Who are the individuals that are driving the fintech wave, that are attracting billions of dollars in funding and that are transforming, and sometimes even disrupting, the financial services sector? Besides the big names in Europe and America, where can they be found in Asia?
They are the trailblazers of this movement, feared by banks, increasingly loved by governments, pushed by venture capitalists and celebrated at conferences. Having personally worked with hundreds of founders in Europe, Asia and North America in the past few years, fintech founders are a special breed. They are steering through regulatory and compliance waters and sometimes jealously looking at their counterparts in other tech industries, e.g. gaming or lifestyle, where scale might be easier and sales cycles shorter. Because fintech ecosystems are starting to take off in Asia, fintech entrepreneurs are the new stars in hubs like Hong Kong, Singapore, Tokyo and Sydney.
So, let’s take a closer look at this species of fintech entrepreneur and see what kind of different categories can be identified. And just to be clear, there is no right or wrong. Everyone exists for a reason.
1. The Passionate Graduate
The archetype of an entrepreneur. A college or MBA graduate who feels a personal pain in the way finance and banking is done. Empowered by their skill sets, affordable startup tools and venture funding, they move on to solve a very specific, mostly consumer, problem. They are driven by their passion and vision to make services easier and more convenient for customers, powered by new technologies such as machine learning and blockchain or simply by great user interfaces with a superior customer experience. The competitive advantage they have is speed, agility and an ability to think customer-centric – many attributes that can’t necessarily be said about financial institutions. Given their limited, initial knowledge of the financial industry, including regulations and compliance, they face challenges to sell their technology to banks. A clash of two very different cultures, which incubators, accelerators and innovation labs attempt to overcome. Sprinkled across Asia, students and graduates are emerging in the fintech scene starting companies in payments and lending. Many of them take models from the West and adapt them to local market needs.
The Passionate Graduate is pushing with his/her energy the regulatory barriers, introducing new concepts and attracting a lot of attention. Many will fail, but nonetheless will have changed the face of finance in the long run.
2. The Unchallenged Banker
Either inspired by the stories about The Passionate Graduate described above and/or because of an uninspiring environment in the financial institutions, there has been in a huge push in the market by industry professionals to start their own fintech companies. In average they have worked for around 10 years in a bank and now, at an average 35 years of age feel they need to change their career. They bring very specific industry knowledge and an understanding of the processes and relationships from their previous life. Many start with being a startup mentor, advisor and angel investor to acclimate to this new habitat. Their challenge is twofold: 1) How can they sustain a certain lifestyle, support a wife and kids and pay the mortgage, and 2) are they able to shake off the corporate mindset to take risk and build tech products? It can work out if they find a seasoned CTO and a good board that provide the right governance to a lean culture.
There is big hope in financial hubs like London, Singapore and New York that this type of entrepreneur will change the landscape of financial services. However, if the right platforms of funding and support are not provided, there won’t be many success stories. The highest concentration of this type can be found naturally in financial centres like Singapore, Hong Kong, Mumbai, Tokyo, Shanghai and Sydney. Locals and expats are taking the leap of faith and start B2C and B2B fintech companies.
3. The “Old Tech” Guys
Fintech is nothing new. Technology has always been powering the finance and insurance sectors. Small and large tech vendors have been building products for the past decades. Some have built legacy systems, others focussed on niche segments and became market leaders. They are the previous generation of fintech. Given that speed of technology innovation is increasing, systems become more inter-operable (e.g. APIs) and everything data is gold, tech vendors are now also joining the new fintech wave. For example, where large corporates likeIBM and Microsoft are introducing blockchain tech, small tech vendors are also seeking new funding to utilise new technologies and build more modular systems. Their advantage is existing business relationships, cash flow and strong product teams. The challenges are in the ability whether the products can be upgraded in an innovative manner and the mindset of the management is ready for internal transformation.
Because Asian markets are still very fragmented, every country shows a number of local tech vendors that supply technology to the domestic financial industry. A few were able to scale across the region, but were also challenged by changing regulations and market needs from country to country.
4. The Silent Anti-Startup Professional
Hard to spot, but building great technology firms in the background. They are the techfin entrepreneurs, focusing on technologies that are serving financial industries, amongst others, such as logistics and health care. They sit in normal offices, wear suit and ties and try not join the fintech hype. Many of them have started their company with a contract already in the pocket from their previous employer or are a spin-off from university research. They might not have the most exciting story to tell and most likely won’t become celebrated unicorns, but could become a serious threat to the large tech vendors that can’t build good enough tech for niche markets. Clear advantages are in the diversity of their clients and a strong IP.
Because at least regional financial industry experience is required, this type is mostly present in financial hubs with Singapore and Hong Kong counting the most. Other hubs like Jakarta and Kuala Lumpur are also emerging with more talent leaving the industry to start a company.
5. The Serial Entrepreneur
Serial Entrepreneurs are everyone’s darling. They have a proven track record (attract a lot of funding), an understanding of the markets (banks trust them and shorter sales cycles) and a great talent pool around them. They can be a mix of the previous four types and would be ultimately the ones being rewarded the most. Good examples are Patrick Collison from Stripe, Ricky Knox from Tandem, Shankar Narayanan from Active.ai and Samir Bhatia from SMECorner. Their chances on driving the company to another success story might be higher and hence are particularly interesting to investors. However, they also need to comply with local regulations and a fairly closed financial industry. Time will tell if they will be more successful than others. In the meantime they have proven that entrepreneurship in financial technology has been happening and will continue to exist and it is not just a current phenomenon.
If you are an about-to-be fintech entrepreneur and can find yourselves in one of the above stated categories, learn from others on how to avoid mistakes (or fail fast and learn from it!) If you are a new type and not part of the five, there is enough space for more entrepreneurs. Because of a progressive regulatory environment in many Asian countries, a constant need of banks and insurance firms to adopt new technologies and changing consumer behaviours, it is a good time to start a fintech company. Good luck!
First appeared at Forbes