“Fintech is not the most difficult industry” – Interview Eric Ries
5 March, 2021 by
“Fintech is not the most difficult industry” – Interview Eric Ries
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During Breaking Barriers, the new Dutch Fintech event that took place last wednesday in Amsterdam, we interviewed Eric Ries, the author of ‘The Lean Startup’. According to him, many of the barriers and obstacles in Fintech are exaggerated: Fintech is not the most difficult industry for innovation.

Eric Ries is the successful author of The Lean Startup, one of the best introductions into the Lean startup methodology, that is used by many teams for innovating faster. Since the publication of this book he has been travelling the world, helping people understand the method and learning from others that his original ideas are widely applicable than he thought. Lean startup was invented for software companies, but has been used in all industries and by all kinds of companies and even governments. While doing this, he has also invested in startups het believes in, including Live on Demand, the Dutch platform for crowdfunding Live events. Eric Ries was in Amsterdam last year for an all-industry conference. Yesterday he was there for a second time, this time for Breaking Barriers, an event focused on the financial technology (Fintech) industry.

Eric Ries’s vision has not changed, but he has fine-tuned his definitions based on his experience. One of the most visible changes is the definition of a startup. The previous definition was that of a team looking for a scalable and sustainable business model. Eric now believes this is too narrow: any human institution can be a startup, when it is designing a new product or service under extreme uncertainty. We asked him if this means that large organisation can also be Lean:

Yes, they can. Even companies with 100.000’s of people can be Lean. They do this not by becoming one large team, but by creating an environment where many small teams can thrive. Some large companies have indeed transformed themselves or are transforming themselves to be able to be able to innovate faster.

There are a number of misconceptions about Lean, and the biggest one is that Lean means Cheap. Ries: Living on ramen does not make you Lean. If you are not spending any money, but you forget to experiment, measure or even listen to customers, you are not using the Lean methodology.

In his talk he again emphasized the risks of ‘bumper sticker Lean’. Many people heard about Lean, some even bought the book, but not everyone has read it and not everyone is putting it into practice. For Eric Ries, it is important to really practice innovation accounting: careful bookkeeping so that you have the data to make factbased decisions. He also noticed that the word pivot is sometimes miss-used so he made sure to present the audience with his definition: a change in strategy without a change in vision. So when is it time to pivot?
“When you become good at making rapid experiments and you perservere, you reach a point where you experiments are giving you diminishing returns. When this happens, it is time to pivot”

The reason for calling the fintech event ‘breaking barriers’ is that many people in the financial industry believe innovating such a complex industry is difficult: there are all kinds of barriers, most importantly regulations and government supervision that stops banks from innovating. Do you agree with this?

“Fintech is not the most difficult industry for innovation. It is not the only industry that is regulated. One important aspect of Fintech is that nobody dies if you make a mistake: there are no lifes at stake. Many other industries are therefore more difficult: the medical industry, military, space industry, aviation or automotive. From this perspective, innovating in Fintech is not that difficult.”

And what about the regulatory barriers? “There are barriers, but their importance is overstated. Many companies have internal procedures that are more strict than regulations require. They make it difficult for themselves. If you work with the regulators, you can often get enough freedom to experiment. I have talked to many regulators, and they are willing to be responsive and flexible. Several regulators want companies to move faster and are surprised by the slowness of financial institutions. This is worrysome: if a government bureaucrat calls you slow, you are in trouble.”

The biggest challenge for startups aiming at fintech institutions, is the slow sales cycle of these institutions: it can take up to one year to make an actual sales. Many startups run out of money in the middle of their salescycle and fail as a result. Do you have advice for these startups?
“The long cycle is indeed a challenge, but it can be overcome if you recognize this as a challenge and engineer your startup to shorten this sales cycle. If startups would spend only one tenth of their engineering effort on shortening the sales cycle as they are spending on their product, they can achieve a drastic sales cycle reduction.”

Later on stage, Eric Ries was panellist and gave feedback while three promising Dutch Fintech startups pitched their companie on stage: crowdfunding/finance platform Symbid, stock market educator Bux and horeca payments app Tabster. One thing he noticed is that many startups are not asking him the right questions. “Many startups and corporates for that matter focus on problems they would be lucky to have, e.g. how to grow, how to handle large numbers of transactions or how to conquer the next country. Of course, I get it, you are not going to share your greatest weaknesses here on the main stage with your investors in the room. I would not either. But given the questions that you are asking (about acquisition cost) your real problem probably is customer retention. One strategy that works for many similar business is to really focus on customer retention, until you get to almost 100%. If you have this, you are no longer dependent on paid customer acquisition.”

Above: Ries (middle) and Nick Bortot from Bux (right). Also on table Bindi Karla from London, Benoit Legrand from ING and host Justin Halsal. Below: Frans van Hoogstraten from Tabster (right). Further below: Robin Slakhorst, founder of Symbid (standing). All pictures by Sieuwert van Otterloo from Startupjuncture.


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