2015 was the year of fintech. We spoke about it extensively, VC money poured in from everywhere, and banks around the globe collectively jumped on the bandwagon.
If you are among those wondering why that is, let me offer an explanation. In one of my previous articles here, I mentioned how the world’s most valuable startups create trusted intermediaries for people to interact and transact. Fintech startups, for the most part, do precisely that. This is what makes them interesting (and potentially dangerous) for banks, which are effectively trusted intermediaries between individuals, businesses and financial markets.
If the main job of a bank is to serve as a trusted intermediary, and fintech startups are reinventing how that works across a wide range of financial services, then fintech companies are possibly the better banks.
Take alternative lending – a trillion-dollar industry whose place in the market is rock-solid following SoFi’s billion-dollar series E funding round led by SoftBank last year. What’s more, whereas banks do a little bit of everything, most startups in the space are by nature very focused – and that is but one of the reasons why they end up becoming really good alternatives to the traditional banking system.
A good example is TransferWise, the Estonian fintech star that specialises in offering international money transfers with 90 per cent savings compared to banks. Not to forget the Blockchain, everyone’s new favourite word.
In a nutshell, Blockchain is the ultimate trusted intermediary because it theoretically eliminates the need for having a trusted intermediary. Unsurprisingly, countless industries see an application for it.
In 2014, VCs may have loved it if you were building Uber for xyz, nowadays Blockchain for xyz gets you the funding. Jokes aside, I am extremely delighted by this development, because it affirms the core of my upcoming book, Fair Advantage – that trust is the most important ingredient you need to create value in new ways (i.e., to innovate).
Building a trusted intermediary is the most valuable thing you can do as a business, whether you are a startup or established company. Financial services in particular are impossible to deliver in the absence of trust. Would you keep money in your bank account if you did not trust the bank to hand it to you whenever you need it?
Ideas like the Blockchain transform the banking system because they provide the trusted interface people need to do business with each other at a fraction of a bank’s cost structure.
Another really interesting development is happening on the wealth management side. Whereas many people are used to parking their hard-earned wealth with a wealth manager or private banker (who in turn invests it partially in financial markets, partially in wining-and-dining their clients), the landscape is due to change dramatically. So-called ‘Robo-advisors’ – startups making algorithm-based investing software that invests in a theoretically optimum way -– emerge as better, cheaper alternatives to snazzy banking lounges, vintage champagne and hefty fees. One of my friends from Estonia recently co-founded Smartly.sg — Singapore’s first roboadvisory platform.
While these Robo-advisors sound really great, the question in the back of my mind is: How does they gain people’s trust and convince them to invest? Of course, I took to answering this question in the only way I know – with the six-stage trust model that forms the foundation of my book. For detail on the model itself, check our my last article on e27 on how to fund a zero-to-one startup idea. Now, let us take a look at how Smartly fares. I picked the website as a suitable channel for evaluating Smartly’s trust building efforts, since the service will soon be ready to launch.
Robo-advisors have been increasingly talked about as alternative avenues for investment. While new in Singapore, the concept has traction. In 2014, an estimate predicted Robo-advisors could manage US$255 billion by 2019.
The Smartly website features a simple, bold call to action – start investing from just US$50. Compared to most banks’ minimum assets under management (AUM) requirement, that number feels even smaller.
By using conversational language, Smartly sounds like a person, which makes the platform naturally relatable and different from the jargon-heavy and clichéd world of investment products.
After gaining people’s initial interest, Smartly provides detail on investment philosophy and approach (such as their use of Nobel-prize winning research as the foundation of their portfolio), fees involved and an entertaining quote on investing. All affirm the initial impression of a reasonable, simple and useful service.
Since the service has yet to go live, any button clicks invite the user to provide his email and stay up to date with the upcoming launch. This is a better approach than prompting people for their email, since a click on any button or call-to-action (CTA) shows the user’s actual interest in the service.
Speaking for myself here, the first thing I did after visiting the website is share it with my colleagues. By keeping things simple and clear and empowering the user to decide if they would like to engage and keep in touch, Smartly ticks many boxes that will make users keen to give the service a test-drive.
The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, please send us an email at sainul[at]e27[dot]co