What are the opportunities for Financial services enterprises (banks, insurances) vs. Startups?
Startups are considered one of the biggest trends to the financial services industry based on the large influx of investment money startups that are in one way or the other becoming a threat to the financial services. The Startup trend is growing and becoming more and more famous due to the fact that several startups have now accumulated billions of dollars, even the thought of which was previously considered impossible
However, with the startup industry the financial services industry has always diverted their sails by conforming and adjusting with the trends as much as they possibly can. Following are some facts that the financial services industry has embraced in order to conquer what the startup industry had taken away from them.
Attracting the Big Fish
“If you can’t beat them, hire, buy and retain them”. It is a fact that the tech industry thinks of employment at a financial institutions boring and useless. However, this mentality has slowly and gradually started to change after several financial institutions has started hiring executives from the tech industry, for instance, Capital One hiring Dan Makoski, the former head of design at Google. Hiring people from the tech industry can pull the attention of several people and it can also change the thoughts of people who consider a bank to be a bad place for a job.
Banks and companies belonging to the finance sector are restructuring their executive hierarchy by bringing in new minds. This helps with creating a sense of competition and ads up to the quality of the services at the end of the day. For example, Wells Fargo created a new position of Chief Data Officer to fit in the right person.
Financial institutions have the ability to acquire small startups that can become a threat in the long run. The sooner such a startup can be acquired the better the situation. This not only helps banks to innovate and but also allows them to sail as the tide flow. The perfect example for this is BBVA acquiring the Startup bank Simple.
Changing the Development Processes
The edge that startups have over stables organizations is their development process. Seldom do we come across a startup that is using slow development process, majority of the startups are using agile methodology for development that develops applications quick.
Moreover, financial institutions are forming innovation labs that are focusing on faster product cycles as opposed to the conventional methodologies. This way they are able to respond to the changing market trends.
Changing the Mentality
Startups are the bigger players in the game based on the fact that they are always open to changes and they take the path that they believe will give them better growth. Comparing this mentality to financial institutions, they are more inclined towards a confined set of rules that allows for minimal space for innovation.
Several banks including Barclays, MasterCard and Citi have started holding competitions and Hackathons that allow for bringing in new ideas into the pool and also allows for picking the right minds for the institutions.