2016 was the year when fintech was booming. This year, as experts predicted, is the year of bank-fintech collaborations.
The times and mindsets are changing – big banks are finally embracing innovation and have started showing signs of willingness to change. With investment in fintech increasing every year, banks have actually started snatching a portion of the fintech pie: investments in fintech initiated by banks began a few years ago and have been gradually increasing ever since. In 2014, Barclays launched their own fintech incubator, in 2015 Visa Europe launched an accelerator, in 2016 China’s largest P2P lender Lufax tapped four banks for Hong Kong IPO and just a few weeks ago we officially confirmed a €21M deal with Capitec, the third largest bank in South Africa.
Banks’ business model is quite simple, understandable and has existed for centuries. Activities of banks are pretty straightforward – lending (collecting deposits from savers and lending it out), payments and executing trades in the financial markets. Due to such a straightforward role in people’s lives banks have become an entity nobody really cares about – just like gas stations which you need to use but do not prefer any one in particular as a fintech influencer named Alex Nech compared. Banks can offer a credit or a debit card as well as do a few other activities and you will be treated exactly like a person xyz without any significant difference either in the service or in the treatment itself. In other words, banking has become a commodity. Commodities in an online world, however, do not exist – the whole fintech idea is built on online technologies, personalized services and a superior UX. Feeling potential competition stepping on their toes, banks have started hazing at successful fintechs aiming to tackle the problem of the ageing, unchanging approach to the customer. After all, embracing innovation implies acknowledging the lack of personalized connection, and increasing attention towards fintech companies from banks only proves the beginning of a trend.
Banking has become a commodity. Commodities in an online world, however, do not exist – the whole fintech idea is built on focus on online technologies, personalized services and a superior UX.
If there is no easy way to crush a rival then it’s best to become friends with it. Through partnerships and collaborations, banks get access to the sources of knowledge, UX differentiation ideas and new customer segments that would not be accessible otherwise (or very hardly, at least). An increasing amount of partnerships between banks and fintech companies also represent a shift in how each party views their counterpart and that starts an interesting debate since those two camps have been seen as divided and are normally would be presented having different views and objectives, often so opposing that the future predicted would present the dominance of one of the parties. After all, both have something serious to offer: for banks, partnerships with fintech companies offer a fast and interactive approach to innovation without significant capital investments and streak for experiments whereas for fintechs banks come with real-world infrastructure and stability. There’s a potential to rebuild the whole financial system to offer a needed service in a faster and more transparent way to meet increasing needs of customers, so if not now, when?