As an aspiring Software Product Manager, it can be challenging to decide exactly which industry you want to start your career in. Product Managers are often expected to be generalists, capable of understanding a wide variety of markets, and then building a business case and associated development plan. Yet, as a Product Manager spends more time in a given industry, they acquire more subject matter expertise, equipping them to better lead innovation in that vertical.
Before I started working at Nomis, an industry leader in pricing retail banking products, I was ignorant of the Financial Services industry and was initially uncertain that I would remain passionate about building Fintech* products. Yet, instead of finding an environment of lifeless numerical analysis and social apathy, I learned that Financial Services is a human-oriented field, filled with passionate consumer advocates. And it’s also a lot of fun! For all those who’d like to hear a bit more about why I think this, here are my top three reasons to consider a Product Management role at a Fintech:
1. Investors are optimistic about the potential for operational efficiencies from digital transformation for banks.
Oliver-Wyman’s State of the Financial Services Industry report for 2020 reflected that 80% of Financial Services investors still say digital transformation is critical, and that 60% believe digital, including systematic improvements to automation and data-driven decision making, will make platforms more profitable over the next five years. That means there is money in the pot for building Financial Services software - investors are searching to make gains in profitability, and they understand that digital is a key lever for improvements.
Many firms are at the beginning of their digital transformation, meaning that vendors will continue to have opportunities to introduce new products for years to come. Customers currently experience better service and more flexibility in other industries, such as travel, and this raises their expectations for the digitalofferings of financial institutions.
However, customer experience through digital channels like mobile applications and rate aggregator sites (e.g. NerdWallet, CreditKarma) may not yet be the main drivers for banks to get new business. Deloitte’s global survey reports that 56% of consumers are likely to change their main bank within the next two years, and that, of these, 34% will do so because of better pricing at another institution.
2. The market needs help from Fintech partners to define their digital transformation strategy and demonstrate ROI.
Oliver-Wyman’s 2020 report also showed that investors have low confidence in their current digital transformation plans, quoting one Global Bank CFO’s remark that, “I know 50 percent of my digital transformation spend is wasted - I just don’t know which 50 percent.” Moreover, there is an increasing trend towards embracing fewer, but larger, CEO-backed initiatives.
Thus, Product Managers at Fintechs have a broad opportunity to present a digital transformation vision to prospective clients, especially if they can demonstrate ROI of such a transformation (via their products) concretely to an executive. Demonstrating this ROI to a human decision-maker is the type of work that many Product Managers need to excel in.
The industry is demanding product visions that focus on simple solutions focused on human work-flows, as opposed to those mired in abstractions and information overload (like some overpromising machine learning solutions are these days). In this context, it can be an advantage for a Product Manager to be an outsider to financial services, as they will naturally arrive at simplified explanations while gaining exposure to computational sophistication in finance.
At a Fintech technology company, a Product Manager is responsible for understanding the goals of customers seeking financial services, as well as to identify areas of improvement that are worth paying for. Then, they are tasked with defining the technology roadmap to fill this market niche in a way that makes both financial service institutions, and their customers, very happy.
3. The financial services world is embracing stability in a post-COVID world, meaning there are opportunities for Fintechs to disrupt economic inequality.
The Managing Director of the International Monetary Fund, in a speech given earlier this year, explained that the theme of the upcoming decade would be “increasing uncertainty” and that one driver of this uncertainty is global inequality. In a time of pandemics and climate change, markets have become less resilient due to growing inequality, which hinders growth in the long-run. Simultaneously, global inequality is strongly affected by the stability of the financial sector, and a financial crisis often shrinks opportunities for the poorest members of society.
The market-guided solution to this problem has been to increase financial inclusivity, and Fintechs are playing a positive social role by giving people access to banking services. For example, McKinsey quantified that “widespread use of digital finance could boost annual GDP of all emerging economies by $3.7 trillion by 2025.”Investors are realizing the value of lending to more smaller firms which is a lower-risk strategy than putting all their eggs in fewer large baskets. When smaller firms can apply additional funds, they can partner technology companies to modernize their digital strategy, by guiding them with industry-leading products and practices.
As a Product Manager, this is a golden opportunity to dig into a market niche and make a positive social change on our financial ecosystem. While many people working in financial technology are generally aware that improving banks helps to stabilize the economy, they are still seeking moral leadership from product teams to present a larger vision of the company’s impact.
At Nomis, this means demonstrating that we are not just optimizing price for retail bank products, but also solving capital market inefficiencies resulting from price. When banks price in a way that is more customer-centric, customers are more likely to end up with the right bank and financial service product (e.g. loan or deposits account) price for them. Customer-centric pricing also allows financial institutions to identify the right mix of loans for their portfolio and efficiently serve more customers. Serving more customers promotes growth in areas of lower economic activity. For example, in the mortgage industry, loans are bundled and sold to Wall Street investors as mortgage-backed securities, allowing banks to utilize capital from areas of high economic activity to promote growth. Nomis’ pricing expertise results in better capitalization for markets that our customers serve, which include rural & impoverished areas.
Thanks for taking the time to read this! How is global uncertainty impacting the vertical market that you work in? If you’re a Product Manager, how does the Financial Services industry compare to the industry that you work in? Please leave a comment below.
*Fintech in this article used to refer more generally to Financial Technology, including not only digital lenders but technology companies that partner with financial institutions.