Mr and Mrs Smith
Is it love, is it rivalry? What happens between the Fintech companies and the banks to roll the ball?
Fintechs need banks to reach a large customer base and bring their business model to life by testing, adjusting and releasing from the regulatory burdens, banks need Fintechs to innovate faster and cost effectively. Today 75% of the operation cost of banks is due to information technologies.
They seem to love and support each other and behind the scenes their strategies may deviate and even be self-destructive.
Coo-petition is the new term used for the collaborative and innovative work conducted between Fintechs and financial institutions. Competition is useful in creating new business ideas mainly coming from friction, inefficiencies and rigidities of the current financial system and services. Cooperation is needed to execute, transform and endure the business models. Shared ideas and efforts lead to win-win situations where Fintechs and banks create value simultaneously.
Major banks in Europe are very active investors in Fintech, such as Banco Santander, UBS, Deutsche Bank, Societe Generale, BNP Paribas, Credit Suisse, HSBC, BBVA, Barclays, ING, Unit Credit, RBS and Credit Agricole. They invest both in unicorns and small-scale startups in alignment with their vision and roadmap.
In USA similarly we observe active investors such as Citi, Goldman Sachs, JP Morgan Chase & Co, Morgan Stanley, Wells Fargo, Bank of America Merrill Lynch, TD Bank, Capital One, US Bancorp, PNC.
Most of these European and American banks are part of R3 consortium building the new operating system for financial markets with a distributed ledger platform Corda.
Well, it seems the future is being built wisely.
However, how to scale innovation in banks still remains a challenge. This is mainly led by the alignment of the mind-sets between Fintechs and banks and how the teams are built and managed for their integration, business development and execution.
The future of Fintech will also be defined what Fintech will desire and lead for. Will they come up with innovative solutions with an ultimate goal of being acquired by a bank maybe one day or aiming to shake the global financial system for change and evolution forever?
