The best way to drive innovation is to stop looking at the screen and start looking at the window, to start looking at the horizon, at what’s going on in the real world, at what goes on outside the industry and bring that back with a fresh set of eyes with enhanced new ways to do it.
While the traditional banks have been viewing Fintech firms with an eye of fire, spur of the Fintech revolution, digitisation and the increasing influence of the millennial generation has made banks look out at the horizon.
The burgeoning Fintech industry bears testimony to the fact that it has grown five times over in terms of venture capitalist funding in as less as four years. And banks have been quick to collaborate with them rather than compete by following the ‘partner or perish’ model. This is a wise and vitally relevant move with symbiotic synergies involved, especially after the advent of sequential events like core banking, open banking, the Equifax breach, and the digitisation of the alternative lending industry.
Getting out of the woods would help go beyond borders. But not in the case of banking. Banks are clearly out of the woods in their quest towards a gateway to the borderless digital world. Banking is no longer about moving dollar bills from here to there anymore. It is all about moving digital widgets from here to there.And customer centricity is forcing Banks to evolve into a technology-driven enterprise. So, the banking culture should evolve to be one of collaboration, not ‘protectionism’.
Hence Fintech are clearly seen here as a part of the solution and not the problem in helping Banks traverse the path of technology revolution with aplomb.
The biggest advantage leveraged by banks through Fintech is that success of a bank is measured by building a better ecosystem, not a bigger bank. This is a scalable and cost effective business model of the future.
Both Fintech and Banks have complementary strengths in helping them address their collective and mutual shortcomings.
Fintech, boast of the tech wizardry needed to develop creative solutions resonating with millennial banking and the e-age customers’ preferences of digital and omni-channel interactions with payment systems and services. They are free to innovate nimbly and dedicate their resources and time on engaging and user-friendly digital solutions, much-needed attributes of the banking domain.
They are an open sesame for banks as they give access to the treasure trove of cutting-edge technologies like Artificial Intelligence, Machine Learning, Deep Learning, Robotics and Automation.
Such a digital innovation, brought about the Fintech industry ,is potent enough to bring about a radical transformation in the ‘payments’ space through cost effective end to end solutions which increase the security, efficiency and transparency.
Though Fintech companies set the ball rolling with respect to payment revolution, banks are leveraging their scalable and ineffable sector expertise and considerable client database to drive industry initiatives and deliver an enhanced payment experience. So banks and Fintech have collaboration at their core in bringing out an enriched, real time and global payment experience to customers.
Fintech are also embracing Banks with open arms and eyeing them as ‘friends with benefits’. The reasons for this are one too many. Take regulations, for instance. Fintech have been relatively obtuse in adhering to regulatory compliances. They are often abstract and one too less. The rampant reason of mistrust among many online users is because of the security risks involved and the lack of regulations and its unchanging dynamics across borders.
Banks provide the much needed regulation for Fintech along with the value adds of brand name, trust and goodwill. They offer innovative things like ‘regulatory sandboxes’, which allows Fintech to test new ideas for a stipulated time with regulatory restrictions. Welcoming banking regulations brings along with it a lot of comfort and trust to the process, which is vitally important and becomes a brand differentiator in the competitive Fintech space.
Banks have been the guardian angels of the society’s capital and have been in the business for a whopping five hundred and fifty years! Their unbridled acumen and expertise in the world of payments is unmatched and is an invaluable asset forFintech.
Some people collate a brand to the people involved. If they donot see someone associated, they feel like the business is chewing the air. So ‘physical’ transactions with people behind it is a better workable business model and the Fintechcollaboration does just that.
While Banks and Fintech have been locking horns with each other, desperate times calls for desperate measures. Desperate times of digitisation for Banks, desperate times of trust for Fintech, and so on and so forth. Hence they are evolving from a rocky relationship to a ‘rocking’ relationship with collaboration as the trump card.
Hence, banks and Fintech firms emerge as the radical squadron in bringing together the cauldron of new technology initiatives to deliver an enriched customer experience anywhere, anytime and in real time.
The views expressed in this article are of Srini Peyyalamitta, Head of Banking, Financial Services, Aspire Systems.