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On May 23rd we held a FinTech Innovation and Collaboration meetup with the overarching focus being on corporate innovation. The meetup consisted of two opening talks followed by a panel
discussion (and some finger foods and beers throughout, of course).
A lot was learned about corporate innovation within the financial sector but, before we get into the issues that were raised and the insights that were gained, let’s take a minute to mention our fabulous speakers:
Kicking the evening off was Yoram Tietz, who has been the managing partner of Ernst & Young Israel since 2007. Roy Minkov, Head of BizDev, FinTech and Innovation at Isracard spoke next, followed by a panel discussion moderated by Yoram Tietz and panelists: Emanuel Avner, Co-Founder & COO of Cycuro, Doron Cohen, Founder of Leverate and current Co-Founder & CEO of Covercy, and Meirav Har Noy, General Partner at Moneta Seeds VC.
Now, let’s get into it!
Where Digital Transformation Begins
Digital transformation within the financial sector is a disruption that makes financial transactions more efficient and brings value to consumers while, of course, providing them with a simplified and digital solution to their banking needs. Some very interesting points were brought up in the panel discussion, as three different people shared their varying opinions on the matter.
After a quick introduction of the panelists, Yoram realized that what Doron and Emanuel did with the foundation of their companies, and what Meirav looks for when considering an investment in a company, is disruption within an industry, aka, digital transformation. Take Doron’s past company, Leverate, for example; Leverate disrupted the financial industry by simplifying processes regarding international currency transfer and in doing so took money away from the hands of the banks and returned it to the consumers.
As Yoram said, prior to the recent recession and the need for the financial sector to innovate, the music industry underwent a similar change due to digitalization, which lowered the value of the market by over 50%. If back in the day the ones who made the most money from music sales were the music labels and record stores, the digital transformation brought the power (and profit) back to the source – the musicians and digital distributors.
Banks and Innovation
As with the music industry, the disruption the financial world is currently undergoing will continue to change the FinTech landscape drastically. Because of this, more and more innovators are looking at the financial sector and realizing that a change is not only necessary and coming, but that the space is more than ready for it.
The need for a transformation in the FinTech industry is driven by a desire to change “who makes money”. According to Yoram, “The recommission banks are taking is over $300 billion” and that does not bring with it expedited times for transfers, which the disruptors of the FinTech world are able to provide.
As FinTech startups find ways to provide users with optimized features, expedited times and reduced costs, they will start biting into the recommission pie the banks have been enjoying until now, a move that may increase their resistance to disruptive innovations. Despite the potential resistance, many financial institutions are recognizing that the digitalization and revolution of the FinTech industry is inevitable, and it is best to embrace innovation and integrate it within their systems rather than lag behind.
How Investors View FinTech Startups
Giving us the investor’s input on the innovation and disruption trend in the FinTech world, Meirav Har Noy gives a simple answer when asked what she looks for in a company, or what “the sellable ingredient” is?
As Merav puts it, “we first look at the depth of the technology and the team, and if the technology matches the team; that is the first thing we care about. The second is whether or not the technology is recycled or not and if it is one that will change the way things are done. Is this something that makes us say “wow, we should have been doing this 5 years ago?” Simply put – we look for really interesting and new innovations.”
Merav’s thoughts show that while some banks may still be resistant to innovation and collaboration with the FinTech world, the disruptive FinTech companies have investors to turn to – provided that their idea really is disruptive and innovative and makes the investors wonder how and why they weren’t doing it that way before.
Hope for FinTech Startups
With banks not wanting startups to cut into their profits, and with investors wanting to disrupt the market, it seems at first like the FinTech industry will be in an impasse – well think again!
Consumers’ demands for innovation within the space is here and is increasing quickly, and ultimately that will drive innovation and widespread adoption. The banks recognize (or at least they are beginning to) that if they do not accept innovation and digitalization, the FinTech startups will come in and take a larger slice of their profit. The only thing banks and other financial services firms should be doing is embracing innovation and rolling out new solutions themselves to answer the calls.
Emanuel Avner, who previously sold a startup to an enterprise, and has been on both sides of the startup/enterprise equation, gave us insight into how small startups can actually collaborate with enterprises in order to not only further their product/s but bring value and innovative solutions to enterprises and their customers:
“Most startups think they have secrets that they fear the big companies will steal and use… so, of course, there is fear; on the one hand, you want to engage with them [the big companies]… but on the other, you fear they will steal your ideas.”
Emanuel’s advice here, based on his own experience with Intel, is to form a joint team to gain confidence in the collaborative relationship startups can have with enterprises. “You gain confidence throughout the process and realize [the enterprises] are really working with you to use your solution and not trying to steal your know-how.”
Getting the First Collaboration Going
Ultimately, collaboration is the most powerful tool when innovating. Enterprises have a lot to gain by working with innovative startups, while startups benefit by gaining the enterprises
support and customer base on which to pilot their product. But, as many startups know, securing a collaboration with an enterprise isn’t always simple, especially if not using prooV.
When Yoram asked Doron how he did it, he said – “With leverate, there was a bank we wanted to collaborate with at one point that was the leader in our industry. The way for us to get to the right person there was through the right intermediary. It was neither someone from us or from them, but someone who was able to connect us… It really helped having those independent intermediaries (who are often well paid if they’re successful). Just as good is having someone who understands the pains and can go to each side to help make a good deal”.
Another strategy is to simply “fake it till you make it”.
According to Emanuel, “sometimes as a startup, you say that you have a fully automated product, but half of us are lying about that. When it comes to seeing what you do and ‘lifting up the hood of the car,’ you see that all the supposedly automated tasks are not really as automated as they seem to be.”
It is actually perfectly acceptable in the startup space and specifically that of FinTech, to have an innovation that is ‘not quite there yet’. Many investors and potential partners are used to it. At Moneta for example, the general partners help their startups, and, as Meirav says, it’s important for startups to “start with an MVP (minimum viable product) and manually “automate” the process if it is not quite there yet”.
The reason for this, as Meirav reminded us, is that in the early stages before a startup grows into an enterprise, the only thing that matters is “getting your company going”.
Did you love reading about the meetup? You’ll love attending them even more – join our NY and IL meetup groups to stay in the loop on upcoming events and meetups!
