HOW BANKS SHOULD BE APPROACHING FINTECH TO AVOID DISRUPTION

There's a lot of debate about banks; their involvement with FinTech startups and what that should look like to avoid being disrupted. I believe it should look like this (scroll to bottom of page)

New Internal Legal Entity: (Low Complexity)

If a bank has the required capabilities and already has a presence in the market, banks should setup a new legal entity internally and attempt to exploit the technology in-house (with some help from 3rd parties). Even better is, if this can be done with new branding in the early stages. This protects any reputational risk to the main bank and seeks to minimise the banks 'risk-averse culture' creeping in. As an example of this approach, think of National Australia Bank (NAB) and their 'spin off'; UBank

Joint Venture: (Medium Complexity)

If a Startup can execute better and the technology is gaining some market traction. Banks should consider a JV to leverage the FinTechs expertise. Think of Jamie Dimon's comments on JP Morgan partnering with a P2P platform 

“The kind of stuff we don’t want to do or can’t do, but there’s somebody else who can do it and do it probably well. So this is going to be collaborative.” (Jamie Dimon's comments on JP Morgan partnering with a P2P platform)

Acquisition: (High Complexity and Highly Desirable Tech)

Where there is a large amount of complexity (particularly in new markets). Acquisitions are a practical long-term way to establish a permanent presence in the market. Banks are in a financially sound position to acquire almost any FinTech startup of choice.