The Finterview - Fintech Exposed episode 19.
Ajit Ramachandran is a seasoned product and commercial focused executive with experience at large players in the fintech space such as Barclays and Intuit. He is also an advisory council member to Pay UK.
In the latest episode of the Finterview, Fintech Exposed, Daniel Cronin sits with Ajit as they explore important topics such as Open Banking, the importance of trust and transparency and how aspiring fintechs should pitch to larger players such as banks and the considerations to be taken into account when doing so - from the bank’s perspective.
Keep reading for the key takeaways from the episode or 🎧 listen to the full podcast here.
Ajit Ramachandran's journey into fintech
Ajit, with a rich background in technology, financial services, and fintech, shares his career progression from his early days in embedded systems software development at Hewlett-Packard to his current role in Intuit, where he oversees their international strategy for fintech. After venturing into technology, he soon realised the desire to engage more directly with clients. This led him to pursue a business degree with an additional specialisation in design and innovation. His connection with Barclays initiated in London, offering him exposure to diverse financial services. Over time, He shifted his focus to payments, spearheading international expansion for payment acceptance.
Intriguingly, Ajit managed to bridge the realms of technology, product development, and the commercial side of business. This unique combination enables him to understand the feasibility of tech solutions while devising strategies that address the core needs of the target audience.
Embracing the triad: strategy, technology, and commercial
A core principle for Ajit is to always begin with understanding the target customer and the problems that need solutions. A holistic approach to customer experience is fundamental. Using retail customers as an example, he emphasised the necessity of an omnichannel solution that bridges online and offline experiences, especially for those looking to operate internationally.
Similarly, in the realm of small businesses, they have multiple needs - from payments to managing their working capital. He is a strong proponent of Open Banking and believes in its potential to unlock numerous use cases for customers. For Ajit, Open Banking shines particularly for small to mid-sized businesses, streamlining the B2B payment and invoicing processes. Its biggest advantage lies in the reduced friction, allowing customers to utilise their existing banking frameworks.
The value and challenges of Open Banking
Open Banking has been under scrutiny. Its potential benefits for merchants, in terms of cost savings and efficiency, contrast with its perceived lack of advantages for consumers.
Benefits of Open Banking
Ajit Ramachandran highlights a tangible advantage, which is streamlining payments. He recalls an experience where he received an invoice that required a bank transfer, an often tedious process involving multiple steps. Such friction can delay payments, affecting businesses and consumers alike. Here, Open Banking can be a game-changer. This system allows users to receive an invoice, click on a payment link, access their bank details, and pay instantly. It simplifies the procedure while ensuring timely transactions. For businesses, this translates to quicker payments and potentially lesser transaction fees.
Yet, for all its promise, why isn't Open Banking universally adopted? The answer lies in the relationship between fintechs and larger enterprises. Big companies are risk-averse. They await substantial market demand and proven concepts before committing. Adopting new technology, such as Open Banking, often requires a significant player to take the lead.
How fintech startups can win deals with big players
Ajit Ramachandran offers three key pieces of advice for fintech entrepreneurs eager to make a mark.
- Long-term commitment: Business relationships are long-term commitments, and impressing an individual today can have long-lasting benefits as they move through different roles.
- Detailed preparation: Entrepreneurs should be detailed in their proposals, especially in Request for Proposals (RFPs). A lack of detail can quickly disqualify you.
- Holistic approach: Fintechs need to look beyond their offerings to understand the broader needs of the business they are approaching.
In summary, despite the clear advantages of Open Banking, adoption is slow because of risk aversion among larger enterprises. Fintech companies are responsible for driving change by fostering education and collaboration.
Navigating the ethical and strategic landscape of RFPs in Fintech
In the highly competitive world of fintech, companies often face dilemmas around transparency and ethical conduct when responding to Requests for Proposals (RFPs). Ajit believes transparency about your company's capabilities and roadmaps can foster greater trust with larger partners.
Ethical approach vs. 'Shake it till you make it
- Transparency and authenticity: Authenticity should never be compromised. If a certain feature is under development, it's better to be upfront rather than falsely claiming it's ready.
- Credibility: Highlight your successes and completed projects. If you have delivered on past promises, it strengthens your reputation.
- Safeguarding reputation: Both your personal and organisational reputation are on the line during deals. Being transparent about your licences, jurisdictions, and other partnerships adds credibility.
Advice for bootstrapped entrepreneurs
Bootstrapped entrepreneurs face a unique challenge: attracting large deals without over-committing resources. Ajit offers two key pieces of advice:
- Be clear on your unique selling proposition (USP): A compelling USP will get you that initial conversation and possibly subsequent ones. Whether you have influential contacts or not, your product has to stand out.
- Evaluate the opportunity carefully: Innovation labs and hackathons are popular avenues for testing new fintech solutions but don't guarantee success. Ajit urges entrepreneurs to scrutinise these platforms' nature and consider deal structures that protect their initial investment.
In conclusion, whether you're a well-established fintech firm or a bootstrapped startup, the key to winning RFPs lies in a blend of transparency, credibility, and strategic prioritisation. Maintaining these aspects safeguards your reputation and paves the way for sustainable growth.
How fintech and banks can partner: models and opportunities
The modern financial ecosystem is a complex web of partnerships, often between fintech companies and traditional banking institutions. According to Ajit, the sector is generally categorised into three fundamental partnership models: Supplier-Vendor Arrangement, Distribution or Referral Type Arrangement, and Strategic Partnership. Each has its advantages, challenges, and opportunities for both parties involved.
In this model, one party, often the fintech, serves as a supplier to a bank. Here, the focus is mainly on efficiency and governance.
- Pros: Streamlined process, well-defined roles
- Cons: Limited to fulfilling specific needs, constrained by strict governance
Distribution or referral type arrangement
This involves a hands-off referral or lead generation mechanism. Typically, a technology company could be generating leads for a Fintech.
- Pros: Low risk for lead generators, broader customer access
- Cons: The relationship can be one-sided, benefiting only the party receiving leads
The most complex of the three models encompasses various collaborative methods, including what Ajit calls "payment facilitator-type arrangements." This often includes a software provider collaborating with a fintech or regulated institution to enhance their relationship with their customer base.
- Pros: Comprehensive solutions, deep customer engagement
- Cons: Risk of too much dependence on one partner, complexities in integration
The hybrid approach
Ajit also emphasised the increasing presence of hybrid models, especially as companies evolve. He suggests that organisations should continuously iterate their partnership strategy, factoring in the appetite and scale at which they operate.
In summary, there's space for multiple models to coexist. The selection ultimately depends on the specific needs and goals of the organisations involved. This offers a flexible roadmap for fintech companies and banks looking to collaborate in today's rapidly evolving financial landscape.
The future of financial services in 2033: hopes and disappointments
According to Ajit, stagnation would be the biggest disappointment. If the next 10 years fail to witness substantial changes, that would signify a slow pace of innovation and disruption in the marketplace, domestically and globally.
Key areas of change:
- Harnessing data: The industry must leverage the power of Artificial Intelligence and machine learning. These technologies, such as risk analytics, can make financial models much more efficient.
- Embedded finance: Seamlessly integrating financial services into everyday life is vital. Whether it's paying for an Uber or grocery shopping, financial services should be so embedded that you hardly have to think about them.
- Security: As services become more accessible through technologies such as facial recognition, ensuring that these transactions are secure and authorised by the user will be crucial.
- Generational shift: Financial services must adapt to demographic changes. Millennials and Gen Z will dictate the future needs, and banks must innovate to remain relevant to them.
Importance of relevance:
The flip side of innovation is relevance. Banks must accelerate their strategies to cater to younger audiences and diverse customer bases. Their vast capabilities in serving corporate clients, small businesses, and individual consumers offer opportunities for targeted innovation. Ajit underscores that the focus should be on creating 'surprising and delightful' customer experiences that are more meaningful to them.
The gap between consumers and banks
As we look to the future, one hopeful outlook is closing the gap between consumers and banks. However, Ajit clarifies that this doesn't necessarily mean a return to traditional brick-and-mortar models. Instead, the focus should be on creating "hero benefits" or key use cases that make banks more relevant in customers' lives, whether visible or invisible.
By keeping up with technological advancements and remaining attuned to shifting demographics, the financial services sector can create a surprising and delightful future for its consumers.
In summary, fintech is reshaping how we handle money, with traditional banks facing competition from innovative newcomers. One key takeaway is the significance of Open Banking. It simplifies payments, making transactions quicker and potentially more cost-effective for businesses and consumers. However, its adoption can be slow due to the cautious nature of larger enterprises.
Ajit offers three crucial tips for fintech startups aiming to win deals with big players: commit for the long term, provide detailed proposals, and take a holistic approach.
Transparency and authenticity are vital when responding to Requests for Proposals (RFPs). Bootstrapped entrepreneurs should focus on their unique selling proposition (USP) and carefully evaluate opportunities.
He also outlines three models regarding partnerships between fintechs and banks: Supplier-Vendor, Distribution or Referral, and Strategic Partnership. The choice depends on specific needs and goals, with hybrid models emerging as a flexible option.
Looking ahead to 2033, stagnation in the fintech industry would be a disappointment. Harnessing data, embedding financial services seamlessly into daily life, prioritising security, and adapting to demographic shifts are essential to ensure a brighter future.
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