{"id":3063,"date":"2018-03-22T08:00:15","date_gmt":"2018-03-22T12:00:15","guid":{"rendered":"https:\/\/cm-edgetun.pages.dev\/industry\/blog\/uncategorized\/beware-of-accidental-fintechs-responding-to-unforeseeable-financial-services-disruption\/"},"modified":"2023-05-31T16:28:40","modified_gmt":"2023-05-31T23:28:40","slug":"beware-of-accidental-fintechs-responding-to-unforeseeable-financial-services-disruption","status":"publish","type":"post","link":"https:\/\/cm-edgetun.pages.dev\/en-us\/industry\/blog\/financial-services\/2018\/03\/22\/beware-of-accidental-fintechs-responding-to-unforeseeable-financial-services-disruption\/","title":{"rendered":"Beware of accidental fintechs: responding to unforeseeable financial services disruption"},"content":{"rendered":"

It\u2019s hard to spend more than a few minutes reading about financial services these days without seeing some perspective on how fintech companies are disrupting the industry. Recent reports<\/a> estimate that global growth in venture capital investments in fintech have grown at 35 percent annually from 2010-2017, a number that does not include the substantial investment made by banks over the same period, both in fintech ventures as well as in developing \u201cfintech-like\u201d capabilities within traditional institutions. Every segment of the financial industry increasingly seems to be undergoing some form of disruption, from payments and lending, to investments and advisory, to insurance underwriting and beyond.<\/p>\n

Accidental fintech: the Go-Jek example<\/h2>\n

As remarkable as these changes have been to watch, equally noteworthy have been the disruptions driven by players who began with a focus far outside the financial services industry and only later came to be considered fintechs. The Indonesian company Go-Jek<\/a> is an excellent example of this type of \u201caccidental\u201d fintech. Go-Jek\u2019s core business is ride-sharing, similar to Uber or Lyft, but primarily focused on motor scooters rather than cars. The experience is quite familiar in many ways: open an app and enter your pickup point, but instead of a car coming to your location, a scooter driver meets you, gives you a helmet to wear, and whisks you away, weaving through Jakarta\u2019s dense traffic toward your destination.<\/p>\n

A key challenge for Go-Jek, however, was to find a way to provide the same seamless payment experience as other ride-hailing services, but in an economy where 70 percent of retail transactions used cash and 65 percent of the population was unbanked. To overcome this challenge, Go-Jek developed an electronic wallet, fully integrated into their ride-hailing app and capable of being topped up not only by bank account but also by handing cash to the driver, which can then be credited to the wallet.<\/p>\n

After some period of operating in a regulatory gray zone, Go-Jek\u2019s wallet received the blessing of OJK (Indonesia\u2019s chief financial regulator), allowing it to expand its functionality to include peer-to-peer payments. Concurrently, Go-Jek expanded its core business beyond motor scooter ride-sharing to include car-hailing, food delivery, house cleaning, and a wide variety of other services, all payable through its wallet application. Capitalizing on its growing popularity as a general purpose mobile payment platform, Go-Jek in December acquired<\/a> three Indonesian fintechs in the payments space, including the nation\u2019s leading gateway for access to credit card rails. Thus, in a little over two years, Go-Jek went from being a ride-hailing service for motor scooters to becoming the most disruptive payments platform in the world\u2019s fourth-most populous country.<\/p>\n

How to respond to the unforeseeable<\/h2>\n

Given the unpredictable nature of innovation, how can traditional financial institutions best position themselves to compete against upstarts that currently aren\u2019t even on the radar as potential threats? While this question has no simple answer, two factors play a critical role in being able to respond effectively to unforeseeable disruption: (1) being informed, and (2) being agile.<\/p>\n