The FinTech Innovation Lab was borne out of crisis. Some of the best things are. Just seven years ago, I returned from Asia Pacific to a country in financial crisis—one that was not just affecting profitability, but the ability of financial companies to invest in the future.
Financial entities needed to innovate, but it was increasingly difficult to make the required investments. As the crisis accelerated, larger financial institutions found that up to 70 percent of their discretionary spending was being directed to post-crisis regulation and compliance.
Against this backdrop, I was introduced to Kathy Wylde, CEO of the Partnership for New York City and Maria Gotsch, who runs their investment arm, the Partnership Fund for New York City, at just the right time. As we reflected on the impact this situation was having on potential employment and long term investment in New York, we had an epiphany. We noted an emerging set of Silicon Valley start-ups were addressing innovation in Financial Services. They had begun treks to New York to pitch to the banks and insurance companies based here, recognizing that just targeting consumers limited their market too much.
Silicon Valley had the technology, culture and funds to fuel innovation. We saw this in early fintech start-ups focused on consumer payments. These firms benefited from the mature tech ecosystem of the Valley. At the same time, we were observing this growing, unmet need for enterprise-level fintech innovation. The Partnership and the Fund had already experienced success in media tech, leveraging that industry’s presence in NYC. Together, we asked: How could we encourage this burgeoning phenomenon of enterprise fintech to take root locally? We opened the doors to the FinTech Innovation Lab New York in 2010, hoping to do just that.
Since 2010, the Lab has given 47 early- and growth-stage fintech companies access to mentorship to accelerate product and business development by introducing entrepreneurs to top financial institutions. And alums have raised more than $460M.
We could not then imagine we were opening the Lab at exactly the right time. The shift to technology becoming affordable for every entrepreneur, dovetailing with a halt to banks’ ability to spend. That made all the difference.
The plummeting cost of procuring technology played a huge role in accelerating growth in the fintech sector. You could finance a business on a credit card, if you wanted to.
Suddenly, everything was fintech. Investments in fintech went from roughly zero to $30 billion annually.
Another important driver of growth was the shift made by the entrepreneurs. Technology innovators moved from disrupting and competing with financial services companies, to innovating and collaborating with them. It moved fintech beyond the consumer arena only to enterprise-led fintech. The teaming that occurred as a result disrupted a global, highly regulated B2B business model—and made it better.
We soon went from working with our ten initial launch banks (solely New York-based) to partnering with 35 financial institutions (including insurance companies and diversified financial services), in various parts of the country.
We started with uncertain applicants, hesitant of what they were getting into. Today, the success of the Lab has made it a widely-recognized vehicle for accelerating the success of start-ups. As a result, up to one-third of all applications come from outside of the United States.
And we’re not done.
The Road Ahead
It took just five years for cloud computing to go from taboo to de rigueur. Blockchain is accomplishing the same feat in three years. These technologies are not just interesting innovations, but full-scale platforms that will enable massive innovation and accelerate the pace of technology’s impact in Financial Services. That I know for sure.
For me, what is less certain is the new business models that will emerge. And I say “models” because there probably won’t be a single version. The Lab has seen how our participants – start-ups and established financial services firms–are experimenting with consortia, standards bodies, acquisitions, and other formulations. It is a wide playing field. In addition, the constant push towards consolidation, the challenge of “is it a feature or a product,” and the realities of previous massive investments into legacy technology, are not going away tomorrow. So, the business models with staying power have yet to prove themselves—within fintech and within banks.
That means we still must write the final chapter in our innovation story. I’ll give you a hint—it’s really about full-scale adoption. We’ve made so much progress over the past seven years. Now we need to move beyond concepts, pilots and experiments to more impactful outcomes. One potential path, much discussed, would be the development of more ubiquitous solutions like SAP, Oracle and Salesforce. Specifically, will a fintech player, a financial institution or another entity emerge? One that can provide a broader platform for start-ups to scale and connect while providing financial institutions the enterprise-grade, generalized capabilities that can coexist with their legacy estate?
And Finally . . . Passing the Baton
I have had a wonderful, treasured experience these past seven years. I cannot think of a place I’d rather have been or a mission I would rather have accomplished. My personal thanks to Maria Gotsch and the Partnership Fund, our financial institution partners, the start-ups and our network of supporting entrepreneurs for making it a wonderful, fulfilling journey.
I thank Accenture also, for funding this program and for having the fortitude to embark on an uncertain venture—taking a chance on helping us catalyze technology adoption to make financial institutions more resilient and to make New York a fintech leader.
And now I’d like to introduce you to the new Accenture baton holder, David Treat, who will be taking over my leadership role in the FinTech Innovation Lab New York. David is a managing director and the global head of Accenture’s Financial Services Blockchain practice. He brings 18 years of experience in financial services across everything from strategy, to M&A, to customer relationship management. But most importantly, David is a creative mind, an innovator and a steward. I know that working closely with Maria, the Lab will thrive under its new leadership.
As for me, while I am retiring from Accenture, I am not retiring from my passion for the financial services industry. The financial crisis that created this Lab brought many issues to light, some of which have been resolved. But among other remaining challenges, consumer financial literacy is one that still needs work, and that I am ready to explore.
Thanks for the multitude of support, encouragement and of course, memories.