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What will tomorrow’s clients expect from us?

It’s a question I often ask myself.

A transformation is underway in global financial markets, driven by startup firms and disruptive technologies, and investors’ needs are changing too.

The pace of change has been dramatic. When I read that global investment in FinTech ventures tripled to $12bn between 2013 and 2014 (Accenture 2015), it cements my belief that the fintech revolution could be the greatest opportunity the banking industry has ever seen.

We need to be part of this growing ecosystem.

Yes, start-ups have the power to disrupt as they’re quicker, more agile, and less confined by rules, regulation, or legacy technology. But we bring something to the table they don’t have – in-depth understanding of our clients. This is why it’s so vital that startup firms and big banks work together, share ideas and combine their skill sets. It’s how we will maximize the business opportunities in our evolving industry.

With over 150 years of experience and a global reach, UBS has value we can add to the innovative process. How do we scale our ideas? Are we delivering what clients really want? Are we exceeding their expectations? The technology can be built and proven, but start-ups will still need to ask themselves these questions. We explore some of these issues and more in our new Life’s Questions series.

So how do we go about collaborating with these new and fast-growing firms?

It starts with making sure we’re part of the conversation. That’s why we were the first bank to establish a presence in Canary Wharf’s Level39, home to over 170 startups, and why we have established an innovation presence globally.

At Level39, we’ve created an innovation lab, a unique platform from which to explore emerging technologies such as cryptocurrencies and the tools that power them, such as blockchain. How will revolutionary ideas like these impact financial services in the future? We want to play a role in how these solutions develop.

Our specialists act as mentors to entrepreneurs, giving them a sounding board to help them answer the big questions facing their businesses, from regulatory issues to the best way to handle the next stage of expansion. We know expanding a business can be daunting, so our new brand campaign focuses on how UBS can help company founders get over the hurdles to growth.

But that’s not all we do. Another new initiative helps us find the innovators of the future namely our Future of Finance Challenge, a global competition to find fintech startups with potentially disruptive technological ideas and solutions that could reshape our industry. We’re looking forward to revealing the winners of this competition following the regional finals in November.

As well as tapping into the wider FinTech community, we know how important it is to make sure our own house is in order. So we have been investing heavily into new technologies within the UBS group.

Extensive market research is helping us to understand what tomorrow’s clients will expect from us, and we are building a state-of-the-art IT structure which will help us to deliver it.

As the world’s largest wealth manager, we want to stay at the forefront of thought leadership, whether in technology, services or products.

FinTech innovation is reshaping the landscape of financial services, and we’re excited to be part of that ecosystem

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FinTech Startups – Customers Not Cash

I’ve spoken to many entrepreneurs and quite a few have admitted that if you spent your time worrying about the consequences of failure you would never start your own business.

There is certainly a lot of evidence to back up the fact that most start-ups are destined to fail.  For instance a study by Shikhar Ghosh, a senior lecturer at Harvard Business School, estimated that more than 95% of start-ups would be seen as failures if it were defined as failing to see return on investment (ROI).  Another successful Silicon Valley seed venture capital firm, Y-Combinator, has said that a company in its portfolio only had a 1 in 10 chance of success. And according to CB Insights, start-ups typically die around 20 months after their last financing round and having raised $1.3 million, citing the main reason as an inability to identify a market need for a product or idea.

And yet I passionately believe there is no more important time to be an entrepreneur.  These well documented failure rates are at least partly due to too many start-ups focusing on finding finance, and not enough on building a customer base.

And yes, I speak as someone with a vested self-interest, because it is not just start-ups that are facing major challenges. The study by Richard N. Foster (of “Creative Destruction” fame), suggested that companies in the S&P 500 could also be facing serious threat.  He stated that only 14% of companies in the Fortune 500 from 1955 were still alive today and that an S&P 500 company was now being replaced about once every two weeks.  At the current churn rate, 75% of the S&P 500 firms in 2011 would be replaced in 2027 by new firms entering the S&P500.

Therefore, for my organisation, it is just as important to be embracing innovation in order to stay ahead of the competition.

For me, much of it boils down to commercialisation at scale. Over the years there has been a lot of debate about the potential of Fintech startups, but one aspect that it not emphasised often enough is how ideas are taken to market. It is an obvious, but logical fact that if a start-up cannot convince a customer to buy its product then it will very quickly join the long list of “nice ideas.”  Having that invaluable feedback and endorsement from a customer during the early stage of a company’s existence is critical to long-term survival.

Many small companies prioritise chasing investment before customers. However getting a big company as a reference client, not only provides money, it also provides a route to market, and lots of valuable real time insight into what the market needs and wants.

Getting that first customer is much easier said than done, but this is why I am so positive about initiatives such as UBS’s Future of Finance Challenge.  Today there is growing recognition in industries, such as financial services, that open innovation models offer significant mutual benefits to entrepreneurial start-ups and established players collaborating on new ideas and technologies.

Large and small companies need each other more than ever. Established companies have access to disruptive, agile start-ups with ideas that can open up new market opportunities, improve operational efficiency and strengthen customer loyalty.  While conversely entrepreneurs have access to a wealth of experience about product development, customer business needs and go to market models.  Personally I am convinced that this collaborative model is critical, because digital transformation demands faster responses to customer needs.

In 10 years time I’d like to think we could look at a very different and more positive set of statistics on the failure rate of start-ups, showing how the collaborative sharing of ideas, experience and expertise enriches the opportunities for all.  Would love to hear your thoughts!

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