Fintech Is Not “Funtech”; A Major Threat To The Growth Of Fintech Disrupters.

Funtech

 

Disruption is the ubiquitous mantra in the tech startup ecosystem and is one of the significant draw cards for so many – especially developers. The intellectual challenges associated with being at the leading edge (aka the bleeding edge) of change, is a key driver and motivating factor for many that I speak to.

The lack of traditional structure is favoured; the frenetic speed of change, relished; the opportunity to work on exciting new opportunities, adored. This provides challenge, creativity and motivation, which ultimately translates into strong intellectual currency that can be transacted amongst peers. So why does Fintech have challenges?

Fintech has some major differences compared to so many other tech sectors; differences that can slow down progress significantly. The “finance” component of Fintech means that for the majority of Fintech startups (especially those related to consumer based services), have two key areas that will always need to be addressed; Regulation and Compliance. Get these wrong and a Fintech startup is destined to fail from the start. The fines for compliance failure can be significant – just ask the 20 global banks that have incurred fines of $235bn since 2008 (Reuters). So how will compliance and regulation affect the growth and development of Fintechs? Pacing and rhythm.

If developers are working on the latest and greatest social media app outside of the Fintech space, they can get their heads into the code. Projects get completed and any shift in the underlying business model or new products can be reacted to quickly and dealt with there and then – there is nothing to hold them back. It’s head down; bum up; code done. Now consider Fintech.

If there is a change in the underlying business model of the Fintech, or a new product to be launched to adapt to the ever-changing disruptive and competitive landscape, the Fintech startup may need to get the appropriate approval from regulators. Now whilst ASIC here in Australia have committed to turn around requests quickly, this can still involve considerable time, effort and expense in the preparation of all the necessary documentation and advice. The rhythm is punctuated; the flow is lost. So what does this mean for the future of the Fintech sector as a whole?

I would argue that developers don’t see Fintech as “Funtech”. They view the fintech sector as a whole like the institutions they are trying to disrupt – serious, cautious and less dynamic. So, those with the most to offer in terms of disruptive potential will look outside the sector for the “softer” motivations; a cleaner path to chnage and disrupt the world. This will mean a rise in the sectoral costs of development to attract the better quality teams to Fintech that can deal with the lack of rhythm and pace within the space. Is this the reason why banks as a whole are currently willing to pay between 33% – 50% more for developers?

I am sure there are a plethora of reasons for this rise in developer costs – and I would welcome some comments from Recruiters and developers themselves as to their experience. But if Fintech is not Funtech the sector will continue experience growing pains , which will only get worse as the banks they are trying to disrupt fight back – the issue is, however, they have the depth of pockets to pay top dollar for the best minds to come and join them.

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