Delighted to bring you latest in-depth interview with JP Nicols, leading FinTech thinker, innovator and member of the FinTech Mafia thought leaders group. COO of @| Co-founder @ Council | Charter member
Your background, how did you end up doing what do you now?
I spent over 20 years in banking, most of that during a period of massive growth and transformational change at U.S. Bank and its predecessors. Since I left there three and a half years ago I have been focused on driving change at the intersection of banking and fintech. I saw the pace of change quickening and I knew that most banks were not well-prepared to respond to the rapidly changing environment. I started a small advisory firm that has now grown into Innosect a global innovation enablement and analytics company; and I co-founded the Bank Innovators Council to promote and support innovation in banking worldwide.
— JP Nicols (@JPNicols) September 14, 2015
Innosect and the Bank Innovators Council sound like a lot of fun (as well as challenging), how are they going? How difficult is the challenge to get banks to innovate?
We started the Bank Innovators Council because we knew first hand that being an innovator inside a bank was a lonely job, because you are often surrounded by what we call the “Business Prevention Department”. We wanted a club for them to belong to, and we wanted to help create a tide that could lift all the boats by promoting and supporting innovation in all its forms, across all business lines. We have members today in more than 65 countries on 6 continents, and we have been working very closely with Next Bank to build like-minded communities and produce high quality events all over the globe.
Everything we do at the Bank Innovators Council and at Next Bank are public and open source and created for the good of everyone in the ecosystem, from bankers to entrepreneurs to investors to designers, analysts and the media. At Innosect, we work one-on-one to develop custom solutions for individual clients, both fintechs and financial institutions, and often that means finding ways they can work together. Many of the fintechs want banks as partners, and more and more of the banks are opening up to that possibility.
There is been an unfortunate correlation of innovation with bank size over the past few years. The larger banks have been investing in everything from digital labs and dedicated innovation teams to incubators and accelerators to corporate venture capital to drive innovation, while many of the smaller banks continue to view innovation as optional at best, and too risky at worse. Thankfully, this is beginning to change, and we have seen increasing interest from smaller institutions wanting to start or jump start their own efforts in innovation and transformation.
— JP Nicols (@JPNicols) December 16, 2015
How well are conventional banks responding to the changing Fintech developments? What should they be doing better?
I talk to bank executives nearly every week, and while I have met some incredibly sharp people, I am continually surprised by the level of ignorance and denial that exists about how the financial world is changing beneath their feet. There is generally low awareness of some of the most well-funded and popular fintechs who provide very direct competition to every single line on their income statement. They aren’t necessarily technophobes or Luddites either— they talk about how much they like using Uber, and Amazon and the Starbucks app, but they fail to connect the dots on how those disruptive business models have implications on the banking world.
A lot of mature industries are very insular, and financial services is probably even more than most. We surround ourselves with people who have been working in the same industry, doing the same things the same way for literally centuries, and we don’t really notice how the things around us are impacting us. It’s like the parable of the frog in water— it would jump out if you put it directly in boiling water, but it doesn’t seem to notice if you just turn the temperature up slowly.
I think most bankers need to get outside of the industry more and at least go to Finovate or Next Bank or Money 20/20.
— Bank Innovators (@BankInnovators) December 16, 2015
How has the last 12 months been?
The massive increases in capital investments in fintech has been well documented, and we are seeing a pretty big, if maybe not quite commensurate, increase in investments by banks in their own innovation and digital transformation efforts. That has kept me very busy, and I have had the opportunity to speak to audiences all around the U.S. and in nine different countries.
It’s been a great year, and I am especially grateful for all of the great people I have in my life and all of the new friends I have met along the way. I have a great family who is pretty patient with my travel schedule and all of my crazy hours, and my business partners are all great. Then there is my family outside of my family, the so-called “Fintech Mafia” and all of its concentric rings of smart and awesome people whom I tend to run into at conferences and events all over the world. The insights, connections and laughs that we share thousands of miles away from home are truly invaluable and irreplaceable.
— JP Nicols (@JPNicols) November 13, 2015
Anything you’d do differently?
Besides insist on business class for international flights?
I still say yes to too many interesting opportunities. I’m trying to keep focused on the things that will have the biggest impact and generate the most learning and fun for me. I’m also trying to get back to more reading and more writing. I’ll work on that in 2016.
What Fintech trends are you excited by?
Big data analytics has moved down the hype curve a little bit these days, but I still think we’ve barely scratched the surface of meaningfully using all of the oceans of data we have on our clients to improve the customer experience.
Banks know how much their customers own, what the owe, what comes in, what goes out, where it goes, when it goes— but most have not been able to leverage all of that data to improve their offerings or make life better for the customers. That’s part of the reason that so many fintechs have been able to quickly get traction and steal market share.
We also see an emerging role for big data analytics for banks to improve the effectiveness and efficiency of their own innovation programs, and we have been pioneering a unique approach using social computation and multi-dimensional analysis at Innosect. We’ll have a lot more to say about that in 2016.
Do you think bitcoin (or something similar) will achieve wide adoption, if so how soon?
I’m probably the wrong person to ask about this, but I don’t think so any time soon. It depends on your definition of “wide adoption”, I guess.
I’m certainly intrigued by the many potential use cases of blockchain outside of crypto-currencies, but I think a lot of them are still pretty far off from commercial viability in a large way.
We have a lot of fintech innovation happening in Ireland and in Europe in general – how does the US banking sector look from your perspective in comparison?
The U.S. market is interesting. We have a lot of customers, a lot of innovation in Silicon Valley, Seattle and elsewhere, and a lot of capital to be invested. Yet, we are way over-banked in comparison to the rest of the world— we still have over 6,300 banks and a similar number of credit unions, we still write most of the paper cheques in the world (“checks” to us), and we have been very slow to move to EMV and mobile payments.
I look for continued consolidation in the banking sector, about 5,000 of those banks are fighting for about 8% market share, and most don’t have a compelling way to differentiate themselves from the competition. I also think we’ll see more bank-fintech partnerships in the coming years.
I also look for continued growth in fintech investment and innovation, but there will also be increased growth from other parts of the world, including Ireland and Europe.
Your plans for the future?
At Innosect we are working on creating new tools that will help our enterprise clients create and implement ideas that create lasting value, and we are looking forward to expanding our business in the new year. At the Bank Innovators Council, we are continuing our work with Next Bank, with big events coming up in Hong Kong, Silicon Valley, and elsewhere, and we are aggressively expanding the number of local chapters all over the world.
Beyond that, more travel, more time with family and friends, more laughs, hopefully a little more exercise to make up for more sitting on planes drinking more G&Ts…
Oh, and I hope to get to watch my Seattle Sounders finally win an MLS Cup. You guys wouldn’t happen to have any plans to take Robbie Keane back to Ireland from the LA Galaxy, would you? He gets in our way sometimes…
Blogging, who do you follow / like?
I try to read a lot, and there are a lot of really smart people out there. I was recently asked by The Financial Brand to vote on my top five influencers in financial services, and my list of Brett King, Chris Skinner, Brad Leimer, Jim Marous and Ron Shevlin ended being everyone’s top five for the “FinServ 25: The Most Influential Voices in Banking”.
Then I looked down the rest of the list when it came out and said, “yep, yep, yep… Dave Birch, Rob Findlay, Sam Maule, David Brear, Jim Bruene, Cherian Abraham, Yann Ranchere, Duena Blomstrom,Peter vander Auwera…”. All really smart people, and I always stop to read what they have to say. Most importantly, they are all really great people too, and I’m proud to call all of them my friends.
— JP Nicols (@JPNicols) December 11, 2015
With all of the traveling I do, I really like podcasts too. Brett King’s Breaking Banks podcast is really the only one focused on fintech, and you’ll often hear the above names on the show. (Shameless plug: I just guest hosted the first of several episodes on the show. I’ll be guest hosting every few weeks, generally focusing on the innovation that’s happening inside the banks.)
— JP Nicols (@JPNicols) December 10, 2015
The other podcasts I love are This American Life, Radiolab, Freakonomics, 99% Invisible, The Tim Ferriss Show, HBR IdeaCast, Skeptoid, Backstory and both of Dan Carlin’s podcasts, Common Sense and Hardcore History.
How do you manage life / work, and online / offline balance?
It’s not so much balance is it is integration… and a lot of compromise. I love what I do, so most of my work doesn’t feel like work. I’m online a lot, but I’m trying to be more conscious about what’s adding value and what’s wasting time. If I find I’m wasting time, I close my laptop and read a book.
I’ve been trying to work much less during evenings and weekends when I’m home, and I always make time to watch soccer with my daughter. My wife and I binge-watch a lot of stuff on Netflix together.