A fintech start-up or any start-up for that matter, and the banks do not make very happy bed fellows. There are some fundamental differences between the two sectors:
- Start-ups are by their nature, innovative and about taking risks. Banks are arguably one of the most risk adverse industries on the planet.
- Start-ups love new technologies whereas banks are distrustful of anything new and untested.
- Start-ups love the Cloud due to the agility and scalability it offers. When you mention Cloud computing in a banking discussion, it has a tendency to stall if not totally kill the conversation.
Contradictory Drivers at Play in the Banks
They must adopt new technologies as this is what their customers want as they can be seen to be voting with their thumbs. It was reported that any person born after 1980 has abandoned bank branches and want to go mobile. Add all this to British bank customers already logging on via mobile devices 73.8 million times a week by the end of March, up from 18.6 million times a year earlier and 9.1 million times in 2013, as stated in a report by the British Bankers' Association (BBA) and consultancy firm EY. - (see link to article below )
There are a new generation of banking offerings ‘born in the cloud’ (meaning they have started using the cloud from the outset and thus have no fear of it) and these offerings will slowly eat into the bottom line of the traditional banks.
There is potential to make massive cost savings by using new technologies and platforms compared to their traditional implementations.
Fintech Innovation Centres
The banks are trying to bridge the gaps by setting up so called fintech innovation centres and accelerators; however, these do not seem to be given the clout they need to make a real difference to how the bank operates. What can be classed as innovative, attractive and a ‘must have’ in the innovation groups will be seen to be disruptive and difficult to implement across the bank as a whole.
There is a need within the banks to adopt innovation as a core principle as at the moment, it is only happening around the edges with projects to use some Cloud based services for CRM, Email or perhaps some analytical activity around data that can be made available.
The core banking systems remain totally detached from these efforts and ‘untouchable’. This is a combination of people ‘doing their job’ and keeping the systems running by changing as little as possible along with a desire to avoid being part of the ‘big bang’ that is needed to open up these core systems to the rest of the world. There is an attitude that this should happen, but not on ‘my’ watch. I have n years left so the new guys can pick this up.
Until these attitudes are dealt with within the banks, you can be sure that Fintech start-ups and banks will continue to be very uneasy bedfellows.