At the Future of Money event in Toronto last week, I saw something you rarely see at a meetup: there were people in suits talking to people in t-shirts and jeans – both of whom just came from work. The event, hosted at TWG’s offices in downtown Toronto, touched on how the financial services industry is bracing for the future and how traditional financial services firms can actively “disrupt themselves.”
Co-hosted by TWG and Capital One, the evening featured an introduction by Rod Cohen, executive director and founder of Blake Boultbee Youth Outreach Services, three pitches by young companies in the FinTech space, and a panel discussion with Wealthsimple CEO Mike Katchen, Capital One CIO Katie Crepps, and TWG managing partner Chris Eben.
While each speaker, presenter, and panelist held true to their beliefs of how the world should function — and were not afraid to disagree with one another — the overarching tone was that the world of financial services is progressing towards better and more transparent customer experiences through collaboration, not competition.
It’s not FinTech, it’s financial services
Rob Kenedi, TWG’s Entrepreneur-In-Residence (and a regular on BetaKit’s CanCon podcast) opened the evening by saying that every forward-thinking industry is powered by technology – and that now includes traditional banks. Using this rhetoric, there is no such thing as “FinTech” versus “financial services,” instead they are becoming one in the same. The true question, says Kenedi, is further strengthening the ‘entanglement’ between finance, technology, and social good.
Ultimately, it’s about making consumer lives better through technologies that are more affordable or more accessible in every sense of the word. The pitches for the evening definitely focused on this entanglement, looking at customer service from unique angles.
“Innovation gets harder as companies grow. So you have to build time into your process to experiment and see what else is going on.” – Katie Crepps
Dream Payments, a Toronto-based mobile point-of-sale (POS) system company, pitched first. Their mission focused on accessibility; you can go into any retail store that carries Dream to buy the handheld device, download the app, and start taking payments in less than fifteen minutes, a process that can take weeks with other POS systems. What’s more, unlike other mobile POS systems that focus on one type of technology, Dream is platform-agnostic, allowing business owners to save costs by not having to purchase new hardware.
Finn.ai, a Vancouver-based white label virtual chat assistant built using AI technology, pitched second. The solution focuses on working with existing financial institutions to reach customers wherever they are using chat and AI. Finn, the AI chatbot, not only helps high-level customer service become accessible (whereas for some banks, personal-feeling customer service is a premium or upgrade service), it helps reduce costs for the bank who can then use their money for further innovations.
Third was Mylo, a Montreal-based micro-investing app that rounds your purchases to the nearest dollar, investing the difference automatically. Founder Philip Barrar says this is tackling a huge problem facing millennials because it helps them save without even thinking. Since most millennials have less than $1,000 in the bank, regardless of income, says Barrar, the app helps them save up to $1,000 a year just by rounding up simple purchases.
Kicking off the panel, Kenedi asked how the face of customer interaction has shifted, a question coming in hot from the pitches that each showed a unique way that financial services firms can interact with customers.
Crepps answered first, noting that there have been two major shifts since banking started in modern history. There used to only be in-person service, going to a bank or other location to meet with a banker. Then the customer experience moved to merchants, being able to “interact” with your bank through credit and debit cards. Now, she says, we are in an era of 100 percent digital interaction – even when you do go to a bank or use a merchant.
— Capital One Canada (@CapitalOneCA) February 10, 2017
This, she noted, means that customers expect custom treatment and a bank that will meet them wherever they are.
Katchen echoed this sentiment, seeing it as validation for his belief that we are in a pivotal place for financial services where trust is the key to success. He explained that trust is how people feel comfortable parting with their money, and it can be increasingly difficult for small players to build trust with customers since one of the best ways to develop trust is to be large enough that a consumer is confident you won’t go bankrupt.
The solution to this conundrum? Customer experience, believes Katchen. His thought is that you offer your customers a promise of a “frictionless customer experience,” then do everything you can to make that promise true every day. When you do mess up, be honest and explain how you will fix it. Over time, you’ll build trust with some customers.
However, he cautions, the only way to keep trust is to gain scale yourself, so in the financial services world there must always be a growth imperative for new companies and old companies alike – scale will eventually win out in the quest for consumer trust.
A false dichotomy
Next, Kenedi brought up the seemingly age-old question of if whether or not the panelists – Katchen as a ‘disruptive founder,’ Crepps as a ‘big corporate representative,’ and Eben as an ‘enterprise service provider’ — kept an eye on what the other was doing to stay ahead of the game.
Perhaps ironically, this question was met with some confusion.
Katchen responded quite simply with a “not really.” While of course you pay attention to the market (as any good company would), if you only look at competitors you forget who really matters: your customers.
Startups can actively work with regulators to challenge the necessity of certain cumbersome legislations.
Crepps admitted that Capital One is always looking at what startups are doing, but not because they are prying competitors or a big corporate that is fearful of being ‘disrupted.’ Instead, Crepps explained with enthusiasm that Capital One pays attention to the ecosystem because they want to find new partners, new investment opportunities, and find out how they can better serve their customer base with new innovations.
“Innovation gets harder as companies grow,” Crepps stated bluntly, acknowledging the reality at hand. “So you have to build time into your process to experiment and see what else is going on.”
Where a small startup might only have one or two product lines, and thus prioritization is relatively easier, “a big corporate has every product set, so they need to think diligently…about where they are headed,” she explained.
Eben chimed in here, explaining that TWG works with companies of all sizes. Instead of looking to whether it’s a ‘startup’ or a ‘big corporate,’ Eben says he looks for “willing innovators.” These are the people who are willing to build sandbox environments to test, fail, iterate, and repeat until they get it right.
These are the people that Eben, with an echo from the panel, wants in decision making positions at organizations. It’s not the size of the organization, he insists, but the mindset with which its decision makers come to the table.
Building your future
Of course with financial services comes regulation, and this issue is an obvious potential roadblock to the moves of willing innovators, no matter how nimble or cash-flush their organization might be.
Katchen explained that there are two ways to think about regulation, and this is where the contrast between startups and large corporates is perhaps the starkest. Large financial services firms are likely to have compliance departments that look at the rules, applying them across the board in a conservative way to avoid the bank getting sued or fined by regulating bodies.
Startups, on the other hand, have the ability to look at the spirit of the regulations, the majority of which were put in place to protect consumers. Using this logic, argues Katchen, startups are at a huge advantage because their solutions are coming about specifically to offer more transparency, efficiency, and access to customers. Taking the harmony of a startups’ work and the intention of the regulation, startups can actively work with regulators to challenge the necessity of certain cumbersome legislations.
A final note from the panel looked at two things: the process of innovation and startups partnering with large corporations.
The process of innovation is relatively simple, but needs to be supported. Start in the smallest way possible with one thing, says Katchen, then test and iterate. Crepps agreed but called this “creating a sandbox environment” where large corporates — who have brands to protect and millions of customers to serve faithfully — can test their ideas without fear. Cementing the tone of the night, the panelists looked back to the pitches as examples of startups wanting to work with large financial institutions.
“Two of the startups that pitched explicitly talked about collaboration, not disruption,” recalled Katchen, noting that this is the mentality that will push financial services to its next great height.
Photo via Twitter