Lachlan Heussler: From disruptors to collaborators

The managing director of Spotcap discusses the three waves of fintech

Lachlan Heussler: From disruptors to collaborators

The managing director of Spotcap discusses the three waves of fintech

The fintech industry in Australia is booming, growing to a point where we can now analyse its evolution in ‘waves’. The first wave was disruption, the second is collaboration, and the third wave – although disputed – suggests that fintechs are maturing to look more like the traditional institutions they once challenged. Right now, I think we’re in the second wave but on the cusp of the third.

First wave: Disruption

There isn’t one agreed definition of fintech’s waves, but for me, the first was characterised by the period after the GFC.

This is when start-ups eager to approach finance more innovatively began to flourish. With their open-plan offices and ping-pong tables, fintechs began to take bank services and make them slicker, cheaper and more customer-friendly. They capitalised on technological advancements to reform customer expectations around speed and agility, effectively setting a standard that traditional players struggled to match.

While ‘disrupting financial services’ was a nice soundbite, a lot of first-wave fintechs didn’t manage to disrupt as much as was initially anticipated. But while they might not have overthrown financial services, first-wave fintechs did do something important – they emphasised the importance of technology. The future of finance isn’t just technology. If it was, fintechs would have successfully displaced the banks by now. The future of finance is increased customer-centricity that can be achieved through effective use of technology. This is the founding success of fintechs and is still the area in which traditional players are trying to improve.

Second wave: Collaboration

Not all fintechs survived the first wave. Some companies fell by the wayside due to lack of investment and/or failure to penetrate financial regulation. The surviving fintechs are the ones that collaborated, capitalising on what the veterans of the financial services industry have to offer: large client bases, customer trust, and high-scale operations.

The second wave is where we are now. This wave was precipitated by the pressure on big financial institutions to innovate. Fintechs like Coinbase raised big funding rounds and became regulated companies. By integrating into the financial ecosystem, these start-ups have shown they mean business.

Fintech is evolving through collaboration and partnerships to create a richer, more competitive financial ecosystem

In response, banks made public pledges to innovate. Some have set up innovation programs to incubate and invest in fintechs. Others, like Westpac, have established internal innovation and are investing and partnering with fintechs to stay abreast of the competition.

One thing is for sure: the second wave is the era of banks and fintechs working together and learning from one another.

On a personal level, Spotcap values the competitive advantage of the traditional players, and we’re using collaboration to overcome our own shortcomings. We have introduced lending as a service we provide to traditional financial fi rms. Within the next three years, we aim to grow our company by eight times what it is now.

We believe that the proposition of lending as a service will instigate this growth, making up at least half of our loan volume. Collaboration will drive our company’s future success and our industry’s. This is a common understanding in the industry: the World Fintech Report 2018 said 75.5% of fintech firms had reported that their primary business objective was pursuing collaborations with traditional financial firms.

Third wave: Maturity

It is predicted that the third wave will see fintechs being fully absorbed by or turning into hybrids with incumbents. It has also been argued that fintechs will become more and more like traditional financial institutions, going beyond simply collaborating and partnering.

We may be starting to see this now as fintechs begin to adopt traditional funding practices such as applying for banking licences.

This is the way that fintechs are heading: they are acting more like traditional finance institutions with a spin. They are challenging the banks and changing the very model of finance to offer more customised user experiences and products. We should exercise caution when using the ‘disruptive’ label. Fintechs, such as Spotcap, are evolving through collaboration and partnerships to create a richer, more competitive financial ecosystem.

Lachlan Heussler has worked in financial services for the last 15 years, both in Sydney and New York. For the last five years, he has been at the intersection of finance and technology, helping to bring several smaller start-up businesses to market. To find out more visit