Research-Technology Management

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The Future of Fintech

Anne-Laure Mention

To cite this article: Anne-Laure Mention (2019) The Future of Fintech, Research-Technology
Management, 62:4, 59-63, DOI: 10.1080/08956308.2019.1613123
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Published online: 26 Jun 2019.

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 Resources

The Future of Fintech

Anne-Laure Mention

Fintech is fast becoming a global phe- & Young’s (2017) fintech adoption mechanism to disrupt the industry and
nomenon, led by innovators and fol- index showed that nearly one-third of create competition remains an ongoing
lowed closely by academics, and now the consumers in the 20 markets sur- academic debate.
drawing the attention of regulators. veyed use at least two fintech services, Whatever it is, fintech is here to stay,
Broadly, fintech is an umbrella term for and 84 percent of those surveyed were supported by emerging technologies
innovative technology-enabled finan- aware of fintech services. The innova- such as artificial intelligence, blockchain,
cial services and the business models tion world has already recognized the smart contracts, and machine learning,
that accompany those services. In sim- potential of financial innovation, and to name a few. However, the jury is still
pler terms, fintech can be used to the number, variety, and reach of fin- out on what the future of fintech will
describe any innovation that relates to tech startups has risen in the last decade look like. The growing momentum is
how businesses seek to improve the (KPMG 2018). Investment is growing delivering double-edged consequences—
process, delivery, and use of financial too: Five years ago, the fintech industry modernizing financial architectures and
services. While its impact to date has attracted $12.2 billion in investment catalyzing consumer and market behav-
primarily been felt in developing (Accenture 2016); in 2018, the top 250 ior change while disrupting incumbent
economies like China and India (Ernst fintech firms collectively raised more employers, service models, and regula-
& Young 2017), it promises to force than $31.85 billion (CBInsights 2018). tory structures (Nicoletti 2017).
legacy financial institutions in devel- KPMG’s (2018) Fintech Pulse report Expanding technological affordances
oped economies to clarify their strat- stated that global fintech investment have changed the game. Fintech has
egies, develop new capabilities, and increased from $50.8 billion in 2017 to previously grown on its promise to
transform their cultures. $111.8 billion in 2018, more than dou- expand access to the financial system by
Driven by what Gobble (2018) bling, with an unprecedented number providing services to traditionally
defines as digitalization and digitization, of deals through multiple channels. unserved or underserved populations.
fintech is increasingly embedded in Not surprisingly, academic interest in But increasingly, the faster/cheaper/
everyday economic transactions. Ernst fintech has followed a similar trajectory better service models offered by fintech
(Gomber, Koch, and Siering 2017). startups are disrupting the incumbent
Anne-Laure Mention is the Director of the Global
Several journals have hosted special banking system. Financial products that
Business Innovation Enabling Capability Platform at issues on the topic, including Journal traditionally have been the exclusive
RMIT, Melbourne, Australia, and a visiting professor of Management Information Systems’s domain of traditionally licensed credit
at Tampere University, Finland and a FinTech “Financial Information Systems and the institutions—payment services and
Research Fellow at Singapore University of Social
Sciences. Her research focuses on open and FinTech Revolution” (Gomber et al. 2018), loans, among others—are now offered
collaborative innovation, innovation in business to International Journal of Entrepreneurship by fintech firms (EBA 2017). These
business services, with a particular focus on financial and Management’s “Innovation for smaller, more agile companies support
industry and fintech, technology management, and
Financial Services” (Mention, Torkkeli, a greater diversity of products and pro-
business venturing. She is the co-founding editor of
the open access multidisciplinary Journal of Innovation and Huizingh 2012), and Philosophy and viders; they promise greater portability
Management. She has been awarded twice the Technology’s “Towards a Philosophy of of financial products that are now digi-
prestigious IBM Faculty Award for her research on Financial Technologies” (Coeckelbergh, tized, built on hybrid and cross-industry
innovation. [email protected]
DuPont, and Reijers 2018). Some schol- business models that allow them to
In this space, we offer a series of summaries on key
ars have focused on categorizing fintech access markets often closed to tradi-
topics, with pointers to important resources, to
keep you informed of new developments and help across dimensions (for instance, the tional banks and credit offerors. They
you expand your repertoire of tools and ideas. We degree of innovation, innovation object, also offer greater transparency and
welcome your contributions, in the form of and innovation scope), while others are improved risk management, at least
suggestions for topics and of column submissions.
attempting to develop a consensual partly enabled by their ability to get
DOI: 10.1080/08956308.2019.1613123
definition for fintech. Moreover, instant customer feedback and use it to
Copyright © 2019, Innovation Research
Interchange. whether fintech should be considered a power real-time adjustments in the ser-
Published by Taylor & Francis. All rights reserved. product, a business model, or a vices they offer.

Research-Technology Management • July—August 2019 | 59

 Entrenched financial institutions
have been paying close attention to the Resources
fintech growth story. And they’re ready
to move. The big banks have already
poured money into the sector. Goldman IN PRINT
Sachs, Citi, and JP Morgan Chase Arner, D. W., Barberis, J., and Buckley, R. P. 2017. Fintech and regtech in a nutshell,
all hold significant investments in and the future in a sandbox. Research Foundation Briefs 3(4): 1–20.
fintech offerings (CBInsights 2018). Bofondi, M., and Gobbi, G. 2017. The big promise of fintech. European Economy
Increasingly, these investments have 2:107–119.
been strategic rather than focused on Brunswicker, S., and Chesbrough, H. 2018. The adoption of open innovation in large
returns. Many are now seeking to adopt firms: Practices, measures, and risks. Research-Technology Management 61(1):
and internalize a startup mentality to 35–45.
access the energy of fintech for them- Coeckelbergh, M., DuPont, Q., and Reijers, W. 2018. Towards a philosophy of financial
selves. Embracing fintech intrapreneur- technologies. Philosophy & Technology 31(1): 9–14.
ship, firms like Goldman Sachs and Dostov, V., Shoust, P., and Ryabkova, E. 2017. Regulatory sandboxes as a support tool
JPMorgan Chase are organizing teams for financial innovations. Journal of Digital Banking 2(2): 179–188.
and individuals to develop and drive Gobble, M. M. 2018. Digitalization, digitization, and innovation. Resources. Research-
new initiatives through open innova- Technology Management 61(4): 56–59.
tion (Brunswicker and Chesbrough Gomber, P., Kauffman, R. J., Parker, C., and Weber, B. W. 2018. On the fintech revolution:
2018) and exchanging knowledge with Interpreting the forces of innovation, disruption, and transformation in financial services.
fintech startups and other stakeholders. Journal of Management Information Systems 35(1): 220–265.
For instance, JPMorgan adopted an Gomber, P., Koch, J. A., and Siering, M. 2017. Digital finance and fintech: Current
Agile approach, first investing in pay- research and future research directions. Journal of Business Economics 87(5):
ments startup LevelUp and then inte- 537–580.
grating the companies’ technologies to Lee, I., and Shin, Y. J. 2018. Fintech: Ecosystem, business models, investment decisions,
improve its existing Chase Pay system. and challenges. Business Horizons 61(1): 35–46.
Despite the promises of the technol- Lockton, D., Harrison, D., and Stanton, N. A. 2010. The design with intent method: A
ogy, fintech firms face some hard reali- design tool for influencing user behaviour. Applied Ergonomics 41(3): 382–392.
ties. Primarily, they struggle to present a Mention, A. L., Torkkeli, M., and Huizingh, E., editors. 2012. Special Issue: Innovation
clear value proposition for their ser- for Financial Services. International Journal of Entrepreneurship and Innovation
Management 16 (1/2).
vice-based offerings and to understand
users and product-market fit. Scaling up Nicoletti, B. 2017. Future of FinTech. Basingstoke, UK: Palgrave Macmillan.
fintech relies on funding largely from ONLINE
venture capitalists, who demand unique, Accenture. 2016. Fintech and the Evolving Landscape: Landing Points for the Industry.
differentiated offerings that demonstrate Accenture. https://www.accenture.com/t20161011T031409Z__w__/pl-en/_acnmedia/
a strong potential for scaling. PDF-15/Accenture-Fintech-Evolving-Landscape.pdf
Complicating the value picture is the Capgemini. 2018. World Fintech Report 2018. Capgemini, February. https://www.­
fact that financial services are one of the capgemini.com/wp-content/uploads/2018/02/world-fintech-report-wftr-2018.pdf
most regulated industries in the world CBInsights. 2018. The Fintech 250: The top fintech startups of 2018. Research Briefs,
and regulatory concerns have increased October 22. https://www.cbinsights.com/research/fintech-250-startups-most-
as technological integration has become promising/
more complex and more pervasive. Ernst & Young. 2017. EY FinTech Adoption Index: Fintech Services Poised for Mainstream
Furthermore, because it serves new Adoption in the US With 1 in 3 Digitally Active Consumers Using Fintech. Press release,
markets and offers financial tools to June 28. https://www.ey.com/us/en/newsroom/news-releases/news-ey-fintech-adoption-
index
new populations, fintech often operates
in spaces where regulatory guidance is European Banking Authority [EBA]. 2017. Discussion paper on the EBA’s approach to
financial technology (FinTech). European Banking Authority, August 4. https://www.eba.
limited. As a result, fintech companies
europa.eu/documents/10180/1919160/EBA+Discussion+Paper+on+
have run afoul of regulators, sometimes
Fintech+%28EBA-DP-2017-02%29.pdf
spectacularly so. For instance, US
KPMG. 2018. The Pulse of Fintech 2018: Global Report on Fintech Investment Trends.
startup Zenefits, which offered insur-
KPMG, April. https://home.kpmg/au/en/home/insights/2017/04/pulse-of-fintech.html
ance solutions and at one stage was val-
Strange, A., and Rampell, A. 2016. Using “infection points” to overcome fintech startup
ued at $1 billion, was found by the
distribution challenges. Andreessen Horowitz, May 6. https://a16z.com/2016/05/06/
Securities and Exchange Commission inflection-points-fintech-distribution/
(SEC) to be using unlicensed brokers
Zetzsche, D. A., Buckley, R. P., Arner, D. W., and Barberis, J. N. 2017. Regulating a
and underwriters to sell its products. revolution: From regulatory sandboxes to smart regulation. Fordham Journal of
Conversely, there have been instances Corporate and Financial Law 23: 31. https://ssrn.com/abstract=3018534.
where bitcoin innovators have been

60 | Research-Technology Management Resources

able to bypass SEC regulations and pro- 2017). This kind of testing has typically Untangling the tension between regu-
cesses simply due to regulators’ lack of not been looked on favorably by regu- latory requirements and consumer accep-
understanding of the emerging technol- lators; traditionally, it would require a tance calls for a stronger focus on business
ogy underlying their products and ser- full licensing regime, which can kill a model innovation (Arner, Barberis, and
vices. That challenge is accentuated by new fintech firm before it gets out of the Buckley 2017). Practitioners and analysts
regulatory regimes that multiply across starting box. operating at the intersection of technol-
countries, states, and even regions. However, attitudes are shifting. ogy, policy, and financial services have a
It is not only regulators who often do Regulatory sandbox initiatives have particularly significant role to play. More
not understand how fintech offerings emerged in a number of jurisdictions to effort is needed to develop compliance
work; fintech firms must battle broad provide a safe environment for ear- toolkits that will enable fintech startups
misconceptions about the security and ly-stage fintech startups to conduct real- to meet complex, cross-jurisdictional
reliability of the data their products are world market-reach and market-reaction regulatory requirements. Opportunities
built on. They must build relational and testing without obtaining a full license abound for innovation managers to
behavioral trust with consumers and (Dostov, Shoust, and Ryabkova 2017). engage in dialogue with regulators and
partners and construct innovative inter- In the last three years, since the United raise awareness of rapidly emerging tech-
vention mechanisms to nurture desired Kingdom’s regulatory sandbox opened nologies and the consequences they may
behaviors (Bofondi and Gobbi 2017). its doors in 2016, more than 50 such have for market integrity, stability, and
Policymakers and researchers need to initiatives have emerged globally. These sustainability.
steer attention toward responsible inno- tools help early-stage fintech ventures Fintechs also have something to offer
vations that consider the elements of build the long-term experimentation regulators. As many are focused on
embedded trust—demographic diver- capabilities that are essential to innova- developing more consumer-centric
sity, knowledge sharing, ambidextrous tion and allow for validated learning approaches, they are in many ways
thinking, and collaborative culture. through brief, looped iterations. more in touch with the banking public
Collaboration is a critical building Regulatory sandboxes can play and its needs. Knowledge sharing
block for the future of fintech. Without another critical role in the development between regulators and fintech compa-
strategic collaboration, as much as 95 of fintech. As more of these tools nies can enhance regulator awareness
percent of fintech firms fail at the scale-up emerge, they can be designed to help of consumer habits, behaviors, and
phase (Capgemini 2018). Primarily this create a cross-sectoral, startup-friendly, desires. This awareness can then con-
is because fintech firms often fail to inte- global fintech ecosystem. Ultimately, tribute to the construction of regulatory
grate and deploy solutions beyond they can help to break down the current systems that help build consumer trust
regional and national regulatory bound- regionalism of the sector. Many, if not in fintech platforms. On the other hand,
aries and fail to target customers at key most, of the fintech references we relied innovation managers can help regula-
inflection points (Strange and Rampell on are regionalized, and no clear frame- tors achieve their goals by integrating a
2016). Often fintech startups struggle to work for comparative analysis has yet behavioral insights approach in fintech
secure operating leverage, especially the been developed. innovations, maximizing their potential
significant upfront investment required The promise of fintech far outweighs to create desired behavioral changes
to build intellectual property (Lee and the risks, at least in the medium to long (Lockton, Harrison, and Stanton 2010).
Shin 2018). Acquiring early-stage fund- term. Fintech innovations will only Purposeful effort will be required
ing for proof-of-concept development is become more pervasive in everyday from both entrepreneurs and regulators
an onerous barrier for many innovators. transactions as their adoption increases to shape the future of fintech and push
It’s exacerbated for fintechs because they and more inclusive and open regulatory it in a productive direction. Only
often can’t showcase a proven business frameworks allow them to grow. through collaborative and open prac-
model and sometimes struggle to find the Incumbent financial institutions have tices, cumulatively built on global fin-
right market and determine the cus- no choice now but to reconsider their tech intelligence, can meaningful
tomer/user demographics that can strategic choices and markets, creating customization of tools and processes
deliver value. opportunities for strategic collabora- enable growth and scaling-up of fintech
Here, too, regulation can be a barrier. tions with fintech start-ups. A coherent products, services, and approaches.
In developing their technological plat- and pragmatically grounded discussion
forms, fintech startups need to test, con- between businesses, fintech entrepre-
figure, and design applications that neurs, and regulators in this direction Reviews
integrate different and usually hetero- should aim to discuss the evolution of Unsafe Thinking: How to be Nimble
geneous technologies. Testing through fintech trends, analyze the changes in & Bold When You Need It Most
live simulations and realistic operating supply and value chains created by fin- Jonah Sachs (Boston, NY: Da Capo Lifelong
conditions is a vital part of the develop- tech offerings, and assess the impact of Books, 2018)
ment process, but those tasks require national regulatory processes on
strategic collaborations and a favorable cross-border investment and innovation Unsafe Thinking is about doing things dif-
regulatory environment (Zetzsche et al. performance across markets. ferently; taking risks, breaking traditions,

Resources July—August 2019 | 61

jumping into uncomfortable situations, which organizations turn for support in International, we looked forward to
and ultimately succeeding when others making key decisions. The reason for this Data Science for Executives; we were
following a more cautious path fail. It counterintuitive result is surprisingly hoping to gain new knowledge about
captures the pitfalls of the traditional simple—those with the most experience the field and the role it could play in
ways of “safe” thinking, which supports tend to base their advice on the past and building our capabilities. On the first
conventional ways of leading and doing carry a high degree of confidence consis- read, however, we were disappointed
business, ways that often lead to medi- tent with their stature. In the current, with the depth and pace of the book.
ocracy and sometimes lead to the demise fast-changing world, the subtle cues that But on the second read, we better
of businesses. Written by Johan Sachs, a are most relevant are either never seen understood the author’s jargon. Partly,
successful entrepreneur, author, and or are dismissed as irrelevant by the this was because the case-study exam-
speaker, it presents concepts and prac- experts, who simply do not have the per- ples at the end of the book helped
tices that elaborate on the concept of spective to perceive them. illustrate the points made in the begin-
unsafe thinking in terms of courage, Another concept that will be key to ning. Consequently, we recommend
motivation, learning, flexibility, morality, R&D and innovation leaders is the reading the case studies first and ref-
and leadership. Each discussion closes importance of team critique and review. erencing them as you make your way
with a summary of key takeaways and In facing complex problems and chal- through the first two sections of the
guidance for putting the concepts into lenges, Sachs argues that solutions will book.
practice. be found through a balance of critical The first section of the book lays out
The book taps into a wealth of psycho- feedback (which, he acknowledges, can the case for transforming your organi-
logical research, some of it also considered lead some to try to avoid criticism by zation into a data-driven enterprise.
“unsafe” and hence challenged and dis- conforming to the masses and may Kaldero argues convincingly in
puted before it produced breakthroughs. reduce morale) and questioning of basic Chapter 1 that machine intelligence is
The storytelling approach makes the book assumptions. That challenging, in the the Fourth Industrial Revolution and
enjoyable to read and allows the powerful form of both feedback and hard ques- that its transformation of business is
examples to deliver their impact to the tions, must be undertaken from a per- accelerating across all sectors. Likening
reader more effectively. Sachs describes spective that is open-minded and the transformation to be wrought by
specific challenges faced by companies considerate of others. machine intelligence to the rapid
and individuals, who defeated those chal- Unsafe Thinking is about changing the transformation that occurred as people
lenges through unsafe thinking; the conformist behaviors and habits that abandoned the horse and carriage for
examples he offers include the difficult most readers will have been taught their automobiles, Kaldero makes a bold
times facing Whole Foods, the early life entire lives. Following its precepts prophecy that any business not har-
challenges overcome by Mahatma means losing the role models that leave nessing the new opportunities pro-
Ghandi, the tragic death of an otherwise leaders in the same place as everyone vided by social media, globalization,
healthy patient that led to widespread else, and instead seeking to develop a and the power of artificial intelligence
changes in medical practices, and the stra- habit of turning fear of failure into (AI) will not survive in another five
tegic decision by CVS to amplify its focus opportunity. It will require carefully years. He also argues that AI will serve
on health by removing highly profitable testing and honing intuition, seeking as a “brain helper” and job assistant
tobacco products from its shelves. Sachs information from nontraditional places, rather than as a replacement for
also includes his own personal experi- and ultimately following through on a humans. In fact, he points out, even
ences and journey as the founder of an flexible vision. Although not all R&D where AI provides data modeling that
innovative marketing firm that faced its and innovation leaders will have the indicates answers, a human will still
own slow transition to the status quo and opportunity to make big, bold, changes need to make the final decision. The
subsequent market challenges. in their organizations, the benefits of book offers Amazon as an example of
Several of the book’s main concepts Unsafe Thinking can be applied at many a company that is fully leveraging the
will be very familiar to R&D leaders, scales—and it can help you make big, power of AI by perfecting models for
including the benefit of breaking free of bold changes in your own personal per- supply chain and delivery derived from
the focus on safe, incremental progress formance, satisfaction, and leadership. vast amounts of data.
generally adopted to avoid programmatic Louis Gritzo is vice president of research Two chapters are dedicated to defin-
risk. Others may come as a surprise. The at FM Global. [email protected] ing what machine intelligence is and
book presents excellent evidence to how machine intelligence can enable
prove that the “experts” (those with Data Science for Executives: Leveraging businesses to understand their data
extensive experience and esteemed rep- Machine Intelligence to Drive Business and embrace data-driven decision
utations) are frequently wrong. The 2016 ROI making. Indeed, Kaldero points out,
election is cited as just one of several Nir Kaldero (Lioncrest Publishing, 2018) most businesses already have more
examples. This concept is particularly than enough data to begin the journey.
relevant given the common practice of As we prepared to add data scientists The transformation itself is driven in
using senior staff as an expert panel to to the R&D staff at HarbisonWalker five steps:

62 | Research-Technology Management Resources

1. Create a data strategy that takes The workflow of data science is in the case studies are good food for
advantage of existing business data. described as proceeding in four phases: thought. For instance, the first study
2. “Democratize” the data—make it Ask, Acquire, Analyze, and Act: focuses on a key question from the bank-
available to all within the business. ing industry: can we create a model that
3. Engage in a conscious process to shift 1. Ask the business question. What will predict the creditworthiness of cus-
the organization’s culture to one that problem can be solved or what tomers more efficiently and effectively
is data driven. insight will be gained by data analysis than traditional methods? The second
4. Bolster the culture change by quickly and modeling? case study considers the use of a digital
building examples of insights derived 2. Acquire the data and place it in a product to drive engagement with cus-
from data and establishing KPIs for structure that can be analyzed. tomers and new sales growth. The third
data science. 3. Analyze the data. The analysis is the tackles the problem of traffic congestion
5. Establish standards for data gover- heavy work of the data scientists; in overcrowded cities and considers how
nance, security, and privacy. Chapter 8 details the types of models data modeling could be used to solve the
they may create in this phase and the problem. The fourth study discusses the
The second section of the book turns models are evaluated to arrive at the use of blockchain technology to enable
to the application of the outputs from best fit. secure democratization of data.
the work of data scientists, including 4. Act on the model that emerges from The book finishes by stating that the
the hard work of change management the data. biggest issue in this emerging Fourth
to get the organization to think first Industrial Revolution is “not data or
about how to use data to solve busi- The executive, the audience for this technology. It’s people, culture, and pro-
ness challenges and then to actually book, is heavily involved in Ask and Act cess.” The author challenges the execu-
apply the output from data modeling. but must also be willing to engage in tive to lead the change, to “stop asking
The entirety of Chapter 10 is dedicated Analyze, at least to critique the results. what you think but instead ask what you
to outlining the critical points neces- The third, and final, section of the know: what does the data tell you.” The
sary for this specific change; the dis- book presents four case studies to change to a data-driven culture will not
cussion serves as a good reminder that demonstrate the use of data science in come from the bottom up but must start
change management must be ade- business; this is in some ways the most at the top.
quately resourced to harvest value interesting and useful part of the book. Martha J. Collins is the Chief Technology
from investing in data scientists and Each study illustrates the improved Officer ([email protected]) and Tomas
tools. A key learning for my own pur- results achieved by addressing business Richter is a senior director leading the
poses was that it is a good practice to challenges with data-driven approaches Strategic Business Technology Council
hire more than one data scientist to versus those of traditional actions, using ([email protected]) at HarbisonWalker
create an environment that allows for the four-phase approach defined earlier International, a leading supplier of refractories
idea exchange. in the book. The questions Kaldero poses products and services.

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