A Game of Cat and Mouse – Finnovate or Get Left Behind

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Patricia Partelow

Payments & Technology Innovation Leader
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My niece recently shared a video on Snapchat of Pumpkin, her new kitten, playing a game on her iPad. No, my niece didn’t go to the pet store to buy her new pet some toys — she went to the Apple app store to download the Best Cat Games app. This is the digital world we live in today.

With the maturity of digital capabilities such as the Internet, smart phones and devices, data analytics, cloud computing, and the introduction of crypto currencies and distributed ledgers, continuing to operate using traditional business methods seems ridiculous.

The “Mice” Multiply

The impact of this digital disruption has not been more evident anywhere than in the financial services industry. The amount of recent investment in this industry is astounding. Investment in financial-technology (fintech) companies grew by 201% globally in 2014, compared to 63% growth in overall venture-capital investments.* Start-ups have taken advantage of this funding to take friction out of the process and improve the end-user experience, threatening traditional players and disrupting the status quo. These “mice” are agile, technically adept and not constrained by legacy infrastructure and thinking.

The “Cats” Keep Chasing

The traditional players — the “cats” — need to disrupt themselves or risk being disintermediated. While not possessing the technical skills and agility of the start-ups, traditional players have some unique advantages. They understand regulations, compliance and risk. They are often trusted by their customers and have vast data resources. When they collaborate with their peers, they have the ability and scale to set standards.

The traditional players have historically chased the start-ups in this game of cat and mouse.

Can the Cat and Mouse Work Together?

Start-ups and traditional players often possess complementary strengths. Working together maximizes the result. This can happen in a variety of ways: through investments, acquisitions and partnerships. These partnerships can include technology firms, schools and customers. Incubator labs have become the mode du jour. Who doesn’t have a lab?

Each party gains advantages if both work together. The start-up doing business with a known entity gains access to resources that only more mature enterprises can afford, and the known entity also helps legitimize their offering by having that brand association. The traditional players can benefit from quick access to capabilities and talent of the start-ups, which would take years to develop in-house. The challenge will be to foster the entrepreneurial spirit and not squash it with the same processes that provide the safety and security for their mature business.

The culture of the financial industry is at a cross roads. Historically, the industry has stood for safety and security while the new entrants look to provide an awesome customer experience. In my opinion nirvana is somewhere in between and the game of cat and mouse will continue.

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