Mastering Finance

How fintech is revolutionizing the traditional CFO role

For decades, the role of a Chief Financial Officer was set in stone, defined by an ability to focus on financial stewardship above all else. The rapid emergence of the fintech industry, however, is proving to be a significant catalyst for change.

Fintech opens up choice and gives people options

Not only have the disruptors driven their Open Banking tanks onto the incumbent financial giants’ lawn – their brave new models are forcing the old guard to take a fresh look at their management structure. Few roles have been more significantly impacted than that of the CFO. ‘It’s going to be a very different landscape 10 years from now,’ says Mutaz Qubbaj, the CEO and co-founder of the financial wellbeing firm Squirrel. ‘Fintech opens up choice and gives people options. It gives them the ability to customize the relationship they want to have with their money. It gives people the ability to create what you might call the “bank of me”.’ This wave of technological innovation has made inroads into both traditional banking and FX trading, yet in terms of market share the existing major players remain dominant.

What is changing, albeit generally at a slower pace, is the approach taken by the incumbents. ‘The old guard aren’t on their way out but they’ve got this new breed of CFOs nipping at their heels,’ adds Qubbaj. ‘One way of looking at it is by taking the analogy of a doctor.

‘A doctor who wants to stay on top of their game is going to be studying medical journals on a regular basis to keep up with their peers. And the modern CFO is going to need to take the same approach because the nature of that role is changing in this rapidly moving market.’

Narayan Naik, Professor of Finance at London Business School, has taken a keen interest in the way fintech has transformed the finance sector. Such is the interest among professionals that he has set up a specific course looking at the impact on businesses from blockchain and cryptocurrency technology. ‘The Millennial generation don’t want to step into a bank at all,’ he says. ‘They want to do everything through their mobile.

‘Financial professionals will have to retool themselves and start talking the new language - or at least understanding the new way of doing things. Because the Millennials are into their 30s, their spending power is growing and they are used to doing things their own way.’

For all the innovations, however, both Qubbaj and Professor Naik agree that they are as good as worthless without a solid financial education. ‘The thing that kills a lot of fintechs is the cost of customer acquisition, so you really need to be on top of the numbers when it comes to understanding your ability to go to market efficiently,’ says Justin Fitzpatrick, the co-founder and CEO of the company information platform DueDil.

‘The CFO role has to be a lot more strategic, especially because of the need to make fast decisions in the modern market. Which makes it all the more important to really understand the fundamentals. There really are no short cuts. ‘The pace of change isn’t going to slow down any time soon and there are huge opportunities. That said, you can have the best technology in the world but your business will still fail if you don’t get the numbers right.’ For many financial professionals there has never been a more exciting time to work in the sector. The early days of fintech saw the disruptors mostly mirroring services which were already on the market, albeit in a more streamlined manner. Now, however, we have reached the point where fintech is acting as a catalyst for more fundamental change in financial services.

The solution, then, is to combine a lifelong learning approach with a solid financial education.

The CFO role has to be a lot more strategic, especially because of the need to make fast decisions in the modern market

‘You’ve got fintech companies which are getting into the guts of the financial system and the way it operates,’ adds Fitzpatrick. ‘So if you’re selling into that client base you need to be fluent in their language.’ And it is not only the young upstarts who need to do their homework. Indeed, for the younger generation – who grew up as native speakers in this world of technology – the greater challenge is to master the fundamentals of finance.

As for the existing CFOs, who have been honing their knowledge for many years, there is no shirking the task at hand. ‘I’m not saying you can’t teach an old dog new tricks,’ concludes Professor Naik, ‘but old dogs will take longer to learn them compared to the pups coming through.’

Masters in Finance at London Business School