OPINION: The One Reason Silicon Valley is Winning the Fintech Race

There is so much content online right now speculating about innovation in the financial services world.

“Are traditional financial services firms going to be disrupted? Who is the latest fintech disruptor? Will compliance and regulation prevent fintech companies from becoming bona fide disruptors?”

The debate positions Silicon Valley as the innovator, the wolf at the door, while traditional firms are the big incumbent, holding on for dear life, weathering a storm.

This is actually somewhat true. Before payments companies like Square, benefits companies like Zenefits, and wealth companies like Wealthfront and Betterment, traditional FIs just didn’t have a big incentive for big technology pushes. Now, banks are spinning out whole innovation divisions.

But the truth is, Silicon Valley is not any more innovative than big banks, payments companies, or wealth firms.

Think about it.

Big companies have:

• The most money
• The most time
• The smartest people
• The most man power
• The most trusted brands

They have every advantage you could think of. So why is Silicon Valley winning the fintech race?

One reason: Silicon Valley iterates quickly.

Startups aren’t innovation hubs with computer scientists working around the clock producing brilliant new code languages with unheard-of applications. No. Startups are desperate places. Money is tight, and time is even tighter.

But they have laser-like focus on one idea that they think will add value to the world and make things simpler for people. They get that idea out into the world in its most primitive form (usually called a Minimum Viable Product) and then they ruthlessly test, accept feedback, tweak, and redeploy until that Minimum Viable Product starts to reflect something that a lot of people would pay for. That is basically the Silicon Valley playbook.

Silicon Valley has learned to iterate quickly.

Meanwhile, big payments companies and financial institutions hold innovation brainstorming sessions and board meetings about what innovation they can roll out that will head off Square.

But that is the wrong approach. If you are focused on the single biggest innovation that will prevent your company from being disrupted, you are likely going to fail.

Instead, put on your Minimum Viable Product hat and think, “what is the smallest area we could improve that would have the biggest impact?” Don’t think big. Think small. And move as quickly as possible.

Release your product into the wild, get user feedback, and redeploy. Lather, rinse, repeat, until you have iterated on a product or service that is making a meaningful difference to your customers.

Every big innovation starts small. Facebook started as a smaller MySpace for college students. Amazon was a struggling online bookstore. Google was a simple search engine. Make no mistake, these are not innovations. They had all been done before. The difference is, these companies started iterating and never stopped.

There’s no reason why you can’t do the same in the financial services industry.

Mike Gardner is the CEO of Agreement Express. Come hear Mike Gardner speak on innovation in the financial services industry at TRANSACT 2016 in the Security & Technologies Track to learn key strategies financial services companies can use to keep up with innovative fintech companies.