By TheStreet’s John GormleyTheStreet’s senior financial analyst and author of “Blockchain Revolution: A Practical Guide to The Future of Financial Technology” says there are some parallels between the financial industry and the technology sector.
“The technology sector is not a new market,” Gormly said.
“It’s a lot like the insurance industry was a new industry in the late 1990s.
People were getting scared, and then the technology was able to deliver that.
And people realized that there were so many more new markets that needed to be served than just insurance.”
In 2017, financial technology stocks surged, as financial technology firms looked to build out their businesses and expand their operations in the emerging markets.
While many companies focused on building out their core businesses and adding more features, others focused on scaling up operations to meet demand.
With a focus on expanding operations, companies like MasterCard and Citigroup focused on expanding their presence in Asia.
MasterCard even expanded into China.
While many companies looked to the financial technology industry as a place to add features and scale up operations, Gormle says the real winners of the financial sector have been companies that have been able to focus on building businesses and scale operations.
“They’ve been able take the technology that they’ve built and they’ve applied it to what they do, and they have a lot of success,” Gromly said, citing example after example.
“One of the reasons MasterCard was able and so successful in China was they had an acquisition in China, and it was able, they were able to expand in China into the whole country.
They were able, by using the technology they had, to create a platform, a platform that they used for financial services.”
Gormly also noted that there are plenty of examples of companies who have successfully expanded into new markets and created value in the process.
“There’s been a lot in the finance space that have done a lot more than just buy a company or a service and run with it, and there’s been companies like PayPal, for example, that have built a network of relationships with governments and organizations around the world,” he said.
Gormley said companies that haven’t been successful at scaling their operations to reach new markets have done it by focusing on building a business that’s valuable to them, rather than looking to expand into new market segments.
“For example, we’ve seen a lot, for instance, in the technology space where it’s just a matter of, you know, just getting the money into the market, and I think it’s a good thing,” he explained.
“But the reality is, when you’ve got to build a business, you’ve gotta make sure that you’ve built it for your core business, for your service, and that’s not going to be a good way to build that business.”
That’s what you need to look at when you’re looking at where you should be expanding into a new space.
You’re not going, ‘Oh, we’re going to go to a big, profitable market, we just got a lot bigger, better, better customer base.’
You need to have an exit strategy.