The US presidential election and Brexit vote were indicators of strong anti-establishment feeling among voters. There are similar signs in many other western countries. Financial institutions are strongly linked to the establishment. As a small detail we can think of how the speeches of Hillary Clinton at Goldman Sachs were harmful for her bid. The establishment has also been slow to make things better, and it is definitely a time in the finance sector to act to again earn the respect of customers and people.
When the Grow VC Group was started in 2009, our first business was the world’s first equity crowdfunding service. It was the time of the financial crisis. It was the time people really started to lose respect for banks and financial institutions. Or should we say, they started to hate banks and bankers. During the last seven years, we’ve come a long way from the first crowdfunding platforms to a much bigger revolution with digital finance services and FinTech.
Now we are at the point where these new services are starting to have an impact on all financial institutions, including banks. Many digital services, from payment processing and money transfer to lending and wealth management already take business and profit from banks and other financial institutions. At the same time, financial institutions have also started to plan how they can utilize FinTech and digital services better.
We are now talking about hybrid digital finance – how to utilize FinTech in traditional finance institutions, build new finance instruments based on FinTech, and find models that enable FinTech and traditional finance services to amplify each other. You can read more about this, for example, from this presentation.
At the same time it is fundamental to understand it is not enough to utilize new technology to re-earn the respect of people. It has to develop the whole business, processes, pricing and especially attitude. Services and pricing must be transparent, companies must respect all kinds of customers, and the finance sector cannot behave like a private club. The attitude change is most often the most difficult to pull off. And it is also about communications. It is not enough anymore to broadcast fancy marketing campaigns – you have to interact with people.
The term “open API ecosystem” sounds quite technical, but it is actually a fundamental part of this. Its philosophical idea is that all parties, big and small, can easily work together, complement each other services, innovate new services, offer better transparency and competitive pricing. Finance services can no longer be a huge (or ‘yuge’ as Trump would say) black box.
We have seen changes in lending and investing services. Also, areas like online wealth management services and real estate crowdfunding are emerging. We can also expect this to spread to many other services, from digital investment banking services to automated digital funds and how LPs can make investments in new ways.
We hope all finance companies, from small FinTech startups to big banks, can join us to change the image and respect of finance services. We hope it is not a demerit in the future for a politician or anyone to talk or work with finance companies. And especially we hope people can feel finance services are to serve and help them in their life.
Good finance services should be something everyone is proud of. They are an enabler for economies and businesses to grow. We now have all tools to build this new finance sector – we just need the right attitude, hard work and execution to make it happen.
Photo by Fibonacci Blue