Predicting the future is useful, adopting these changes before they make you irrelevant is absolutely critical, and predicting how these changes will alter consumer behaviour is extremely vital in creating ‘new value’. After the introduction of the internet, its vast business implications on online shopping had not been predicted. The internet led to the quick rise of e-commerce, which caused drastic changes in user behaviour and therefore disrupted conventional commerce out of no where.
Similarly, the rise of smartphones disrupted the use of landlines, but the extent of the changes in user behaviour had not been predicted. This insight, had it been conceived ahead of time, would have been extremely important in creating ‘new value’ and for anyone leveraging this insight into a brand new business idea. Would you not think so?
History doesn’t always repeat itself but it usually rhymes…
Whenever behaviour changes from analogue to digital, the frequency of that behaviour rises exponentially. Trips to the library or browsing through an encyclopaedia were nowhere near as frequent as online searches on Google. Similarly, we tend to write a lot more emails than we ever wrote letters. Referring to past trends, we at FinSurgents predict that mobile wallets will disrupt bank accounts the same way e-commerce disrupted conventional shopping, smartphones disrupted landlines, and Google searches and the emails disrupted manual searches and letters respectively. The relationship people have with money will be redefined, as they will have limitless access to their money through their smartphones. Instead of accessing their bank accounts a few times a month, people will now be able to dip into their mobile wallets several times a day. This forecast of the change in consumer behaviour is bound to create ‘new value’ through an exponential increase in transactions and therefore data; the real value maker in this case.
Whenever there is a fight between analogue or the digital, the digital wins
Think back to 15 years, did you use your Kodak camera as often as you used your digital camera? No, you did not. Now think back to 3 years, did you use your digital camera as often as you use your smartphone? Probably not. Has the front facing camera on smartphones and the Snapchat application changed your behaviour towards photography? It most definitely has. As smartphones changed user behaviour towards communication and entertainment, digital photographs changed the behaviour towards photography.
Similarly, the new age communication companies such as WhatsApp and Skype have disrupted telecommunication companies world-wide with their free services which can be downloaded in real time on most devices. Ponder for a minute on how free WhatsApp messages have changed the way we communicate now as opposed to the good old text messages, which of course are priced. Similarly, we expect free mobile wallets to reinvent payments.
Moving to digital from analogue not only increases the frequency and consumption of products and services, but makes their use easier and also free in most cases. The ease and affordability of using digital versus analogue means that in case of a fight between the two, digital emerges victorious every time.
Disruptive transformation, emerging markets and the FinTechs
Whenever large scale societal needs are unmet, disruptive transformation is more likely to take place. Emerging markets have a higher proportion of people who do not have digital and financial identities, and those individuals readily change their behaviour. FinTechs, which by the way, are small companies or start-ups that are obsessed with digitizing the transfer of value and information digitally; in our view will make a much larger contribution in emerging markets. In developed markets, FinTechs only create incremental innovations, but in developing markets, FinTechs will leapfrog disrupting plastics, POS, conventional e-commerce etc, and directly land into m-commerce through the use of upcoming mobile wallets and smartphones. The road to this process are FinTech incumbent-bank partnerships. An example of such a part a partnership is FinJa’s launch of a new mobile wallet in collaboration with Finca Microfinance Bank which is currently in the pilot phase. The solution has been built on top of Finca’s branchless banking platform. This would allow transactions to be instantaneous and this partnership will result in digital payments rapidly scaling, which in time is expected to lead to large scale behavioural change.
Don’t get smacked, instead get SMAC enabled
Since the 1960’s, there have been 5 corporate technology structures, driving business productivity and innovation higher in each time frame. We are currently in the SMAC Stack (Social, Mobile, Analytic and Cloud) stage. To embrace innovation and remain relevant, companies need to become SMAC Stack enabled. This is the ability to build your business on an integrated stack of technologies and we believe the easiest way for large organisations to do this is through a FinTech company. Currently, the companies ruling the world, such as Google, Apple, and Facebook are all SMAC Stack enabled. Companies who failed to adapt their models to become SMAC stack enabled quickly phased out (e.g. Britannica Encyclopaedia and Kodak), to be replaced by companies with integrated structures.
Collaboration is the new winning strategy
Banks and other incumbent organisations resist change, as they are built on platforms; introducing FinTech and modifying the provision of financial services will alter the core of these organisations. FinTech will have the same affect on banks, that mobile apps had on smartphones. iOS and Android are also platforms, but they have allowed applications to be built on top them which has allowed them to diversify. Collaboration between banks and FinTechs, especially in the case of emerging markets, is the key to success. This can be achieved through a process recently being referred to as ‘Fintegration’. Banks will have to expose their APIs and allow FinTechs to be built on top (similar to the mobile wallet built on Finca’s platform), which will let incumbent banks to incorporate technology within their regular processes swiftly and without pain.
This article has been co-authored by Qasif Shahid, Myra Piracha and the FinSurgents/Finja team.
FinSurgents: Analogue to digital journey experts; performing strategy, design and technology consultancy services in Pakistan, Africa and the UAE.
FinJa: Exists to create behaviour changing digital payments and consequently in increasing financial inclusion in Pakistan.