I’m increasingly getting the sense that everything is possible in FinTech, at least from a peer-to-peer (‘P2P’) perspective. For example, marketplace lenders like Funding Circle and Zopa are all based on a P2P model whereby borrowers and lenders can transact directly.
I recently learned more about P2P foreign exchange services by listening to an episode of the London Fintech Podcast which featured John Booth, Co-Founder and Director of Midpoint. Midpoint is a London based P2P foreign exchange firm which facilitates “international money transfers at unbeatable rates.”
These are the main things I learned from listening to John Booth from Midpoint:
- Intermediation in peer-to-peer money transfers? – In the podcast, both John Booth and Mike Baliman, the podcast host, made the point that P2P money transfers still require a degree of intermediation, either by a bank or a P2P currency matching platform like Midpoint. The point was made that ‘opposite transactions’ – where the buyers and seller match each other immediately – almost never happen. You’re still most likely to be needing a middle man to match the relevant currencies (see the Kantox example in Figure 1 below).
- Waiting for a match to happen – Midpoint guarantee that the execution of a transfer will take place within 24 hours. John Booth made the point that P2P forex transactions sometimes take time to match, in spite of the simultaneous buying and selling that takes place through its platform. As a result, you won’t know upfront what rate you’ll pay for the trade. Booth made the point that there’s always going to be a need for a “fallback deal with the market” to ensure trade gets closed out in a reasonable timeframe.
- White label solutions – Like many FinTech businesses, Midpoint has kicked off some successful white label solutions and partnerships with the likes of accounting software provider Xero. They thus provide a seamless experience for private clients and SMEs wanting to pay their foreign invoices at the best possible exchange rate (see Fig. 2 below).
Main learning point: Listening to Mike Baliman and John Booth talking about peer to peer foreign exchange made me realise that it’s not entirely P2P, at least not on the consumer side. There’s still a need for some form of an intermediary to match currencies and platforms like Midpoint might still need to fall back upon ‘the market’ to ensure that transactions are executed upon within a reasonable timeframe.
Fig. 1 – Visual representation of Kantox’ intermediary role in facilitating peer-to-peer money transfers between companies and the wholesale FX market – Taken from: https://ctmfile.com/story/b2b-fx-kantox-peer-to-peer-fx-netting-solution-targeting-mncs
Fig. 2 – Midpoint and Xero, facilitating payment of foreign invoices – Taken from: https://www.youtube.com/watch?v=IfeUoYR-A90
Related links for further learning:
How often do you get agitated when someone starts challenging your product idea? What’s your typical reaction when people ask critical questions about your assumptions or an idea that you’ve come up with?
I have to admit that I’ve learned – and will continue to learn – to not take challenges or criticism personally. I now even go a step further and will either play the role of devil’s advocate role myself or will ask a team member or customer to take on this role. As uncomfortable as it can sometimes be, looking at the worst case scenarios or poking holes in a solution can really help in creating great products and avoiding critical mistakes.
Tool 9 – Playing devil’s advocate
Taken from: http://digg.com/2015/devils-advocate-literally
Why is it important to play devil’s advocate when developing or improving products? – As a product manager you can easily become wedded to your ideas or solutions. Especially as you get further down the product development cycle, there’s a serious risk of developing tunnel vision and becoming blind to any product or market risks. You can avoid this risk by inviting or assigning someone with the task of picking holes in your idea or assumption. This ‘someone’ can be another team member, a business stakeholder or a customer.
What are the benefits of being challenged? – I see three main benefits to creating a challenge where you’re constantly looking for (critical) feedback, always looking for things that could cause your product to fail:
- Identifying and sizing risks early and often – Creating a culture where it’s ok to ask difficult questions or to learn through failures will help you identify and mitigate risks early on in the product lifecycle. This approach of teasing out risks will ultimately save your business a whole lot of precious time and effort, since you’re not waiting until the product has been launched to have difficult conversations.
- Creating a more collaborative culture – If your colleagues understand what it is that we’re trying to achieve and why, having team-wide conversations about what is or could go wrong with a particular idea or product will become much easier. You’ll be surprised how creating such a culture will give others in the team a sense of ownership. Instead of just the product manager owning a problem and the team owning the solution, these boundaries will disappear as soon as people feel comfortable asking challenging questions.
- Being on the front foot – I recently came across by a talk by Astro Teller, scientist and entrepreneur, in which he stressed the importance of doing a “pre-mortem” at the start of a project or product lifecycle. The goal of this pre-mortem session is to “predict failure”: identifying where things are likely to go wrong and to collectively assess this likelihood. I’ve added some more detail about what goes into a pre-mortem session in Fig. 1 below. “Asking the 5 Whys” is another simple technique you can use to proactively challenge an idea (see Fig. 2 below).
Are there any downsides to playing devil’s advocate? – Yes, ‘analysis paralysis’ and ‘death march’ are the most common risks with regard to being open and proactive about things that can go wrong:
- Becoming risk adverse – I’ve seen instances where people take playing the devil’s advocate to the extreme. They end up spending a lot of time upfront to discuss all the risks involved or reasons not to build a product. As a result, ‘analysis paralysis’ arises and product managers becoming risk adverse. Time boxing the time spent on playing devil’s advocate helps overcome this issue.
- Death march – “Trust” and “respect” are key words when it comes to talking about product solutions. What you want to avoid is creating a culture where people stop coming up with new ideas because they worry about their ideas being shot down at any opportunity. I believe this can be solved by adopting basic feedback skills. For example, if a person is looking to critique a particular idea, the onus is on her to provide constructive feedback, explaining the underlying feedback rationale and presenting options for solving the problems.
Main learning point: Getting internal and external feedback as early and often is a critical prerequisite for successful products or service. We can make this feedback more focused and valuable by actively encouraging people to play devil’s advocate. Even though this technique might not always be easy, it will help you identify and manage risks or negative impacts early on in the development and go-to-market process.
Fig. 1 – What to cover in a pre-mortem – Adapted from: http://singularityhub.com/2016/04/18/the-secrets-of-x-these-5-principles-will-help-your-company-make-moonshots-happen/
- Kill product ideas early – Use a pre-mortem with your team to explore why a particular idea is likely to fail. Encourage people to try their hardest to prove that an idea is never going to work.
- Explore the hardest parts of an idea first – We all know how easy it is to get excited about an idea and think/hope that a problem will be easy to solve. With the pre-mortem, however, team members will challenge each other on the complexities and risks of an idea. You’re thus effectively encouraging the team to kill ideas instead of committing to ideas that aren’t going to work.
- What’s the negative impact? – Using techniques like impact mapping can help uncover any negative impacts that your idea might have on the overall customer experience, resources, market positioning or legal aspects. Yes, product managers need to be brave, but you’d rather identify any major product risks upfront and see if/how they can be mitigated.
- Vote for ideas to be killed – The best way to make people feel comfortable about killing ideas early is by enabling them to vote or deprioritise bad ideas.
- Ideas worth pursuing – As Astro Teller argues, the net benefit of a successful pre-mortem is that “the ideas that survive this process (the ideas you literally can’t kill) are the good ideas worth pursuing.”
Fig. 2 – A simple way of asking the 5 Whys to look closer at a problem or an idea – Taken from: https://en.wikipedia.org/wiki/5_Whys
- The vehicle will not start. (the problem)
- Why? – The battery is dead. (first why)
- Why? – The alternator is not functioning. (second why)
- Why? – The alternator belt has broken. (third why)
- Why? – The alternator belt was well beyond its useful service life and not replaced. (fourth why)
- Why? – The vehicle was not maintained according to the recommended service schedule. (fifth why, a root cause)
Related links for further learning: