Why the next Facebook, Google or Amazon will start in FinTech – but end up selling groceries

Richard Wallace

“How can we be like Amazon, Apple, Facebook, or Google?”

Find any tech start-up the world over and you’ll find them asking the same thing. It’s the million-dollar question – or should that be multi-billion dollar?

These four companies have cast a long shadow over the world of tech. And given that Apple in particular is now officially the wealthiest company to have ever existed, it’s hardly a surprise that smaller companies want to emulate them.

But with hundreds of thousands of new start-up ventures launched every year, where will the next big success story come from?

Well, if we could predict that, we’d be writing this blog from our gold-plated yacht in the Azures. But you don’t need a crystal ball to see where the market is likely heading, and for what it’s worth, our money is on a rapidly-growing, and hugely exciting, new category: FinTech.

There is good reason to expect FinTech to provide fertile ground for disruption. Open banking, the ubiquity of mobiles, and massive post-recession distrust of banks (as high as 92% among millennials) means there is a genuine consumer need to be met: “if the computer in my pocket can change the way I shop, why can’t it change the way I bank?”

The explosive growth of Monzo proves that we have no issue trusting challenger banks with our money. But so far, while Monzo and Transferwise – some of the most successful FinTech companies to date – may be a minor threat to Barclays, they’re not only competing with Barclays. They’re also competing with the likes of Facebook or Google – and they’re still a long way from that kind of dominance.

When you compare them to smaller companies, the success of the Big Four really starts to look dauntingly unique. But while they have found wild success, the reason why is no secret. In fact Professor Scott Galloway, of New York University Stern School of Business, has written a book – The Big Four – which aims to analyse just that.

And based on his insights, one particular a rule-of-thumb comes to mind: we shouldn’t think of the Big Four as “tech pioneers.” In fact, let’s not think of them as “tech” at all. Not anymore, at least.

While each of the Big Four began in its own modest way, providing small-scale online services or consumer goods, the real meat of their business has revolved around diversity and adaptation.

They have been nimble enough to move into new categories – Amazon, for example, now provides not just the cheap books and CDs it once did, but all kinds of consumer goods. And groceries. And web services. And – in the near future – perhaps even pharmaceuticals.

And it has moved from bookselling into publishing, with Amazon’s e-book services completely upending the traditional publishing industry and creating a self-publishing revolution.

Facebook, too, has moved into publishing – predominantly news and media. It’s gone from a fun way of staying in touch with friends and family to one of the world’s biggest sources of news: in fact, for 22% of Americans, it’s their only source of news, and is now a sizeable influence on how we think and see the world.

Meanwhile Apple has ensured that it operates as much as a luxury consumer brand as a tech brand – a coveted label, like Louis Vuitton, whose customers pay for the name and design more than the actual capability of the product. This approach has been so prudent that Apple’s turnover is now twice Louis Vuitton’s.

And Google has become, along with Facebook, one of the world’s biggest advertisers – Palo Alto’s resident multimedia empire brought in a whopping $79 billion in ad revenue in 2016. Add that to Facebook’s revenue and the two platforms between them were responsible for a fifth of all global ad revenue that year.

This is how you build a brand to last. Sure, the Big Four had vital products to begin with – which may be the first step for anyone hoping to follow them to the top – but they also explored business ideas and areas that complimented their core offerings rather than directly related to them – and in some cases, areas that bore no relation at all, such as Amazon’s pivot into the grocery and web service markets. This type of big, wild, innovative thinking has proved massively lucrative – web services now makes up around 70% of Amazon’s total revenue.

This is why FinTech is just crying out for the next unicorn to emerge from its midst. There is a customer need – a vital product – at the heart of many FinTech platforms, as evidenced by their rapid growth. But that’s just the start.

Their potential is to create a service that a variety of businesses and individuals can plug into, as Amazon has done (Netflix runs on Amazon Web Services, for example, meaning their customers range from self-published erotic fiction writers to streaming giants).

Banking is a big, convoluted industry, and for a company to nail a single platform that both simplifies and maximises the average user’s relationship to the world of finance – while sitting at the heart of a product ecosystem – the rewards will be astronomical.

What would this product look like? Well, again: yacht, Azures. But we firmly believe that players in the FinTech space should be thinking about the unification of services. That may be plugging insurance, investing, pensions, money-management, travel exchange and home equity into a single manageable interface, or it may be using big data to reduce car insurance premiums, match individuals with brokers (“Lendr”?) or offer group discounts on pricey consumer goods. Or perhaps it’s simply the ability for consumers to pick and choose financial products on an individual basis, rather than as part of a high-street package – giving them the ability to buy individual bags of crisps, as it were, rather than multi-packs when they already know they won’t be eating the cheese and onion.

The possibilities are endless – and already there are businesses brewing up financial offerings in far more detail than we are. The point is, anybody doing so should be thinking a little differently, and considering how they’re going to provide longevity and real value to their business as well as early growth. Because it seems that the days of doing one thing well are pretty much over, and the most stable businesses are the ones taking the biggest risks.

Did you enjoy this post? Then be sure to stay tuned for our next Unframing video, where we’ll be diving even deeper into the future of finance.