The fast-paced technological era brings through what was previously classified as wants and converting them to needs for consumers. Before this era boomed, there was no need for superfast, superefficient, super-convenient, inclusive, etc. services required from service providers. The exciting part of this evolving needs-era is that it brings about fast-paced innovation and fast-paced obsolescence thereof.

Traditional vs Innovative Services

Industries that have high stakes in relation to people’s livelihoods are naturally highly regulated. Although innovation is highly encouraged, adherence to the regulations is critical. The health (dentistry) industry, similar to the financial services sector has been and is still highly regulated. Therefore, to play safely, you have to ensure that you are fully and continuously compliant with the regulations of the industry.

From Slow Smiles to Faster Smiles Back to Slow Smiles

Smile Direct Club (SDC), a US-based online tele dentistry company founded in 2014 managed to attract and service over 2 million people who moved from traditional dentistry services to use SDC services over a period of around 9 years – 1 company basically turning the whole industry on its head by taking clients away from traditional dentistry services.

SDC created new needs for the clients in addition to the technical teeth straightening their clients needed. This disruption resulted in a shift to the tele dentistry services – for faster turnaround time to teeth straightening (from an average of 24 months to 6 months, lower – almost half the cost and no need to travel to the dentist’s or orthodontist’s office. So, the clients won in a big way from SDC’s innovations.

Big and quick wins over the traditional players are generally never well received by the incumbent. A fierce and disruptive competitor always attracts scrutiny and SDC’s new approach to the industry did exactly that. The traditional dentistry players were and are strongly aligned with the regulators. Most had and influence the design and implementation of some of the regulations in the industry.

One new rookie against thousands of people who have been in the game for 100s of years – what are the chances of the one player winning?

The traditional players did their homework in analysing SDC’s systems, processes, protocols, etc. and found many loopholes which they could challenge. SDC incurred high legal costs which ran their once USD 9 billion valuation down to a point of bankruptcy in December 2023 – leading to an eventual shutdown process and the traditional players winning back their customers.

Fintech disruption to the traditional

The fintech industry brings great benefits to market, as it provides for inclusivity to the previously underserved in both B2C and B2B markets. Traditional players in the financial services sector, such as banks and insurance companies, are having to shake up to adapt through either use of their internal research and development teams or through acquisition of new up and coming fintech start-ups.

Although acquisition may seem easy and fast, it is not always the case. The traditional players may have already invested in fintech products that are not yet complete but have fast become outdated or will be outdated by the time they are released. Therefore, stopping a project that has significantly progressed may pose losses to the traditional players. However, continuing with the product may also result in poorer performance than if a solution had been halted – this brings about uncertainty for the traditional players.

The traditional players are unlikely to be completely ousted from the industry – they may marginally shrink, but they have a significant advantage over fintech disruptors. Their financial muscle power can easily thwart out the fintech players, through product price reductions, lobbying for enhanced regulatory requirements against new entrants with the Financial Services Conduct Authority (FSCA), South African Reserve Bank (SARB) and other related regulatory bodies – similar to the traditional players against SDC in the tele dentistry phenomenon.

Sandbox or partner with traditional players

There is no institution that is too big to fail. The mobile cellular phone industry has shown us that dominant brands can seem immortal only to be out of market if they are not listening to customers’ needs or even thinking to disrupt their own dominant products. Players such as Nokia and Blackberry became dominant in the market that they forgot to keep up with customers’ continuous evolving needs. Apple became a player that glaringly led the focusing on other needs that cell phone users would need in addition to telephonic communication, this was obviously backed by trends of technological evolution which other players clearly didn’t bother themselves about – “Internet!, iPod! and a Phone! – 3 devices all on one device and fit in your pocket”

Fintech companies need not fear traditional players, but they can either see them as partners to work with. However, if their innovations are not aligned with the traditional players, they can approach the regulators directly – for example the South African Reserve Bank (SARB) has a Sandbox forum, which has been motivated by the World Bank to allow new and old financial services players to come through with innovative ideas that can be tested to soon be regulated. This allows players to develop products that are safe and useful for the consumers.

The Sandbox approach may be lengthy as regulators have to perform research and consult with various key stakeholders. However, in the long run this may result in new fintech players having dominance in a market they have created or alternatively partnering with the traditional players in enhancing service offering to a wider market. The point is to ensure that the consumers win at the end of the day.