Growing Fintechs into Maturity 

As part of UK Fintech Week 2019, we are releasing a series of perspectives exploring some of the issues facing fintech organisations and the broader impact of fintech on financial services and customers. A new perspective will be published each day, covering topics such as regtech, data and innovation in payments. We hope you enjoy the series and are able to join the conversation by sharing via LinkedIn and social media.

How can Fintechs grow and transition into mature organisations, whilst at the same time retaining the agility and courage that made them successful in the first place? In our Barometer on Change 2018/19 we surveyed hundreds of business leaders and discovered the themes of Courage, Agility and Talent that are driving the debate on transformation across all sectors – as we look at Fintechs, how do these apply to both start-up, growth driven and maturing organisations?

Regulators are playing catch-up 

The global Fintech space has been in rapid expansion over the last decade. The International Organisation of Securities Commissions (IOSCO) identifies Fintechs across the following eight areas: payments, insurance, planning, trading and investments, blockchain, lending/crowdfunding, data and analytics, and security. A contributing factor towards this rapid growth has been the continued advancement of technology and the disruption that it entails – in reality we are seeing less ‘Fin’ focussed and success is now more about the ‘tech’. 

Regulators, globally and in the UK, have been slow to respond to the pace of change occurring in the industry; however they are now turning their attention to start-ups, which makes Fintech maturity a bigger priority than ever. To achieve sustainable growth, Fintechs now need to foster a more pragmatic approach to forthcoming regulatory challenges and develop positive relationships with their regulatory bodies to help direct and develop the regulatory landscape as it continues to evolve rather than fall foul of it before they reach maturity. 

An effective path to maturity 

Fintechs have sprung up, disrupted, and increased competition within the sector; to help assess the differing paths to maturity we have looked through the lens of our Barometer findings to identify differing paths:

Courage Fintechs are known for being disruptors in industry. As firms grow and transition into maturity, they should seek to retain the courage which enabled them to try and develop innovative and disruptive ideas that on occasion fail. However, this is not as simple as it seems; depending on the ownership structure of the Fintech, they might have shareholders to answer to where the organisational culture of not being afraid to fail might be reined in. It will become important for maturing organisations to still encourage this attitude. Firms should look at how disruption and innovation can be incubated internally while providing additional safety and assurances to minimise risk. 

Agility – Small companies, with typically flatter hierarchies and faster decision-making than larger institutions, can still suffer from poor communication and a lack of formalised structure and governance. The result of this is that their decision-making process can be poorly managed and can slow them down thereby putting them at a disadvantage to their competitors. As firms scale, these challenges must be overcome to develop effective decision-making at ever larger headcounts. Fintechs need to learn from those larger organisations that have embraced agility at an enterprise-level, combining scale with the ability to rapidly respond to changing market conditions.

Talent Attracting and retaining quality talent in the Fintech space has largely not been a challenge for the industry where the market perception is still seen as being ‘cool’. As firms look to scale into maturity either organically, through partnerships or through acquisitions between Fintechs and incumbents, there are a number of factors that need to be considered. How can the Fintechs retain both talent and their agile culture, and prevent acquirers/partners from undoing the culture and talent base they have built?  They need to continue to develop competitive compensation and benefits including additional stereotypical start up perks and quirks. Robust processes, organisation structure, infrastructure and governance are pivotal to this; can firms implement structure and process without changing what makes up the very core of their start-up culture and mentality? 

As Fintechs look to scale, they need to look at their larger cousins to see what they can learn from them (both positive and negative) and embrace enterprise agility at scale and apply it to themselves.

Maturing without losing the disruption

What is clear from the rapid rise of Fintechs over recent years is that across the three themes of agility, talent and courage for Fintechs to achieve effective scale and maturity they need in place appropriate organisational structures and formalised processes and procedures with governance at the root of all decision-making while maintaining the unique culture of each organisation. They will also need a pragmatic approach to forming and developing positive working relationships with regulators.  

A mature Fintech organisation is still one which challenges, disrupts and innovates in the market, but one in which the organisation has also developed operationally, structurally and culturally, therefore enabling sustainable growth into the future. Fintechs should leverage everything that has made big finance successful at scale, but look to learn also from what has limited them and held them back. Fintechs have been so successful in disrupting the market because of their agility; they are able to embrace technology change and compete at a pace far greater than their rivals.  As they scale, the need to retain enterprise agility and courage to try and test new ideas remains as important as ever. 

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Joshua Hedge Consultant