Fintech’s Value Proposition

This is not for the Faint of Heart

One of my Favorite Bible stories occurs in Ancient day Ephesus in the book of the Acts of the Apostles. It goes like this; A couple of Workmen, led by a guy called Demetrius who was a Silver Smith gather together to discuss about Paul the Apostle. The Major bone of contention is simple; These men are workmen and Craftsmen whose major source of income comes from making idols for the temple of Diana their god. But Paul is preaching a Gospel about a “New” God, who unlike all the other gods, doesn’t necessarily need a physical temple to be worshiped in, or an idol to pay obeisance to. This is the major source of contention. It’s not like these guys were really spiritual guys or anything, I mean if the God Paul preached about needed to be worshiped with an idol, there would have been no cause for alarm, they’d just send Paul a Cold pitch, with their tenders for new contracts, so they can build idols for this “New” God, and forget about Diana, because let’s face it, change is inevitable right?.

Either way, the main part of this story I want to highlight is in verse 32 of that Chapter 19, after Demetrius successfully stages a riot in the city, because let’s face it, saving his business from disruption is enough reason to riot against anybody and break anybody’s head. It says; some people were shouting one thing, and others shouting another, and majority of the people at the scene of the riot didn’t even know why they were there. I strongly believe this is the condition of Fintech today.

Fintech has become one of the hottest part of the startup ecosystem to invest in. A good number of funding rounds find their way into the hands of Fintech Startups solving problems that have to do with finance and the like. And since almost everyone is drawn to where the money is, a good number of the Fintech startups being founded today have little or no value proposition. In other words, a good number of the Fintech Startups founded today have little or no use. Let me not sugar coat this with grammar, let me be as clear as possible takes deep breath a good number of the Fintech startups founded today are completely useless. Everybody and every company wants to have a Fintech App, or a Fintech side of their business, My bank has taken note, my network provider has one, my phone manufacturer has one, and almost every Dick and Harry who has some tech experience ends up building one themselves, calls themselves the future of Fintech, and talks about how their new app can solve all my finance problems (you’d be thinking they intend to transfer money to my bank account when I download the app).

It’s almost like everyone came to the party, but we don’t know whose Birthday it is.

 What really is Fintech’s Value Proposition?

At the heart of any meaningful Fintech company whether those founded as in house parts of a larger organization, or those founded by external individuals, should be Simplicity and Inclusiveness.

 Simplicity

Simplicity is simply making things simple (English is a funny language).

Too many things about finance today are complex. Take investing for instance, before the rise of Startups and companies like RobinHood, buying shares and investing in the stock market was a hell of work, and would cost you money too. RobinHood made it simple, and with no commissions or fee charged for transactions, they’ve made it attractive for even millennials to take advantage of.

Owning stock in Google, Facebook and Apple has never been easier.

Loan oriented Fintech companies, especially in Nigeria have delivered on this Value Proposition. As a private individual in Nigeria, borrowing money from the bank in Nigeria used to be harder than learning to fly a Boeing 747 Overnight. Blindfolded. When your bank begins to list out the requirements for taking a loan, you’ll think you’re marrying an Igbo girl (no offense to the Igbo’s, I love them), or a Native doctor is giving you the list of things he’ll need for money rituals. Until some of these banks start asking for your Birth Certificate and your Health records to verify your real age, and make sure you don’t die halfway before the loan is fully paid. Not that they care about you or anything, they just don’t want their “Act of Benevolence” to turn into a bad debt.

Simplicity is key, making things easy is of Paramount importance.

 Inclusiveness

A good number of Fintech companies today are not inclusive. Their Value Proposition is in helping people do funny things like; transfer money, pay bills and buy airtime. They’re targeting people like me, people that have money in their account and that do money transfer. They forget that a good number of transactions in Nigeria go on in the informal sector where cash is king, where people buy recharge cards and scratch it with their key to reveal the code underneath (I still do this), where people pay their bills in raw cash, and where Mama Ufouma has refused to collect transfer because she “doesn’t like all this bank people and their wahala” (wahala means trouble).

According to the National Bureau of Statistics (NBS), 40% of Nigerians live below the poverty line. And a good number of Nigerians work in the informal sector where cash is still king.

Fintech companies should endeavor to make things both simple and inclusive.

Helping people transfer money doesn’t come across to me as a strong Value Proposition because your bank app does that well in most cases. And also the process of moving the money from your bank account to your Fintech account is like buying Jollof rice from Chicken republic (fast food joint), and driving down to Tantalizer (another fast food joint) to eat it there. Why don’t you just eat it at Chicken republic where you bought it?. Why don’t you just transfer the money from your Bank account where the money was paid into?.

The only Nigerian Fintech app I use is Barter by Flutterwave. The Value Proposition for me is very clear, I am given the opportunity to access Dollar cards that allow me to make transactions on platforms like Facebook, Amazon, Netflix e.t.c. keeping money in my Barter account, and maybe using my balance to pay for airtime or run a transfer makes perfect sense since my bank doesn’t solve that problem for me. If for any reason barter were to remove that feature, I really do not see the reason I would stay around any longer (In other words, I will delete the app, or at least freeze it).

Oh, and those companies that claim to help you monitor your spending online are being funny and non-inclusive too. How many people in Nigeria really run all their transactions online? How many people run on even 50% without cash in a week?, very few.

I once wanted to pay an Artisan that worked for us, so I asked for his Account details to do a transfer, he told me his account was…..wait for it…. Dormant, his account had been dormant for I think 6 months if I’m not mistaken. This is a grown man who walks around, and is able to feed his family, and he doesn’t have a working bank account. The women he buys vegetables or meat from in the market do not collect bank transfer, they want raw hard cash.

Mpesa from Kenya has a nice model that is worth emulating when you talk of being inclusive.

 One area that Fintech can work on becoming more inclusive is in Insurance.

I asked someone some days back if she had any kind of insurance. The lady in question is a business woman of some sort; Property Agent, owns a School, has employees that supply bread, and is working on establishing a Bakery.

Her answer was No.

In Nigeria, if you own an iPhone, you’re either a Yahoo boy (as law enforcement have been made to believe), or well-to-do to some extent. If you drive a Rolls-Royce, it’s safe to say when the Government was sharing palliatives to help people during the lockdown, you weren’t among those trying to get some.

Owning Insurance in Nigeria is a wealth symbol of some sorts. If you own insurance in Nigeria, not just health insurance, you either work for a good company, or you run a business that has some good intrinsic value.

According to statistics, 1.5% of Nigerians are properly covered by insurance.

Panama is a Central American country that acts as a tax haven of some sort. With a population of around 4 million people, there are more people living in Panama than those that have insurance in Nigeria.

It’s not too difficult from a top-level perspective to conclude why people don’t have insurance in Nigeria. I mean, instead of paying #20,000 Naira a month on Insurance Premiums monthly, #250 naira will buy you a bottle of Anointing oil that you can use to draw a cross on your car every morning that will last you for at least 2 to 3 months, comparing #250 naira to #20,000 is a long shot if you ask me.

If you asked the average Nigerian “what would you do if your car were to just blow up?” He will reject it, some will go as far as saying it is your own car that will blow up.

Designing For Insurance Tech.

Applying the Principles of Design can help birth the next generation of Insurance Tech companies. This is how Design can help:

Empathy

At the heart of Design, and the design thinking process is empathy, developing a deep understanding of your users and their context of use.

There’s a reason people don’t use insurance. It’s easy to say they just can’t afford it, but if there’s one thing I’ve learnt as a designer, is that asking the right questions and going deeper and below the surface can unearth massive insights that were unknown before, and can help in developing a product that really solves the pain point of your users, and that has a meaningful Value Proposition. Asking the right questions, sitting down with your potential users, observing them, and trying to understand their point of view and context will open you up to new insights on how to design a value Proposition around an effective insurance product that your users will find meaningful.

Empathy is about sitting down to understand your users, walking in their shoes, and seeing from their perspective.

Define the Problem

When you have gotten the insights from the empathy stage of the design thinking process, the next phase is to really define the problem you’re trying to solve. A vague problem statement doesn’t cut it, and will only add more ambiguity to your work, and reduce your chances of designing a feasible solution. From the insights gotten, you can deduce who your real users are (you do not design Lego bricks for Adults, or BMW’s for 14 year olds), what their pain points really are, what a solution should look like to them, what they can afford, and what they aspire to (Experience Design), all these insights will form a valuable problem definition statement that will give your team direction, and clarity on the problem that needs to be solved.

Ideation

My favorite part of the design process is ideation, unlike other fields where senior management may just look at data and make decisions based on what they THINK is the right direction to go, design employs a multidisciplinary approach where people from every part of the business are represented, give their opinions, and supply ideas to solve the Problem that has already been defined. Ideation could include people from Marketing, Engineering, Design, Customer success, Senior Leadership, and even Sales, all these different functions of the organization bring their expertise together to birth various ideas which are then streamlined to the most plausible ones to move to the next stage. Design determines Desirability, Engineering determines Feasibility, and the Business side determines Viability.

Prototyping and Testing.

After streamlining your ideas, prototypes are made of these ideas and put into the hands of real users to test their reactions to these products. In the Empathy stage, users may have said things they didn’t mean (trust me, this happens a lot), but when a prototype is in their hands, they tend to be a lot more honest in their reactions, and this can help you verify what part of your product needs to be tweaked, and which needs to be left the way it is. The Prototyping and Testing phase is essentially a learning phase where you get to learn and gather deeper insights about your users that you will likely use to redesign your product. Prototyping is the foundational idea behind the MVP (Minimum Viable Product) concept, the simplest form of your product that solves the most basic needs of your users, that can be iterated upon.

Iteration

The final step (there really isn’t a final step, design is forever iterative), of the Design process is the iteration phase. This is where we take the insights we have gleaned from the Prototyping and Testing Phase and check if they align with our previous assumptions, and the insights we gained during the Empathy phase. If they align, we carry on with the process, if they don’t, we go back to the phase of the process where the misalignment occurred and redo it with the new insights we have gained. This could mean performing new empathy tests, redefining your problem, or even picking some other ideas that were generated during the ideation phase.

Honorary Mentions.

Understanding The Jobs to be Done Theory.

Understanding that People do not just buy products, and that there is an underlying purpose behind every product is key to understanding the Jobs to be done theory. The Jobs to be Done theory postulates that people do not just buy products, but they buy the “Job” they believe the product can perform. That “Job” is wrapped inside the Product itself, and is exactly what people buy a product for. Do you pay for Cable TV Subscriptions, or you’re paying for entertainment?, do you buy a car, or you buy mobility and comfort?. That underlying purpose is the “Job to be done” of your product, and that is what your users, “Hire” your product for.

Having a clear understanding of what the “Job” your product performs is key to designing an efficient product that remains effective in the marketplace.

We all Loved the BlackBerry, but we “Sacked” her when the iPhone began to Perform her “Job” a lot better.

 Conclusion

Fintech is more than just helping people to send money, or do basic things that Bank apps already perform effectively, but creating products that win on Simplicity and Inclusivity.

The Opportunities laden in the InsurTech Space (I think this is what they call it) can be effectively unlocked by applying the principles of Human Centered Design and the Design thinking process.