction.
  • Direct-to-consumer apps are already in-market, selling policies based on digital profiles. The Silicon Valley startup, Sure, is utterly focused on mobile service of the customer on his or her journey, which is “phone-only and instantly and completely individualized,” says Sure CEO, Wayne Slavin. “We want to marry technology to the customer user experience, frictionlessly.”

Since the dawn of insurance circa 1750, periodic payments of self-owned insurance have been the norm. On-demand services, Slavin says, mean consumers won’t “own” their insurance: they’ll “rent” insurance, just as they rent an AirBnB or an Uber cab. High-frequency, always available, personalized insurance will replace “life moments” insurance (marriage, birth of kids, first house), just as rental housing is becoming far more socially acceptable to millennials than ever it was to older folk.

“Tap and be insured” is the ultimate goal, even though InsurTech is still barely a toddler. That mantra applies because the new purchasers of insurance don’t focus on what the insurers want to sell them: they want their insurance provider to embrace technology and customer data for better underwriting and better customer relationships.

And switched-on customers want to be sold insurance right before they need it—and know, like iTunes® and month-to-month mobile phone plans, what the next month will bring.

Sure and other startups like Ireland’s Trov and Germany’s GetSafe are applying artificial intelligence and machine learning to reimagine customer risk profiles and the behaviours that underpin those profiles in order to insure a particular behaviour or new purchase. (Think: why be insured for a sports injury when you’re at the office and your mountain bike is at home in the garage?) Claims are already being settled by “compassionate chat bots” in pilots in Ireland.

In five years, insurance is going to be a very different beast from what it is today, with entirely new customer-facing platforms.

FinTech geeks will revel in the technological changes, but for consumers, InsurTech is going to get really, truly interesting, and in short order.