One of the most archaic, traditional systems in the world is getting a facelift, it’s being disrupted from the outside in at a pace that is necessary for the sector to grow. Banking is being turned on its head through the agility and prowess of fintech startups across the globe, and interesting to me is the revolution of partnerships with startups that’s making the threat a sweetened growth hack opportunity.
More and more, we’re beginning to see the quite intentional innovation through large corporates, particularly banks with the agenda of strategic partnering with fintech startups to not only tell a good story but innovating with the intent of incrementally and radically transforming products within the bank’s objectives.
In Africa, we’ve seen successful partnerships like ABSA through their RISE signing POC deal with Peach Payments to test their product and Nigeria’s GT Bank investment in Accounteer with live integration to enable the bank’s financial services are prime examples of how the fintech dream team has mutual benefits for both entities.
Leverage the Open Innovation Agenda (Data, Infrastructure and Technology)
Innovation is expensive, and as disruptive as the process is and as sexy of a story it is to tell, the selling of innovation is nothing compared to the sweat equity involved to successfully take a product to market from ideation. One of the most heartbreaking cycles is witnessing a startup working with an entity, be it an accelerator or a bank with the intention to scale or prove a concept, and the innovation agendas are not aligned. Once the alignment is recognised and relevant, for the bank be it to incrementally or radically innovate their products which has an impact on their systems, or a growth hack opportunity for revenue and having more customers, and adding value to their data and technology. Whereas, the opportunity for startups usually comes in at acceleration of proof of concepts, going to market faster through capital investments and other capabilities and the chance to build on top of the infratrsucture of the bank through open integration.
Access to Capital, Network and Domain Expertise
As I mentioned in the previous paragraph, the opportunity to support startups from the bank’s perspective comes in at monetary investment capital, access to the network that of the bank and the knowledge sharing through domain expertise. In 2017, Merrill Lynch South Africa and Royal Bafokeng Holdings in partnership with Rand Merchant Bank’s Alphacode invested over R4 million in 4 fintech startups for the development of these high impact startups. Through Alphacode, fintech startups like Bankymoon, Livestock Wealth, Slide and Commuscore to name a few have to had access to resources such as an advisory network and a co-working space available.
The Opportunity to be a (First) Customer and The Acquisition
One of the most celebrated bank(able) fintech dream team partnerships is between startup Firepay and Africa’s biggest bank, Standard Bank to launch Snapscan. This partnership worked because of the aligned innovation agendas, and provided Standard Bank the opportunity to provide a solution to and grow their customers and supported the bank’s emerging payments strategy, and for Firepay, to have Africa’s biggest bank not only as a customer but now also as an investor in the business, and the opportunity for their product to scale beyond borders.
The dream team partnership doesn’t not come with its challenges, it’s not all rosy, after all, financial innovation and startups are competing with an archaic system with inertia to change from the security policy to the production management process. Partnering with banks is no walk in the park – especially given the early stages of these kind of collaborations.
As the ecosystem embarks on the journey, it’s key for both banks and startups to recognise that the bankable partnerships are not innovating not against legacy, but with legacy systems because of the valuable intelligence of failure’s patterns and the combination of new models, science and data through which both entities have the capabilities to impact.
And as a final word, ensure that your core values, and not just your technology and data talks to each other.
One of the most exciting things to be at this age is to be young (by age and mind), African and being a part of an organisation at forefront of contributing to the knowledge economy and leveraging the power of data and technology to empower economies and communities. We’re also at a time where the emerging market that is Africa has the opportunity to craft its own the Fourth Industrial revolution perception through not only commodity prices, but to diversify away from these resources and move into sectors which will leverage the opportunity to use open innovation as a tool to shape Africa’s Future Agenda.
Open Innovation is a term coined and promoted by Henry Chesbrough, professor and executive director at the Center for Open Innovation at Berkeley . The professor described it as “ … a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology. The boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward. The central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (e.g. patents) from other companies.”
The holistic idea of open innovation relates to creating profit and community from technology convergence of perceptions and an efficient way to operate and find solutions.And although outlined what it is, it is NOT Just crowdsourcing and one dimensional transactions, it’s to foster accelerate creative and business value for all stakeholders involved.
The Global Innovation Index is created and published by INSEAD, the World Intellectual Property Organisation (WIPO) and Cornell University and it covers 127 economies around the world and uses 81 indicators across a range of themes. Although no African countries emerged in the Top 10 of the list, Kenya (80) and Tanzania (96) represented the sub-Saharan African region as innovation players to be on the lookout for. Products and innovations like MPesa, Jumia, Ushahidi and Obami are incredible examples of the type of innovation that can and has come out of the continent.
My argument stems at how better accelerated in proving the concept and taking the product to market could these products have been, had the application of open innovation been applied.
Is it not about time that Africa heightened the advocacy and importance of open innovation? And at that, not just leaving it to one sector, but push collaborative open innovation – the interconnectedness needed to scale a Future Africa Agenda .
One of the most fascinating cases for me is the idea of a Sandbox, which is a cloud based capability that provides access to samples of organisations content and tools and where there’s tangible value for all stakeholders part of the transactions. On Africa’s potential alike, I believe we’re ready for a sandbox, and to this point, not only because Africa data is costly but finding credible sources of data has proven to be incredibly difficult.
Organisations like Fintech Sandbox have shown the value of a sandbox for startup partnerships in Boston, CodeSandbox Live in providing value for real collaboration between developers and Any API which has over 500 open APIs that have benefitted many entities. These entities show us what is possible with the world of open innovation in both emerging ad developed markets.
With the many 2020, 2030 and future plans that Africa has for itself, the concept of open innovation to drive Africa’s Future Agenda is a tool that not only invites the strengthening of intra-African and global knowledge trade , but the opportunity to collaborate with stakeholders in the private, NGOs and public sectors to empower Africa’s success.
Images : EOH and Schema Open Innovation