Merge or aquire? Why #fintech is critical to achieving scale in financial services

It’s easy to become jaded by too much hype on any topic. But the ubiquitous discussion of “fintech” at the moment is entirely merited. Fintech has reached a tipping point. It’s become a critical component of success in financial services. Whether you’re selling financial products, providing financial advice, managing retirement and investment funds, or offering insurance, fintech has the power to make or break your business.

But it’s not just about beating or losing out to competition. In the volatile and predatory arena of financial services, success is often manifested in M&A transactions. Will you be forced to merge your business with another when the competition gets too hot? Or will you be in the ascendancy, dictating the terms of an acquisition? That distinction boils down to the simple matter of scale, and nothing is more critical to scale than fintech.

Whether you’re selling financial products, providing financial advice, managing retirement and investment funds, or offering insurance, fintech has the power to make or break your business.

Managing initial growth badly can kill a business in its early stages. But as the business grows, the challenges start to come thick and fast. First it’s hard to acquire talent, then you’re faced with motivating and training a team, building a reputation, selling and marketing hard and managing cashflow, all while competing and meeting customer expectations.

David Stephen is founder and CEO of Invest Blue, one of Australia’s premier AMP-affiliated advice practices. David says “as a multi-site business operating in a heavily regulated environment, our clients need us to have streamlined management and advice delivery processes.”

“We believe our clients should not have to pay for legacy systems and legislative obligations”.

David knows that the right technology platform is critical to managing the challenges of scale successfully.

The future winners in financial services have a scalable technology platform that can easily on-board new employees, add additional service offerings, manage rapid customer growth, automate workflows and integrate easily.  If you’re stuck with a complex and expensive upgrade or integration crisis at every turn, the path to growth is just so much harder.

Just last week, AZ Next Generation Advisory acquired Fortnum-aligned Priority Advice Group. PAG Managing Director Larry Fingleson told Financial Standard:

Our board and shareholders have chosen to partner with AZ NGA because we believe that the transaction … ensures that for at least the next 10 years the Priority Advisory Business is supported and secure as we build and develop solutions that are best of breed and enable and support our clients’ goals and aspirations.”

In other words, ‘we accepted this deal because we lack the infrastructure needed to scale ’. PAG was founded in 1987, so there’s a succession narrative here too. But it’s hard not to conclude that like many smaller financial services businesses, PAG’s options were limited by technology systems that don’t scale.

It doesn’t have to be that way. The secret is to invest in an industry cloud platform — and trust me, it’s inevitably cloud —  and worry about point solutions afterwards.

The future winners in financial services have a scalable technology platform that can easily on-board new employees, add additional service offerings, manage rapid customer growth, automate workflows and integrate easily.

Moving your business to an industry cloud platform gives you the flexibility you need to scale. You can make the most of your existing point solutions while you gradually integrate all the applications and services you need to underpin growth and to scale successfully.

An industry cloud platform that’s configurable and extensible means your leadership team can watch the road ahead and not the rear view mirror.

Once established on your platform, you’ll have established your core information architecture and core processes. When M&A opportunities then arise, you’re in a position of natural ascendancy. Your business is attractive because it’s under control and built for scale, positioning you naturally as an acquirer, not a merger.

With the right technology platform, it’s easier to integrate newly acquired businesses. Data can be standardised and consolidated to your format. Processes can be streamlined and aligned to your existing standards. New staff can be absorbed into your team structure.

With the right technology platform, it’s easier to integrate newly acquired businesses.

This is all without ever worrying about server capacity, networking and hardware upgrades — the sort of features that make global cloud platforms such an obvious choice.

This brings me back to our new client, Invest Blue. CEO David Stephen sums it up perfectly: “cloud platform technology affords us a robust foundation to scale our business.”

Learn more about how PractiFI is helping Invest Blue in Financial Observer: http://www.financialobserver.com.au/articles/invest-blue-signs-up-to-practifi-platform