You’ve probably heard the phrase, fintech, before. Perhaps it means something to you. The interesting part of the underlying concept is not the combination of the finance and technology industries. It’s the directionality of it.
Does a company come from a mostly finance or mostly technology background?
In the case of Wealthfront, Robinhood, and Acorns they primarily approach fintech from a technical perspective. Engineers are at the core of their business. Suits and spreadsheets are replaced by hoodies and code. This type of fintech is relatively new.1 It’s techfin: software eating finance.2
Far to the other end is where companies approach fin tech from a finance perspective. Traditionally, these large, gray monoliths have treated engineering as a cost center. Not core to their business. (Plus, they call it Information Technology.) In doing so, they are slow to adopt change, especially technology—which changes constantly. They prefer to buy Microsoft Office Y - 4.3
Among other things, this Internet Explorer environment breeds risk aversion. No one wants to be responsible for implementing/upgrading tech since the perceived absolute risk is much larger than any reward. It’s programmed into finance’s DNA of not wanting to be in the red.
All this is not to say finance-driven fintech is dead/dying. As the incumbent, it’s not. Tech-driven fintech has problems too: engineers have less financial domain knowledge, etc.
Regardless of directionality, what’s important is organizational culture. Culture of embracing both the fin and tech parts of fintech. Consultants can implement some cool, new tech at a 200-year old bank, but what happens when they leave? Like a transplant, does the company reject it? How long do engineers want to solve finance problems at a venture-backed startup with shrinking runway?
When two industries collide it’s difficult to tell which will come out on top. The one that has the more favorable hand is likely the one that challenges the “because we’ve always done it that way” mentality and embraces change.
My money is on technology.
Post-2008 when a large number of these companies were founded. ↩
The previous version of Microsoft Office, where Y is the current year minus four. Example: Office 2016 becomes Office 2012. ↩