Fintech advances prompt lenders to become start up friendly
Lenders face challenges in finding the right firms and getting them integrated into their systems before their rivals as market dynamics change
Finding the right partners with which to work and fostering an environment for fintech collaboration are posing challenges for lenders, as the relationship between big global banks and emerging financial technology companies shifts away from competition to more of collaboration.
“Banks and fintech firms really are going to be symbiotic in the future, and so we need to develop a mindset in the bank which ensures our ecosystems are ones in which fintech companies can participate,” said Standard Chartered Bank’s global head, data and architecture for retail banking, Dipen Mehta.
“Of course this is a challenge, but it is one we have to work with,” said Mehta.
Many large global banks in their current form are not easily compatible with agile and innovative financial technology start ups, due to their complex existing systems and legacy issues. Some managers responsible for working with fintech companies at financial institutions, speaking privately, bewailed their more senior colleagues’ inability to make the necessary changes to the way in which they operate.
“After all the talk of disintermediating the banks, in some ways what we are trying to do is to reintermediate,” said Japan based start up Moneytree’s head of marketing, Zach Taub. Moneytree, a data aggregation application, currently works with two of Japan’s big three banks, and was in Hong Kong as part of its attempts to expand further in the region.
“Most of the fintech companies are trying to sell their services to or partner with existing institutions,” said James Lloyd, fintech leader at EY. “But that does not mean that banks can forget the 5 per cent that are trying to compete with them,” he said.
It is for both this reason, and doubts about what their rivals might be doing, that banks are still concerned about fintech.
“Fintech is moving fast, and any bank that does not see it as a threat is kidding themselves,” said Felimy Greene regional head of customer franchise at Citi’s consumer banking business in Asia-Pacific.
The challenge for each bank is to find the right companies, and get them well integrated into their systems before their competitors.
“If I’m a start up, then I am keen to get a bank to take me in, but, on the other side, all the banks are keen to be first when it comes to working with the firms with new ideas,” said Greene.
This competition is partly responsible for the plethora of fintech accelerators, incubators and competitions that institutions run around the world , with each adopting a different strategy for getting the “right” smaller companies into its ecosystem.
“A big institution might want to work with a start up to solve a particular problem, but it might also want to work with a smaller player to force itself to become more agile,” said Lloyd.
Citi adopts a slightly different approach.
“When trying to attract firms to our outreach programme, Citi Mobile Challenge, we keep it open, and say ‘If you could work with us, and have access to our data, what would you do?’ and then see what ideas come in,” said Greene.