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If you’ve got a technology startup that plays in the financial space, you need to know something: the big guys are coming for you.
In some cases, they may want to buy you, or your technology, out before you have a chance to seriously disrupt them (it’s one reason so many banks now sponsor fintech incubator and accelerator programmes). But they’re also looking to out innovate you and use their weight of resources to shut you out of the market.
And it’s not just the banks either. The largest financial technology incumbents are also out to ensure their survival, either through acquisition or the launch of their own products. Take Fortune 500 company FIS for example.
At the recent Fintech 2020 conference in Johannesburg, it announced that it’s developing platforms to meet South African market needs, including a soon-to-be-launched stokvel solution which also runs the world’s largest pension fund.
The stokvel solution pits it against startups such as Stokfella, an app which aims to “put the power of informed financial management and and financial decision-making in the hands of all stokvels.”
FIS’ stokvel platform will meanwhile electronically record each member’s portion of the cash balance and ultimately, each member’s right to claim their savings.
“There are countless ways to turn technology innovation into a competitive advantage,” says Alberto Fasana, managing director, Africa, FIS Institutional & Wholesale. “Our stokvel solution, for example, makes it possible to leverage the power of collective bargaining so that stokvel members can get benefits they have been missing out on.”
It’s not just launching its own products however. Last year, the business acquired SunGard including its offices in Johannesburg and Cape Town. That acquisition allowed it to expand its support across the gamut of financial services, from retail and institutional banking, payments asset and wealth management to risk and compliance, consulting and outsourcing solutions.
According to leading business speaker Vusi Thembekwayo, the reason for this shift is that companies in the financial services space have seen how quickly the landscape around them is changing.
“We view transformation and change as the same thing. Change is a linear process in the sense that the beginning form is an indicator of the end state. What we are seeing in financial services today is not linear change, but complete transformation. Using the example of a caterpillar transforming into to a butterly, the end state and the beginning form are totally different,” he said”.
That sentiment is echoed by Stephen van Coller, CE of corporate and investment banking for Barclays Africa. “If change outside your business is happening faster than it is within your business, you’re losing,” he said at the conference.
Any business which has substantial margins is a target for disruptors, he continued. “Google has over 1000 employees whose sole job is to find businesses with big margins and figure out how to disrupt those markets. But this phenomenon is nothing new – twenty years ago we all shopped at the greengrocer, then came along supermarkets who disrupted the greengrocer’s margins by supply chain scale and now make small margins on food; their margins come from other sources like interest earned by making suppliers wait for their money,” he said.
“Modernisation is disruptive and uneven, but it cannot be stopped because it becomes part of the organisation,” explained Andrew Merrifield, a former modernisation programme manager for the eighth largest pension fund administrator worldwide, the Government Pensions Administration Agency. “Accept that there are slings and arrows in the process. The business should be clear about what it wants to achieve through modernisation or the process will not be effective,” he said.