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Background on Fintech Explained

How did I get inspired to write a course book on fintech?

In early 2016, I was part of a group at Western University’s Ivey Business School that pitched Scotiabank on the idea of setting up a university research centre focused on fintech, which would mirror the recently opened Scotiabank Digital Factory in Toronto. Scotiabank gifted Ivey $3 million over 10 years to create the Ivey Scotiabank Digital Banking Lab, with Prof. JP Vergne and I as co-founders. Our mandate was to examine the implications of digital disruption for banking and financial services, and to prepare our students to operate in an environment of changing technology and innovation.

Over the next three years, I immersed myself in the fintech ecosystem in Canada and abroad. I spent all my time studying fintech. I interviewed entrepreneurs, venture capitalists and hackers who were transforming the financial system. I also met with the intrapreneurs at incumbents who were running innovation labs, as well as the regulators who were monitoring this rapidly changing space. JP & I organized academic research conferences and public seminars, hosted hackathons, wrote cases and academic papers, and absorbed as much information as we could on this fascinating, dynamic field.

I first saw the need for a coursebook when I began teaching fintech to business students and finance professionals in 2017 and 2018. Fintech Explained grew out of my teaching materials for my undergraduate, MBA and executive education courses.

What was the most challenging aspect of this project?

The hardest part of this project was seeing the big picture. Fintech is such a diverse landscape and there is so much innovation happening. As a finance professor, my background is in banking, financial services, and capital markets. I quickly realized that I only had one part of the picture. I had to learn a tremendous amount about computer science, cryptography, strategy, entrepreneurship, and industrial organization.

I had a breakthrough in my own understanding of fintech when I began teaching others what I had learnt. As I created my notes and slides, it dawned on me that I was observing a paradigm shift in the way that financial services are delivered to retail customers and small businesses. I could see that some fintechs were simply replicating the traditional business models of “bricks & mortar” financial intermediaries, while others were bent on disrupting the financial landscape. This led to the “Two Paradigms of Fintech” described in the book.

My other major insight was identifying and recognizing the formula for a successful fintech business, which I call “The Fintech Explained Lens”.  It comprises the four questions that every founder must answer when pitching an angel or VC, or a strategic partner such as a bank or asset manager. The book is organized around this insight!

How did I research the content for Fintech Explained?

The most important part of my fintech research process was people. I started by meeting as many passionate, innovative, and intelligent people working in fintech as I could. And there are a lot of them! I interviewed them, listened intensely, and took extensive notes. I invited them to be speakers in my classes, on public panels, and in workshops. These people educated me, day-by-day, week-by-week, and month-by-month over three years. What surprized me was how much there was to learn. Even after several years focused on this topic, I was meeting people with fresh insights and perspectives.  

The other part of my research process was reading. I read all the academic research papers published in the leading finance and economics journals. The research on multi-sided markets and platform economics appeared more than a decade ago. In 2017, a handful of top scholars organized specialized conferences on fintech, with the work published in 2019. After that, the field exploded.

Finally, I became an angel investor and put $100,000 into a fintech start-up at the seed stage. I figured I would only really learn about this vital part of fintech by having skin-in-the-game. And I was right.

I started writing the manuscript in 2019 and didn’t finish until 2022. I kept re-writing and editing the material because I wasn’t satisfied that I had captured what I had learnt. At one point, I rented an Airbnb in Palm Springs and wrote in 2 hour blocks for 8 hours per day over 3 weeks. An important part of this process was writing the more than 30 case studies on fintech businesses. As I explained their value proposition and monetization strategy, the Fintech Explained Lens crystallized in my mind.

What do I hope readers will take away from reading Fintech Explained?

We are witnessing a paradigm shift in financial services caused by technology that is mirrored in every other part of the economy. Fintech is both an evolution and a revolution. Traditional fintechs are digitizing existing businesses to automate inefficient processes and increase profitability. Transformational fintechs are leveraging technology to disrupt an oligopolistic, rent-seeking industry.

A successful fintech uses technology to solve a customer pain point in financial services, and shares in the value created through its monetization strategy. The value proposition is cheaper, easier, faster, and more convenient.

An unsuccessful fintech starts with a cool technology, builds a prototype without talking to anyone, and ends up with a product or service that no one wants. This lesson explains why so many high-profile start-ups have struggled or gone bust.

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