As we approach the 4th Industrial Revolution, digital innovation is happening at a rapid pace. Fintech companies are multiplying, industries are being disrupted, and traditional companies have to change their business model if they want to survive. Citi’s Mobile Challenge Virtual Accelerator is a model for how to succeed in the latest Industrial Revolution. By partnering with fintech companies and developers, traditional companies can bring the best ideas to fruition and create innovative solutions around the globe, including in Latin America.
The 4th Industrial Revolution
Humans have experienced a number of revolutions in the past that have changed how we live, work and relate to one another:
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First Industrial Revolution (The Late 1700s to Mid-1800s) – Mechanical innovations like the steam engine, cotton spinning, and railroads.
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Second Industrial Revolution (The Late 1800s to Mid-1900s) – Mass production through assembly lines and electrification.
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Third Industrial Revolution (The Late 1990s to Today) – Mainframe computers, personal computing, and the internet.
Experts say that we are on the brink of a fourth Industrial Revolution. It is led by the interplay of different fields where breakthroughs in areas like artificial intelligence, robotics, IoT, 3D printing, nanotechnology and quantum computing create new realities that were previously unthinkable. More people have access to technology and just about anyone can create new products and services quickly and cheaply.
Traditional Companies Must Adapt and Evolve
Because of the changing business landscape, business models in every industry must be transformed. In general, there are two types of companies:
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Traditional Industry Companies - Large corporations like Citi or other companies that are 15+ years old and have more than $1 billion in sales.
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Tech Industry Companies – Smaller companies and startups that aim to apply technology to shake up various industries, including fintech, health tech, food tech, gov tech and others.
The cost of innovation has never been lower, so tech industry companies are able to get off the ground with only $5000 whereas in the past, starting a company would take $5 million. In addition to lower costs, these tech companies are growing fast and strong. Traditional industry companies typically experience growth of less than ten percent, but tech companies have the potential for exponential growth.
If you look at the S&P 500 index, you can see these changes happening. It used to be that companies would outlive people – you’d see the same companies on the S&P for your entire life. Today, people are outliving companies, and there has been a rapid decline in the average company lifespan on the S&P.
Last year there was about $130 billion investment in tech companies, and almost 75 percent was Series A or seed money. Tech industry companies are multiplying and shaking up each and every industry. Traditional industry companies must adapt and evolve if they want to succeed. It doesn’t matter what industry you are in – if you try to keep growing like you’ve been growing, then you will be disrupted.
Citi Mobile Challenge Virtual Accelerator
The first thing any traditional company must realize is that there is more than just one startup out there trying to do better than you. Citi realized this and decided not to go against it. We decided to partner with these companies instead.
Each type of company brings certain benefits to the table. For example, a traditional company like Citi brings a robust infrastructure, operational knowledge, global reach and market trust. On the other hand, fintech companies bring lifestyle components such as innovation, creativity, technological expertise and teams with diverse backgrounds. With the Citi Mobile Challenge, we aimed at finding and partnering with the best fintech companies and designers so we could bring the best ideas and technology to customers.
This concept of partnership can only happen when you first realize that you don’t have to build everything yourself. In fact, you shouldn’t be building everything yourself. You need to rely on the ecosystem and create your own platform – to leverage what the world has to offer. Fintech companies understand what people want and can produce new solutions very fast. Partnerships can bring the best of both worlds, where traditional companies and technology companies together can speed up the pace of development and bring solutions to the world.
Through the Citi Mobile Challenge, in two years we were able to attract 7,000 developers from 500 cities around the world. We compiled a portfolio of 300 solutions that are currently being worked on, with 24 that will be implemented by the end of the year. We also partnered with 160 companies, aiming to come up with new ideas for them too. They have also opened up their platforms to us, and together we are driving innovation.
Global Innovation
In revamping a business to adapt to the 4th Industrial Revolution, it is also important to realize that innovation is happening everywhere. Silicon Valley may be one of the most advanced areas of technological innovation, but innovation is happening in every country and every city. Tech starts up are popping up all over the world. The Citi Mobile Challenge was successful because we looked everywhere for the best innovators – and we found them in 500 different cities.
These innovators are coming up with tech-based solutions for local problems, based on local industries and local experiences. It’s important that we leverage tech companies in various countries so we can develop location-specific solutions. These solutions are specific to a certain market and serve the customers’ lifestyle in that location. This goes against the idea that there can be one method that will serve all.
The Mobile Challenge helped us find fintech companies that can expand digital life in Latin America. For example, one of the biggest pain points for those living in Latin America is not having the ability to buy online from the United States, since most companies (for example, Target) require a U.S. credit card and address. One fintech company we found developed a method where people in Columbia can buy from Target with Columbian pesos. The item price includes shipping and customs, they can pay with their Citi payment, and the item comes directly to them. This application was tested and is now live in Columbia and open to many online US stores. Another fintech company we found created a way for people in Guatemala (which is a cash-based economy) to pay more efficiently using a line of credit from a microfinance entity. Both of these solutions represent location-specific digital innovation for Latin America.
As we transition to the 4th Industrial Revolution, Latin America companies can digitize through a similar partnership model. So far, financial innovation has not advanced much in Latin America because there are not enough innovators (both people and governments) and not enough venture capital as there is in other regions. By working on putting these essential elements in place – and then leveraging the tech companies and innovative ideas in the world around us – we can accelerate digital innovation in Latin America.