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The Fintech Petting Zoo

Updated: Oct 31, 2023

Is your financial institution looking for innovation? Have you tried partnering with a local accelerator? How about startups pitching your executive team during a branded demo day? If you're still not feeling the effects of innovation, how about attending one of the trendy new fintech conferences or personalized tour of Silicon Valley?

If your efforts end here, you’re looking for innovation in all the wrong places. You’ve ended up at the Fintech Petting Zoo.

Happy hours with startups, conferences and demonstrations of the latest technologies are not wrong in and of themselves. These activities need to be tactics with clear objectives supporting a broader strategy, not stand alone efforts.

The petting zoo is seductive because it is easy to implement, doesn’t seem costly and it feels like progress. Without a clear plan, however, these activities don’t have outcomes and in the long run can spell disaster for your innovation efforts.

My garage is a great example of this phenomenon. The workbench and shelves are filled with the components I need to complete the endless number of projects leftover from our home renovation. Conduit and electrical boxes. Wires and connectors. Rust remover and touch up paint. All the pieces I need to make progress on the punch list but no coordinated plan to bring these components together. With so many of the pieces on hand, it begs the question why do I head to the hardware store every weekend to collect more of the inputs? Because it feels like progress and covers up the fact that I haven’t checked off any of the punch list items as complete.

Mistaking activity for progress is the first trap of the fintech petting zoo.

The second trap is that without addressing internal processes and procedures to deal with companies at this stage in their lifecycle, the cute little startups from the petting zoo don‘t stand a chance of getting through the bank's traditional risk and vendor vetting. We hear this story proudly repeatedly: “we’ve met with dozens of startups and even done a proof of concept.” The answer to the obvious follow up question of “how many startups are you engaged with now?” brings a more sheepish response when they say “none.”

The last trap of the fintech petting zoo is a process that is doomed for suboptimal results. Scott Watson, the CIO of Cape Cod 5 Cent sums it up succinctly: “figuring out the problem is hard and not so much fun. It’s easier to start shopping for solutions and try to work backwards.” My partner JP equates this with going to the grocery store hungry. You end up with all the ingredients but don’t have everything you need to make a meal. This is how you end up solving a problem no one has with technology nobody wants.

Innovation doesn’t happen in the four walls of the bank. It starts with the customer, not the solution providers. The petting zoo can create havoc and confusion as exposure to the latest and greatest” technology whipsaws the organization. Worse, when these activities don’t generate tangible returns on effort, the entire innovation effort can end up scrapped.

Visiting the zoo can generate inspiration but it doesn’t create innovation.


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