FintekNews is pleased to offer the 9th installation of our weekly feature column “3 Questions”. Each week, we feature a thought leader within a unique sector of fintech and ask them to answer just 3 questions for our audience in their vernacular. This week we are pleased to introduce you to Ali Raza, Principal with CCG Catalyst, a leading management consulting firm connecting bank strategy to innovation, transformation, and disruption.
How did you personally become involved in fintech?
As a consultant to the banking, card, and payments industry both in the US and abroad, I have been involved with financial technology most of my professional life. This is before the term ‘fintech’ was in vogue and technology companies provided solutions to the financial services industry enabling them to market, sell, and engage with their customers. The value chain was quite straight forward – technology companies worked with the banks, asset managers, and insurance companies, and they in turn used this technology to develop products / services for end users; ie. their customers. The world of fintech is different today creating both opportunities and challenges for not only the financial services industry, but incumbent financial technology providers as well. Simply put, there has been an ‘explosion’ of fintech startups (12,000 companies accoring to CBInsights) fueled by a combination of market demand, advances in technology, and venture capital funding. I call these ‘ New Fintech’ as it is important to differentiate these companies from older and established companies. These New Fintech startups have a sharp focus on ‘customer experience’ and in many cases are developing customer facing solutions threatening the traditional value chain equilibrium.
I am increasingly working with early-stage New Fintech companies and banks on strategic partnerships and alliances, as well as innovative new business models. Its been an interesting evolution over the last twelve months where the conversation has shifted from ‘disruption’ and ‘displacement’ to one of ‘collaboration’ and ‘engagement’. I think the fintech startups, are a powerful new force re-shaping traditional provider-customer relationships and the financial services and technology industry needs to be actively involved in that process. There is both revenue and business risk if the incumbents do not take advantage of new possibilties.
What area/s of fintech do you believe will grow the most in the coming 5 years?
It is early days for fintech and there is a lot of activity and experimentation in several areas. Needless to say, there is considerable inefficiency in the financial services industry, core banking systems are old, and several customer groups are not well served. Clearly there is significant opportunity at a macro level.
New businessess, business models, and alliances are being tested with some solutions clearly catering to unmet demand, while others seem to be solutions looking for a home. I believe there is a lot of ‘runway’ in lending and payments including the development of truly integrated platforms and further leverage of mobile and digital. Insurance and wealth management are high priority, as is corporate and commercial banking. There is a lot of interesting work being done in the area of risk management and security, particularly cyber security and this will continue. Blockchain offers tremendous potential and while we have seen some applications, it is quite possible that it drives large-scale infrastructural change in value transfer networks. Then there is machine learning, artificial intelligence, and data – I think advances in data leverage, personalization, and artificial intelligence will have a profound effect on how consumers and businesses manage their financial affairs.
What are the biggest problems facing the fintech industry in the future?
There are three big challenges ahead. How do regulators interact with New Fintech? Currently the sector seems to be operating in a gray zone. Can New Fintech firms develop sustainable value and scale and drive mainstream market relevance? Presently many are in niche areas with an unclear monetization and growth path – this is a critical issue and impediment in fostering bank partnerships. Reduction in venture capital – if indeed there is a bubble emerging and funding is impacted this will have a dramatic effect on future growth.
Ali Raza is a Principal and payments leader at CCG Catalyst working with clients on their strategy, business, and operating issues. He brings deep subject-matter expertise in retail banking, cards, and payments, and focuses on strategy-to-execution high-performance solutions for top-tier institutions in the global financial services industry.