From Banking to Fintech
There is a lot of discussion these days on the role of Fintech companies — and the future role of banks. I am personally in the camp that there is room -and important roles to be played- by all parties. The amount of capital that large financial institutions have, as well as the regulatory framework, currently provides substantial barriers to entry for fintechs who aspire to topple the large universal banks. I do believe that in 10 years we will see that the top financial institutions are no one we have heard of today- and likely coming from the fintech world. I also believe that many of the existing banks will adopt new technologies and partner appropriately with fintech companies who can innovate more quickly, and they will, like Darwin’s finches, adapt to a new competitive landscape. Smart people find a way.
Having spent a couple of decades or so on Wall Street in Big Banks, there are a few observations I have about what is different on the world of Fintech startups (even if that start up is a few years old, that is infancy compared with the centuries that some of my previous places of employment have been around). So here is what I see:
Big banks typically have a lot of smart people. Fintech startups typically have a lot of smart people. So what’s the difference?
1) Pace. Because banks have developed with layers and layers of approval processes — much of which is in place to avoid the large fines that have been recently levied on banks- banks move really, really slowly. Unfortunately it isn’t clear that moving slowly avoids fines as much as it avoids getting business done. I was speaking with a friend last week who moved to a startup from a large bank. He is a lawyer and he said that it took him 3 days to write 3 papers and get them out to regulators. He said at the bank it would have taken 9 months to do the same. In a bank, by the time you get the required input, have the meetings, get consensus and send, it can take that long.
2) Experimenting. Naturally in a startup there is a lot of experimentation because for the most part there is a lot of new ground being covered. So testing things, collecting data on what works and making changes is the norm. Some parts of some banks also do this really well. The trick is — and this is for startups too- to make this the norm in every aspect of the company and not only for the “innovation” areas. Every area is an innovation area.
3) Urgency. Being what Jeff Bezos referred to as “always a Day 1 company”. Never complacent, never relying on the way we always did things, never being lazy about costs, never being anything but laser focused on being ahead of any completion. This has to be the way it is in a startup because your life depends on it. The thing is that your life depends on it in a big bank too- it just isn’t in your face all day every day so it is easier to forget.
4) Scarcity. At a startup there is never enough staff and everyone has to wear lots of hats, and pitch in where needed. A friend who is the CEO of a tech firm told me when I shared with him my plan to move to the Fintech world that there were 2 things I needed to get comfortable with to be ok making the move:
i) know that most tech firms fail- and you need to know if that happens your life won’t be ruined and
ii) know that the cushy perks of banking (and anyone in banking will tell you that these aren’t anything like what they used to be- but are still way more than in a startup)- but secretaries and flying business class for long haul flights- will be something I will be saying goodbye to in leaving banking and going to Fintech. No problem saying goodbye to business class flights. If I am honest I will miss my secretary- she made my life way easier- but being frugal is an important dimension in building a sustainable Fintech (or any) company. But if you are thinking about leaving banking and going to any more entrepreneurial environment- be ready to take out the trash- literally.
Large, established companies of any type provide their employees a lot of stability, resources, clarity of role, and can be as challenging as any start up under the right set of circumstances. I enjoyed enormously my years in banking and found some of the smartest, hardest working people I know there- many of whom are still there. Whether you work in a company of 10 people or 200,000 it is important to find that place where you can exercise your creativity and make a difference. Leaving the office every day feeling satisfied that you gave it your all, and that you are leaving the place a little better than you found it is possible at all types of organizations- it is really all about what is best for you at the point in your career journey where you find yourself. Here’s to finding the best place for you!
