FinTech: Move steadily and build things
My poor vision is perversely good on the peripheral. Recently at Friday prayers, the chap off to my left was spending the entire khutba messaging. The reflection distracted me by zapping the corner of my glasses. That feels like FinTech: flashy, not clear. It complements the problematic thought process of ‘move fast and break things.’
In finance, hardly anybody wants to break something. Northern Rock and Lehman Bros are two unhappy reminders of wrecked fast movers breaking everything else.
Wahed is the most recent poster-child of how the tech mentality doesn’t always align well with finance. The robo-advisor first drew the SEC’s ire over “making misleading statements and breaching its fiduciary duty, and for compliance failures”. Then, the person appointed to fix the problem issued a press release: “While Wahed cannot publicly deny the allegations, Wahed does not accept or admit to them as accurate, truthful or complete findings of law or fact.” Sounds like a denial to me. One imagines that the SEC’s microscope has not been lifted from this file.
Let’s look at some others, albeit anonymously or in composite form.
A number of years back, I had a fascinating encounter with a tech guru. Showing me a FinTech app offering financial advice and basic banking — through an unaffiliated sponsor bank. “Muslims need this.” I asked how it was going? “Well, Central Bank X is not taking me seriously even though I have collected thousands of indications of interest on my website.” Central Bank X wanted much more than an app and a mailing list. Meanwhile, his role model app, the sponsor bank took it over. Then, a bigger bank ate the sponsor bank,… and killed the app.
How about the FinTech that gives its projects six months to make it big, or else. Having done some skillful work with crypto and dividend focused products, the business took on deposits. That’s when the FinTech learned that inertia is legacy banking’s greatest secret. Coolness and speed struggle to disrupt inertia. People don’t easily move bank accounts. Add subscription fees, and domicile the account with a sponsor bank, would you move your checking account?
Consider the event attended by the promoter of an Islamic open banking app. Having felt the above described pains of the guru and the FinTechie, the promoter had too much of their own money in the game to give-up. Appealing to the various Islamic banks present, he soon discovered that no matter how small, these banks had built or were building proprietary open banking solutions. They were not buyers. Integration with their core banking systems was more important than an off-the-shelf solution.
Let’s review some fascinating observations that I have culled from meetings from London to Kuala Lumpur, New York to Dubai, Lagos to Los Angeles. On the one hand, “our FinTech is Shariah compliant.” On the other hand:
No Shariah board had been appointed.
Even if there was a Shariah board, products were sold either prior to starting or completing the Shariah process.
The Shariah board was in place, the products approved, but the programmers didn’t bother integrating the Shariah parameters. Goods murabahah with “the lowest interest in the market”,….
I could report more.
Recently, I had tea with a C level executive at a UK FinTech. “Please, Abdulkader, we are not a FinTech, we are a financial institution.” The distinction arose as the FinTech dotted i’s and crossed t’s to make UK regulators confident in its process. This FinTech as adopted a style that I call “Move steadily and build things.” Shouldn’t this be the mantra for contemporary Islamic FinTechs? All FinTechs?