I picked up an article talking about 16 Ways Banks Will Need To Change To Survive Advances In Fintech in Forbes. It’s a survey of an expert panel that cites that banks must do the following action points:
- Become Nimble And Decentralized
- Incentivize Culture Change
- Combine Security With Blockchain Technology
- Lean Into People-Centric Customer Service
- Provide Improved Transparency In Lending
- Expand Mobile Banking Capabilities
- Divert Resources To Enhance Digital Banking
- Enable Better Connectivity Between Various Services And Tools
- Partner With Transformative Fintechs
- Allow Direct, Secure Connections Between Merchants And Customers’ Bank Accounts
- Switch To Microservices And Third-Party Tech Vendors
- Speed Up Transactions And Lower Transaction Costs
- Leverage Direct Financial Data And Automation
- Switch To An All-Virtual Interface
- Create More Customer-Intimate Services
- Embrace 24/7 Customer Service
These build on the over forty lessons that I discovered in my last book Doing Digital, but it made me think a different way. It goes to the heart of the headline I posted here: What do banks need to do to deal with FinTech?
The way that question is phrased is defensive, and relates to the Forbes headline where they used the word survive. I would rather turn it on its head: What do banks need to do to leverage FinTech? It’s not survive, it’s embrace. How can banks embrace FinTech and use it to leverage their services.
I was reminded of this when talking with the UK regulator, the FCA, a few years ago when they launched The Sandbox. The Sandbox would allow FinTech start-ups to innovate and trial in partnership with banks, and this is important.
Many start-ups don’t understand banking; many banks don’t understand start-ups or, more clearly, technology and digitalisation. If the two can work together in partnership, then it’s a win:win. If they compete and fight, it’s a lose:lose.
And this is the point. Most banks are struggling with digital transformation and FinTechs can help them to transform; most FinTechs are trying to help banks digitally transform by focusing on their processes and sub-processes, and using Open Banking and APIs to transform them. It’s not an adversarial relationship but a symbiotic one.
Sure, there are some FinTech start-ups that want to disrupt and destroy the big old banks, but I think many are focused upon a different question and opportunity: how can we use technology to make banks more effective and efficient?
When you look at the likes of Stripe, Wise, Currencycloud (now Visa) and their brethren, they are all targeting areas where banks are ineffective and inefficient and solving the issues. That’s why Visa acquired Currencycloud. In fact, if you look at the likes of Plaid, Dynamic Yield, Aiia and others, they are all looking at the question: what’s wrong with the current structure? How we make it better, more effective and more efficient? and what is the opportunity of the network and open world to improve poor bank processes?
MasterCard and Visa and PayPal woke up to this a few years ago. Equally, a few banks have – just checkout BBVA’s acquisitions and JPMorgan’s – but the key to this and heart of it is that FinTech is improving banking processes in most cases, but not destroying banks.