Fintechs Under Pressure

If You Build it, They Still Might Not Come

By Tom Alford, Deputy Editor, TMI

Fintech solutions abound in the treasury space. But is the level of creativity and production of these tools matched by treasury’s appetite to use them? If not, why not? TMI explores the current appeal of the fintech solution from the perspectives of treasurer and fintech.

There’s an often but slightly misquoted line from the 1989 film Field of Dreams that suggests ‘if you build it, they will come’. It’s a notion that has been used variously in a commercial context to suggest that when thought and energy are put into the creation of a solution, a market will naturally develop.

But there is more to success than simply building a useful tool; at the very least, the potential client base has to know about it, and then buy in to its advantages, before investing time, effort and money, especially when there are so many other solutions – and challenges –competing for their attention.

Arguably then, the creative side of a fintech build is the easy bit. It’s the taking of the product to market that is the serious challenge for many providers, whether large or small, across all sectors and industries. Indeed, according to research by Clayton Christensen, a professor at Harvard Business School, nearly 30,000 new products are introduced each year and 95% of them fail.

A major contributor to failure is simply not taking the necessary time to study and understand the potential customers’ real needs. As Svafa Grönfeldt, a faculty member for MIT Professional Education’s Designing High Impact Solutions programme has said: “Many innovations fail because they introduce products or other solutions without a real need for them.”

It’s a view echoed by Sean Crichton-Browne, Head of Global Partnerships & Customer Engagement at Sydney-based MarketCulture Strategies, who wrote in a recent Clootrack 102 CX Expert report: “One of the biggest challenges in companies is to truly understand what the customer needs. Not what they think they need.”

Evidently ‘build it, and they will come’ is a high-risk strategy. So how do fintechs get their ideas to market, how do they build on their successes, and crucially, how do they know when to let their failures fall by the wayside?

Conditional commitment

Some treasurers have an innate faith in the power of technology. Amit Baraskar, Vice President & Head, Treasury, Thomas Cook India, knows what he wants, and offers his view on the state of the industry.

Amit Baraskar
Vice President & Head, Treasury, Thomas Cook India

India is one to watch when it comes to nurturing fintech growth, believes Baraskar. He says all eyes have been on the country’s fintech space since it was revealed in late 2022 as the world’s third-largest fintech ecosystem.

With an industry valuation estimated to go beyond $150bn by 2025, according to The Economic Times, India is among the fastest growing fintech markets in the world. Some 67% of the country’s 2,100 and rising fintechs were set up between 2017 and 2022.

However, despite the volume of trade fintechs have amassed in India, Baraskar notes that with the exception of a handful, such as NeoGrowth, Indify, and Groww, “many have been struggling to break even”. To add to this frustration, fintech funding slowed down in 2023 – in fact it took a sharp drop of around 37%.

It doesn’t help that major market players such as Jio Financial Services (JFS), a company providing FS including payment services, can draw upon a market capitalisation in the region of $14.5bn (in fact, it is one of the world’s highest capitalised financial services platforms). The presence of such a tech giant, says Baraskar, “heralds a major market disruption”.

The central bank – the Reserve Bank of India – recently caused more than a few nervous glances in an industry concerned by regulatory challenges when it announced the licence cancellation of Paytm Payments Bank, a popular fintech bank. As Baraskar comments: “all this has been quite discouraging for fintech startups”.

The best of both worlds awaits

But perhaps because of these setbacks, collaborations between fintechs and banks have been more evident in recent times, notes Baraskar. And with the Indian government’s initiative, Open Network for Digital Commerce (ONDC), expected to drive huge growth in the country’s digital commerce ecosystem, he feels now there is renewed vigour in the market.

“Before the introduction of ONDC, fintechs were operating on platform-centric models, with a focus on scaling the most effective offerings,” he notes. “ONDC encourages fintechs to be platform-agnostic, and to include every single merchant, from the smallest retailer to the largest corporate provider. ONDC is set to reimagine e-commerce in India.”

With this in mind, Baraskar says Thomas Cook India’s focus will continue to be on productivity enhancement using technology, cost re-engineering and the provision of a best-in-class customer experience which is also cost effective for the customer. “Fintech offerings built around these objectives are the ones we have gone for, and they will continue to appeal to us. We also look at fintech offerings as a tool to enhance customer reach by exploring open banking via API integration.”

Other areas of fintech endeavour that are of interest to Thomas Cook India include using ML and AI to aid investment decisions. These are seen as a means of improving cash flow forecasts and also analysing and predicting benchmark-rate movements.

“With the company’s focus on going debt-free, we’re reducing our reliance on external debt, so borrowing ceases to be relevant in this context,” continues Baraskar. “But we’re considering collaborations for open banking via APIs, bridging micro, small, and medium enterprise [MSME] credit gaps, as well as exploring new ways to offer buy-now-pay-later [BNPL] functionality to our customers.

“BNPL fintechs are able to offer credit to the untapped part of the market. As this model scales up, it will fuel growth and serve the aspirations of travellers in the millennial customer segment. NPCI’s pet project, UPI, has become the most important pillar of fintech, and with the Indian government’s intentions of making UPI global [it has already taken it to Southeast Asia, Middle East and the UK], this could bring in ease of payments for Indian travellers.”

While the fintech community is facing a few new hurdles, especially of the regulatory and compliance kind, clearly it has a lot to offer an organisation the size and reach of Thomas Cook India. Baraskar states: “I believe that fintechs can deliver a whole new level of tech-driven efficiency. There is significant potential for enhancing customer reach, as well as the customer experience. And AI and ML can work wonders on increasing data access and improving predictability.”

And now that both the banking and fintech communities have finally realised that it is better to collaborate instead of compete, he declares that, “as potential clients, we get to enjoy the best of both worlds”.

Anatomy of an idea

The enthusiasm of professionals such as Baraskar seems to be the exception, so if uptake is so low, why do fintechs matter to treasury? It’s all about advantage. Will Fairbairn, UK Country Manager of cash management solution provider Agicap, explains how this fintech builds on end-user opportunity.

When it comes to starting points for the creation and development of a new product or feature, Fairbairn says it always kicks off with customer feedback. “We constantly track and store demands from our customers and prospects, which enables us to have a macro view of the most requested features, products, or pains our clients and prospects need to solve through Agicap,” he explains.

Will Fairbairn
UK Country Manager, Agicap

“Sometimes our customers have urged us to launch new products based on their needs or what they are using already. But we also take into account feedback from our prospective customers,” he adds. “On occasion, some may choose not to partner with Agicap because of a missing feature. So when we see a pattern emerging, we assess the opportunity of launching this new feature or product.”

To achieve this aim, Agicap has a team working on market intelligence. It is charged with understanding the key features proposed by its competitors, where Agicap may not be at the right level with its own offering, or indeed where a competitor product falls short, and Agicap can bring more value to its customers.

At the same time, Agicap also keeps in mind its stated mission. Fairbairn explains: “We are building a range of products with cash at the centre, ranging from cash forecasting to accounts receivables [AR] and from automations to spend management.” With cash the lifeblood of a business, and the most important metric, Agicap’s belief is that it should not only be a treasurer’s responsibility but also a core focus for the CFO and CEO, “and that’s why we build the products to support them in their strategic needs”.

Won’t or can’t? Treasury reasons to resist tech uptake

PwC’s 2023 global survey, The New Equation: Treasury’s role in driving sustainable value indicates that adoption of technology “still requires significant ramp-up and buy-in from stakeholders”. Should fintechs be concerned?

Well, this is not an isolated view. Citi’s 2023 study, Treasury Leadership: Does it Matter? shows that while 60% of companies claim to be looking for transformative digital opportunities across both their core business and treasury function (compared with 57% in 2021 and 49% in 2018), only 40% of treasuries are ready with the essential data strategy to be able to progress. The survey also shows that real-time treasury functions in support of digital business models are yet to attract priority attention.

So in terms of tech-based treasury projects underway, Citi’s results reveal a subdued response to the opportunities of technology. APIs are a practical project for only 30% of respondents, and the similarly hyped notion of data analytics is happening for only 21%. Instant payments projects are currently being implemented at 36%, and RPA at 30%, which feels somewhat muted given the fanfare each has received. However, it’s the reality of the cutting-edge project that seems really blunted in treasury: active AI projects are proceeding at just 21%, and just 4% each for DLT and digital currencies.

An earlier (2021) Citi Treasury Diagnostics report touched on a common reason. It showed that 74% of treasuries are not yet in a position to fully embrace the digital opportunity, with 32% admitting that they need to focus on treasury fundamentals before they can consider automating through emerging techniques.

At the heart of the matter, cost remains the biggest transformation hurdle, as shown in both the PwC and Citi 2023 studies. Some 59% of Citi’s participants, across companies of all sizes, cited this, with 46% also raising concerns about integration of emerging technologies with legacy infrastructure, and 20% citing the risk of deploying unproven technology. The 2023 PwC survey reports that more than 50% of organisations of all sizes bemoaned lack of budget – a recurring theme from previous PwC survey years.

Customer power

If the motivation and ideas are free-flowing, then the processes used to validate a product or feature before, during, and after creation must also be fine-tuned. Again, says Fairbairn, customer needs must be in the driving seat. “We have a strong culture of co-building with our clients and prospects. The CFO or treasurer’s pain points and needs that we work on all come from the discussions we have with them during demos, onboardings, and formal or informal discussions.”

At the heart of this process is a three-step discovery phase: user interviews; prototype testing with users; and tech delivery. Fairbairn explains: “When we start working on a new feature, we conduct user interviews with clients who mentioned their interest in a given feature to precisely map and understand their pain or the business result they want to achieve.

“Then, we deliver prototypes that we will test several times with them to be 100% sure the feature will provide value to a representative proportion of our customer base. Once the first version is released, it never stops there: we gather feedback through internal tools and processes, consolidate it, and iterate on the topics where we have most requests. Each iteration follows the same path of discovery interviews with clients and prospects, prototype and user tests, then delivery of the feature by the tech team, and it starts over again and again.”

At some point, a decision must be taken as to whether or not product or feature development is worth pursuing. Criteria used to help decide either way starts with analysis of the constant-user feedback gathered in the development and release process.

“As long as we have constructive feedback from a significant part or our customer base, there are iterations that are eligible in our prioritisation process,” comments Fairbairn. “It is very rare that the developers will completely stop iterating on a product or feature. So while work can be paused for a few months if other topics with a higher priority emerge, it is still very likely there will be new iterations in the future.”

As fintech customers, using technologies that can become deeply embedded in core processes, treasurers should initially question product credibility and the long-term business viability of the vendor. Indeed, these issues must be part of any rigorous selection process. 

While there are no guarantees that any vendor or its products will last forever, it is always useful to understand how well the business is run. Of course, vendors also need to continually deliver on their functional promises. “We have built real expertise in treasury management by talking to thousands of treasurers and CFOs from all over the world. This enables us to understand what they struggle with on a daily, weekly, and monthly basis, and to bring them the right value with the right solution,” emphasises Fairbairn. “And in purely practical delivery terms, we rely on trusted, robust and common protocols such as Swift, EBICS [Electronic Banking Internet Communication Standard], and EDItran, enabling our clients to have full confidence in the data we provide to them.”

Leaping hurdles

The main obstacles for treasurers in adopting fintech solutions, according to the Citi and PwC 2023 surveys referenced above, are that they either don’t have the technology budget available to them, or they are constrained by legacy systems. It’s an issue all vendors must overcome but it’s clearly a persistent one.

The response from Agicap is to aim to provide value at different levels, for the treasurer, the CFO and the CFO team. This demands that it appeals to each. The operational level requires it to highlight how, through automation at all stages, the system is able to ensure finance teams are equipped to save time by shifting away from Excel and avoiding manually keyed errors.

At the financial level, the promise of more precise and more frequent cash forecasts should enable clients to increase their available cash and their visibility of it. As Fairbairn explains: “It means users lower their funding costs and create more financial revenues by investing in short-term vehicles, in the context of a high-rate environment. Usually, price is less of an issue when we contrast Agicap’s licence fees with a client’s earnings.”

The strategic level of appeal is the most important level, notes Fairbairn. He reiterates his earlier view that cash is not just the treasurer’s concern. “CEOs need cash to finance their growth plans and mitigate any cash-shortage risk. Our clients understand this and are willing to pay for a top solution to be able to take the right decisions for their business.”