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There was a time when B2B tech accounts were viewed by all but the most specialist agencies as being solid but dull: bread and butter work that wasn’t going to change the world or win you any awards. But not any more. There's no question that fintech is one of the hottest industry sectors around, from daily stories of the latest cryptocurrency Initial Coin Offering and the dark arts of blockchain, to the introduction of 'open banking' and the rise of challenger banks.
Disruptive is an overused word these days, but fintechs can credibly claim to be transforming the traditional banking and investment world. Broadly speaking, fintechs are start-ups that use innovative new technology, including apps and digital and mobile platforms, to create better financial services for consumers and businesses. They are already shaking up areas previously dominated by heavyweight institutions, such as personal financial management, lending, insurance, payments, wealth and retirement planning, equity finance and asset management.
As Harvard CEO Louie St Claire, says: “The finance industry is heavily regulated and full of very established institutions which struggle to innovate. It was ripe for disruption. What our client Square is starting to do for mobile payments, for example, and blockchain can potentially do for all payments disrupts the very nature of currency and our relationship with money and transactions. It’s about disintermediation of insurance, mortgages, financial advice: all that stuff that has a secondary market of brokers is under attack from online platforms that can do it more quickly, cheaply and with no trust issues. Every part of the finance ecosystem is being disrupted, which makes it really vibrant.”
And by start-ups, we’re not talking four geeks in a garage in Sweden. Fintech is a multi-billion-dollar industry and these new businesses are the current darlings of the VC universe, with startups in the US alone raising around $19 billion since 2015, according to PitchBook, across nearly 1,400 VC-backed deals. Two of the most valuable US start-ups — mobile payments company Stripe and loans app SoFi — are in the fintech sector, and there are already more than 10 fintech start-ups valued above the 'unicorn' threshold of $1 billion.
Younger millennials and Gen Z, in particular, expect easy access, convenience, efficiency and speed — a so-called “frictionless experience” — from their financial service providers, whether they are tracking spending and saving, applying for a loan or investing. App market data provider App Annie counted around 200 billion financial app sessions globally across iOS and Android in 2016, and the market is growing exponentially: in 2017, Android mobile sessions on fintech apps grew by 60% in the EU.
The introduction of the European PSD2 legislation (the second Payment Services Directive) as part of the shift towards Open Banking this spring is a further opportunity for fintechs. PSD2 requires retail banks and payment service providers to allow third parties to access real-time secure account and payment data, if they have permission from the account holder.
Retail banks — HSBC, for example — are now required to share account information with a digital banking alternative such as Revolut, Monzo or Starling. This access to customer data will extend the potential penetration of fintechs, not only as individual entities but as a collective, since fintechs threaten retail banking’s entire portfolio of services. Bank of England governor Mark Carney has already recognised fintech’s huge potential.
Digital transformation, the changing customer landscape and new legislation are a triple threat to traditional banks and financial institutions, which are hampered by regulation and formal structures and have been struggling to keep up with the innovation and speed of the sassy young challengers.
And it’s precisely this traditional environment that means, despite the inherent sexiness of fintechs, there’s a comms elephant in the room.
The challenger banks, new payment systems and swishy new investment platforms are, after all, still subject to the same regulatory framework as the incumbents. There’s a reason why the big banks employ huge teams of seriously experienced PR and public affairs professionals.
“Finance is finance, no matter how brilliantly slick the technology underpinning it,” says Chameleon CEO Tom Berry, “and there lies a bit of a problem. If new technology companies are going to start providing services in highly-regulated industries, they have to prove they are compliant and act appropriately when it comes to data management and security. Technology start-ups are not the first place you would expect to find grey hairs and crisis experts, but that is exactly what is needed in financial services. Customers want to feel they get a fantastic service when things are going well, but they also expect companies to protect their personal data, mitigate risk and respond appropriately when the shit hits the fan.”
Lansons works with internet-only Atom Bank, for instance; as founder and CEO Tony Langham says: “It may have a partnership with Will.I.Am, but it still has to navigate the same regulatory environment as other banks.”
As far as the product offering goes, fintechs appear — after some teething troubles — to have largely determined how to communicate benefits rather than concentrating on the technology itself. The level of the challenge here depends on whether their target audience is B2B (trying to sell a new payment platform such as Trustly into established financial systems, for example), or a new consumer app targeted at digital native audiences that makes it easier to track spending and saving (such as Plum) or applying for a mortgage (see Trussle) easier.
So far, so good on the comms front. Fintechs are developing innovative products that are being understood and accepted by business and consumer customers. They know their way around a press release, and are hitting their social media content out of the park compared to most traditional banks.
But what happens if there’s a cyber-attack, the app or website goes down, the CEO goes wildly off message, or they get hit with a slap on the wrist or a fine by the regulators? How will they deal with the potential risks of financial innovation, including issues around consumer protection and money laundering, and how will they make their case to policymakers?
Could they handle a crisis such as Visa faced earlier this month, when its entire payment system in the UK and parts of Europe crashed, leaving millions of store customers in “cashless meltdown”?
As one seasoned financial communicator put it rather bluntly: “Around 90% of the heads of comms I meet in this space are barely out of university, have never written a communications plan that isn’t about selling a product, managed a real crisis or made a bad story disappear. It is, quite frankly, bollocks to say a fresh grad could handle a regulator landing a $300m fine on a Saturday night, or Greenpeace busting your reputational balls. They only know how to talk about the awesome.”
Sharon O’Dea, a co-founder of new digital consultancy Lithos Partners, who worked in-house as head of digital communications at Standard Chartered Bank, says the problem is that fintech founders often “don’t know what they don’t know” about corporate and crisis comms: “Fintechs are putting inexperienced people in senior roles who won’t take communications seriously until a crisis hits. But to be fair, the same thing has happened even at the big banks. Maybe it’s down to the VC community to focus a little more on whether fintechs have the right level of comms capability before they invest.”
Julia Streets, founder and CEO of Streets Consulting, says fintechs often need a trusted adviser more than tactical support: “They crave experienced counsel based on a true understanding of the world they inhabit — from tokenisation on the blockchain to non-standardised derivatives — and their customers: anything to help them have better conversation, deal or sales engagement. What they need is to be surrounded by people who can tell them what they don’t know. A lot of the founders come from a very techy background and it’s about how they make the transition to being an effective evangelist, figurehead and spokesperson in the media and on digital and social channels.”
At Hotwire Global, associate director Felicity Hudson agrees there is typically a lot of hand-holding with fintech clients: “They are much more open to experimenting and new ideas, and there’s often not a dedicated marketing contact so you’re working the with CEO a lot of the time. Regarding crises, they do tend to take the slightly risky approach of crossing that bridge when they come to it, because asking ‘what if things go wrong?’ and paying someone else to spend time developing a strategy you might never use is less fun than developing content and ideas and new products.”
Nim Haas is head of marketing at Global Processing Services, which powers the payment services of a number of challenger banks and fintechs. She recently went in-house after heading up fintech at Clarity PR and agrees there’s a risk of poor crisis handling from fintechs: “If there is a crisis, fintechs will communicate on social channels with more speed, although I’m not saying the messaging will be adequate for the situation.
“A start-up may get a message out within an hour and a bank is more like four-to-five hours, but messaging from a traditional bank will be more thought-through because they have crisis communications in place. Fintechs are more reactive and more emotional, so they maybe won’t go through legal, other internal departments, or through a crisis management process.”
Daniel Lowther, head of fintech at CCGroup says the nature of fintechs means comms expertise is likely to be patchy: “There’s a long tail of small organisations who have Series A or B funding and haven’t built out their marketing function yet. It’s not always that they’re not senior people, but a marketing VP might have come from PR, digital, or advertising and is now pushed to be an all-rounder and handle multiple disciplines. It’s not necessarily a lack of experience per se but they are likely to be more stretched, in a sector that demands expertise.”
His colleague, CCGroup CEO Richard Fogg, says fintechs’ approach to comms generally depends on where companies are in the funding cycle: “The younger companies just want to get out there and be quoted in Techcrunch slamming the banks; it’s awareness-oriented, ‘PR like it’s 1985’ stuff. As you move along to Series B funding, you start to find people are more interested in lead generation. We’re now gradually seeing the bigger fintechs looking for broader communications support.”
But Berry says this doesn’t necessarily mean that fintechs are comms disasters waiting to happen: “We work with several fintech companies that are baking security and communications strategy in from the outset, but it is a little like the Wild West out there at the moment. New fintechs should stop and test a few ‘what if?’ scenarios before they get too carried away by the promise of their bright shiny technology.”
So does its bubbly approach of “accentuating the awesome” mean that fintech is overhyped? FleishmanHillard Fishburn spoke to 30 global financial services and fintech experts, including Ant Financial, Citi, Ripple, Santander, Western Union, Starling Bank and Visa and found that even AI providers admitted the tech had been hugely over-hyped so far.
Claudia Bate, head of financial services and fintech at the agency, says: “That’s not to say that AI won’t completely alter the financial services industry in the future, but likely in a more measured way that begins with fundamental shifts in back-end processes, rather than consumer-facing robotics that grab the headlines. There is a fine line between being excited about the future of finance and its potential, and over-hyping. Clients of financial services, whether consumers or other businesses, are increasingly able to see through overly exaggerated claims.”
The question of whether fledgling fintechs have the communications muscle to manage a crisis, influence policy, or weather a reputation storm in the grown-up, global business of finance is a valid one for any startup. In the whirlwind of funding rounds, if they have any comms expertise on board at all, it is likely to be someone relatively young and inexperienced.
O’Dea pulls no punches: “A fresh graduate with two years’ experience managing a corporate blog is unlikely to have the knowledge, experience and diplomacy to handle a real reputational crisis. By leaving the media to inexperienced communicators these firms are taking enormous risks with their reputations, and their investors’ money.”
This inexperience is evident, too, in public affairs: recent minutes revealed just one of 25 attendees at the Open Banking Entity Steering Group was from a fintech. O’Dea says: “The focus on social media and blogs is great if you’re speaking to an early adopter audience, but not in isolation. It’s also about how you influence the public narrative, and I don’t see fintechs represented on advisory bodies in anywhere near the numbers they should be. For challengers to influence policymaking they need to cultivate relationships with stakeholders while keeping front-of-mind with the public and politicians through the media. That takes skills, knowledge, networks and experience.”
Hudson says fintechs don’t always understand the value of this level of relationship-building: “Understanding how you can use regulatory involvement as a hook for PR — through open letters, round tables, bringing others together — is a link people often don’t make. Talking to the Financial Conduct Authority, for instance, can be a powerful proof point for your credibility and willingness to take a seat at the table and shape the agenda.”
Haas agrees that inexperience can be an issue: “I see a lot of young heads of comms who are 22 years old or maybe have no real PR background, and it does cause an issue because they are not necessary up on regulatory changes. Established companies have a hard time understanding the impact, so it’s even harder for fintechs who don’t have someone keeping up with all the regulations. I sit on a lot of councils impacting our industry so we can get insights, and I don’t see a lot of fintechs on these committees. They have fewer resources so they can’t commit to regular meetings and unpaid work, and maybe they don’t see it as essential.”
Chad West is one of the younger heads of comms in the banking sector, as head of global brand and communications at digital bank Revolut, but he agrees there’s a valid argument for fintechs to invest in experienced comms counsel: “Challenger banks are more prone to crises than the average tech company, given that we operate in the financial space with regulations, so it’s absolutely right that there should be an experienced executive team in place who can deal with crises. Any fintech should invest in that early on, when they are making their first comms hire: it’s not just about product releases, but about how the brand is communicated and how it would deal with any future crisis.”
But he argues that the more corporate side of comms is often simply not a priority for start-ups: “It’s only fair to give companies time to grow and then expand into non-urgent areas — they have to get developers and designers on board first. A lot of start-ups don’t have budget to hire someone to do public affairs, for example, but as they make money and scale, they will hire experienced people to watch over risk areas. Some start-ups actually avoid hiring the more corporate kind of comms professional. And the start-up world isn’t for everyone: the culture here is hustling and fast-moving.”
West also says younger comms professionals bring an important perspective because they understand the new target customer: “The communications landscape in finance is changing, because the expectations of the millennial audience are completely different to my parents’ generation: we want fun and fast, we want banks to speak like humans and to be built around our needs; that build communities and speak to customers in a light and transparent way. People are willing to put up with hiccups along the way for a service that fits their needs, as long as we let them know what’s going on, how and when we are fixing it, and hold our hands up if it’s our fault.”
Langham believes the tension between old and new in the financial space is more about attitude than age: “People expect to be able to order off-menu and it’s the same with financial services now, we want to be able to do it all at 2am. You can’t have a mindset that how it was is how it was will remain forever. We’ve all worked in sectors where dinosaurs go out of business and the ones who survive have completely evolved.”
Cristina Danilla, head of brand and communications at digital banking software company Backbase, which works with banks including Lloyds, Barclays and Metro Bank, believes we are at a pivotal moment where there’s a clash of cultures in finance between tech entrepreneurs and established, highly-regulated organisations: “In older, more corporate financial firms it’s hard to be as agile and they are trying to catch up by maximising online communications. It’s not about them not getting it, it’s about how much time it takes to change everything: they are huge ships whereas fintechs are speedboats.”
She says the old and new players both have strengths and weaknesses: “Fintech players can learn communications maturity from the big banks and not shout before they have something to say: start-ups are optimistic and not so cautious about messages, but as they grow they learn to do comms properly. Big corporates can loosen up on social media and remember the human touch.”
For all her caution over especially-youthful heads of comms, O’Dea agrees the incumbent banks can learn from the agility of fintechs: “They are amazing at leveraging consumer advocacy. No-one has ever said ‘I love NatWest’, but look at Monzo: its bright pink bank card is almost a chat-up line in some bars in Shoreditch, and people are referring their mates because they have great referral schemes. Fintechs are also good on transparency, as they move from beta to live product, there will be downtime and things they get wrong, and they are good at sharing what they’ve learned.”
There’s another positive aspect to helping fintechs with their comms. At a time when two billion people worldwide, including 7% of Americans, still don’t have access to a bank account, Lowther is passionate about the social impact aspect of working with fintechs: “Here are a bunch of new organisations trying to help customers get access to services that have been denied to them by largely lazy banks who have all this data on us and don’t use it to help us plan financially, get on the property market or achieve our life goals.
“Fintechs are developing products that genuinely help people, including those who have never had access to financial services. I get really excited when we’re working with an interesting, ambitious fintech organisation with its heart in the right place that is not just shifting product, but is trying to shift the world.”
Take the example of Tandem Bank, which invited its first 2,500 customers to become “co-founders” to “co-create” what they wanted from a bank together. Lowther says: “There’s good PR and comms in this space, from great companies with a strong cause and ethics, building communities that feel personal, and really differentiating from what’s happened before. The question is whether they can retain ethics and governance as they grow and become more corporate.”
It’s worth pointing out that many fintechs are being incubated within big institutions keen on finding ways to innovate and play in this new space, such as money management app Yolt, which has been flipped out of ING, and ABM Amro in Netherlands with its digital spin-off bank Moneyou.
And there’s the point: today’s fledglings will grow up. In all the tension of this rapidly-evolving industry, the finance sector may eventually be able strike a balance between the rigour, corporate comms experience and regulatory nous of the big, traditional financial institutions, and the energy, agility and purpose of the fintech challengers.
