RIDING THE FINTECH WAVE
Ray Ruga, CEO of Fintech Americas, provides an insider’s perspective on the burgeoning fintech sector and its impact on banking.
In an era where the digital experience is important to consumers, Ray believes that banks need to be curious, agile, and comfortable with ambiguity in order to succeed.
The last decade can be rightly termed as an age of financial disruption with the introduction of new technologies aimed at bringing financial services to end users across the globe. Innovations such as quick mobile payments, cryptocurrencies and blockchain have provided users with a level of financial control and freedom previously inaccessible to all but the wealthiest of clients. This growing integration between traditional financial institutions and technological solutions has paved the way to the rise of fintech which promises to bring about a game changing revolution in global finance and services.
Among the pacesetters in this increasingly crowded field is Fintech Americas, a focused marketing, media and educational platform in the fintech and banking sector, and brainchild of CEO Ray Ruga. A banking innovation entrepreneur, Ray has had a distinguished career with over 25 years of international political, governmental and corporate experience. An International Business and Finance graduate from George Washington University, Ray has gone on to work for the White House, Pentagon, a US development agency, two Fortune 10 companies and was involved in five US presidential elections. He shares his thoughts on how fintech is reshaping the banking landscape.
Working With Banks
Ray’s experience with fintech began with Citigroup to develop the bank’s innovation strategy. After observing the shifting focus of venture capital firms to disrupting financial and banking services, he was prompted to create Fintech LATAM, a conference aimed at helping banking executives learn more about the growing fintech sector. In order to encompass North America, US and Canada, Ray expanded the scope of Fintech LATAM to Fintech Americas.
In the beginning, Ray was uncertain on Fintech Americas’ direction. The turning point for him came after he attended a singularity programme in New York, where most of the speakers were critical of the ability of traditional banks to keep up in the fintech age. But after doing the math, Ray realised that when it came down to it, the banks were the ones with all the resources to excel. “My thesis at that time was that in this financial transformation battle, maybe half of the banks will perish. But 90% of fintech companies will perish too,” Ray explains. He reasoned that the regulatory system would also protect the banks, providing them a better chance of survival, as long as they transformed their method of operation.
From Confrontation To Collaboration
Many banks were unfamiliar with fintech back in 2014, says Ray. “We were maybe too early, because banks were initially unreceptive to what we were talking about,” he recollects. This was especially true for Latin America, where the banking system lags behind the US system. At that time, banks were beginning to understand what was happening in the marketplace, and realised the need for them to collaborate with new fintech players. “The challenge is that most fintech companies only have to be good at one thing. But big banks have to be good at everything. And that is really hard to do,” he explains.
A year later, Ray attended a conference where he observed that the investment strategy of venture capital firms was changing – they were now more interested in investing in startups that wanted to collaborate with banks, rather than compete with them. Scaling fintech startups was starting to become problematic, and investors were looking to invest in companies that were complying with regulatory procedures.
At first, Ray struggled to make headway with the banks. “Most boards of directors are very far removed from digital disruption,” he says, noting that they tend to be older, legacy driven, and unaware of the global disruption scene. Digital talent was also being attracted by tech giants, leaving banks to face a dearth of world class talent. “Someone has to train the bankers. There was an opportunity here to create an education vehicle to start retraining the workforce in order to make them Digital 4.0 ready. In the process, we went from a conference to a digital marketing company, to a media company, to an education company, and are now moving towards a knowledge company.”
Agility In The Digital Age
During the gradual shift in attitude of banks towards the fintech sector, Ray notes that there is a need to change the way banks operate, to allow for more creativity, innovation and problem solving to flourish. “Think of the last innovation that emerged in the financial service sector: the ATM. The ATM is now widely adopted but it was launched more than 50 years ago,” he says. “From AI, to blockchain to quantum computing, new technologies are now hitting us like a tidal wave. Today’s customers are not comparing your bank’s digital experience with another bank’s experience. They are comparing your digital experience to the last digital experience that they had,” he believes.
Ray adds that customers tend to move quickly to the next best experience. He cites a study conducted by PwC in North America which observed that one third of millennials would change their bank in 90 days if they found a better and more user-friendly experience. “There is no loyalty. Facebook was the greatest thing, and now it is considered something for old people. Now there is Snapchat and Instagram. Consumers move on very quickly. To be successful in the digital world, you need to be very curious, agile, and comfortable with ambiguity.”
Musings On Blockchain Technology
One of the biggest changes that financial institutions face is the introduction of blockchain and cryptocurrency within the ecosystem. “Blockchain has a tremendous amount of usability in the financial services sector, a lot of which is in secure databases for transactions,” Ray notes. Some blockchain applications such as know-your-customer (KYC) are already moving quickly in the banking industry, he says, but mass adoption has yet to take place. “The blockchain industry is way ahead but regulators have not kept pace, which has resulted in a misalignment in the marketplace.”
“Cryptocurrency poses a different challenge, because of the nature of the technology,” Ray continues. “There are still sovereign political considerations that affect how cryptocurrencies will evolve and expand.” Using Facebook’s Libra as an example, Ray believes that it would be difficult to achieve a global agreement among regulators from across the globe on the use of the currency. “Facebook is looking to make money out of this,” he states matter-of-factly. “But regulators have a different interest because governments cannot have a competing currency operating in their country.” Ray’s past governmental experience has shown him that the development of unregulated digital currencies will be a challenge, due to a lagging financial ecosystem and multiple security issues.
Bridging The Americas And Asia
Part of the future plan for Fintech Americas is to expand into Asia, especially with the Asian region being at the forefront of global financial innovation. “I have to be here because this is where the market is being created in a lot of ways,” Ray states. “I want to start with bringing Asian fintech companies back to Latin America to operate. And at the same time, there are fintech companies in Latin America with a lot of experience developing in markets which could be very applicable to the ASEAN region here. We hope to be able to help them in creating a highway, a digital bridge to take them from the Latin American market to the Asian market.”
In Ray’s mind, there is no doubt that Fintech Americas’ Asian base would have to be in Singapore, saying, “Singapore is a small country that punches way above its weight. It is inherently a global country as there is no domestic market.”
Self-funded and profitable, Fintech Americas is currently looking into a fundraising strategy for its innovation incubator, MINT Labs. The incubator will focus on developing programmes and services that will help financial service institutions and fintech companies to thrive in the Digital 4.0 era. The launch of MINT Labs will be the next step in Fintech America’s journey in becoming a leader in digital transformation. “We hope to be a global player in the transformation of the banker of today to become the banker of tomorrow,” Ray concludes.
The Fintech Americas team hopes to be a global player in the transformation of the banker of today to become the banker of tomorrow.
This article was first printed in MillionaireAsia Issue 54 - December 2019