As the trend of start-ups ‘disrupting’ financial services moves into the mainstream, fintech is at a crossroads. It must double down on building consumers’ trust to move in the right direction.
Weekly Leading Article
Trust is at the heart of banking and financial services. Just take a look at the architecture of the City of London. It was built to exude strength and safety. Important, if you’re looking after someone’s cash or gold.
The question of consumer trust in financial services came into sharp focus last week with news that Lanistar, a fintech start-up aiming to be the next digital bank success story was re-launching its plans via a deal with Modulr Finance after a shaky start.
If you’ve not heard of Lanistar, it’s less than a year old and hasn’t yet launched. But, it has attracted huge attention owing to a colourful social media campaign encompassing 3,000 ‘influencers’ offered equity in the business in return for promotion of its services.
Not long after Lanistar last year trumpeted its ambition to be the next fintech unicorn (recently upgraded to a ‘deca-corn’ goal) through an attention-grabbing social media campaign the FCA put out a statement warning that it may be a scam only to change its mind a few days later and remove the warning.
What is the average consumer to make of the events? Will consumers trust Lanistar with their cash? Do they even care about a messy start to a fintech brand’s life?
Fintech, and all digital finance, has faced an uphill struggle over the last decade to build trust, not helped by a number of moderate scandals such as the collapse of several mini-bond issuers, Wirecard’s demise and Lendy’s administration to name but a few. Not to mention the churlish warnings of many sceptical onlookers.
All have knocked consumer confidence and trust in fintech, highlighted regulatory weaknesses, as well as provided fuel for naysayers who wince at the fast-paced growth and bold ambitions of fintech entrepreneurship.
As fintech companies start to move beyond the early adopter phase to a broader market most likely to be (small ‘c’) conservative, building trust in that customer segment will be mission-critical to long term sustainability.
Lanistar, the regulator clearly believes, deserves a second shot at launching its products - albeit with another firm's oversight and infrastructure - and it may well be right. But trust is very hard to build, and quickly lost.