20 May 2018
Dennis Gada


Dennis Gada - Infosys

6Posts 52,847Views 0Comments

How Banks and FinTech Start-Ups Can Work Together

16 September 2016  |  7887 views  |  2

Even after the global economic crisis of a decade ago, the world’s largest banks have continued operating much like they always have because of the belief that they were “too big to fail.” Governments for the most part seemed to go along with this reasoning. Then came the rise of the financial technology start-ups.

One can compellingly argue, that FinTechs grew so fast and offered such innovative and groundbreaking products and solutions simply because of the vacuum that existed from ‘banking-as-usual’. If there is one thing the world’s consumer’s desire, it is a new and more convenient way by which they can use digital devices to pay for goods and services. My favorite example of this completely new paradigm involves telecommunications companies, which realized that they controlled an infrastructure that could not only be used for telephone calls but for financial transactions as well.

Enter the M-Pesa, a mobile money platform created by Vodafone for Africa based mobile communications company Vodacom and Kenya-based Safaricom. The entire premise of the M-Pesa is that people in emerging and frontier markets, who don’t have bank accounts, can use the platform via their mobile phones to make payments and facilitate money transfers. By some estimates, nearly 43 percent of the gross domestic product of Kenya takes place on the M-Pesa platform. The success of the platform can be seen from another perspective: entire businesses have arisen because of the ability of the consumer base to move money around.

Global banks are now waking up to the economy going digital and the ability of FinTech startups to develop innovative disruptive solutions for consumers to move money. To counter this trend, a consortium of some of the world’s largest banks recently announced they were dusting off a project known as clearXchange. Although it has existed for about five years, the consortium is moving forward as a way to counter the serious challenge posed by the rise of FinTech start-ups.

The attraction of clearXchange is that consumers can use the platform to make real-time payments instead of the traditional method of waiting for payments to clear. Not to be outmaneuvered, the digital payment app PayPal announced that it is now working with credit card company Visa to allow consumers who use both the PayPal and Venmo apps to access money transfers in an instant. What’s most interesting about this new battle for the hearts (and wallets) of banking consumers is that the large global banks have set aside fierce, old rivalries in order to make clearXchange work. That means a Wells Fargo customer can use clearXchange to transfer funds instantly into a Bank of America account. No middleman. No clearinghouse. No waiting.

But the real challenge before large banks is whether they should continue to work in isolation, consolidating their strengths internally or whether they can realize near and long-term value in partnering with FinTech start-ups. The opportunities are huge, and a partnership of this nature could create a new global payment system.

The trend is not too easy to spot. Younger, more digitally savvy consumers are increasingly demanding person-to-person payments. So much so that the most traditional banks are taking notice. Add in the plethora of FinTech firms and even telecom companies that are innovating new ways to make payments possible for their consumers, and you will realize that we are  seeing the birth of a new, global system of finance.

This blog was first published on InfyTalk>> 


TagsSibosStart ups

Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 19 September, 2016, 09:08

If fintech is defined as companies providing technology to the finserv industry, then banks have not been working in isolation at all. It is common knowledge that BFSI is amongst the largest buyer of technology for decades, with, say, your employer attributing nearly 45% of its revenues to this sector.

If fintech is defined as companies that offer financial products and acquire customers directly, it's common business practice across all industries to fight your competitors rather than partner with them (except in rare examples of "coopetition"). How often do we hear, say, your employer coming out of "isolation" and partnering with its competitors like Accenture or TCS or Wipro?

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Urs Meier
Urs Meier - Tata Consultancy Services - Zurich | 19 September, 2016, 10:33

More and more customer are asking for a multi bank service using their account. To use a dedicated app for each bank looks not like a solution.

Banking services are going to be merged into business processes.

It's very hard for a bank to provide this on its own. Hence cooperation of banks with FinTech is a way to follow. 

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Latest posts from Dennis

Why banking passwords will soon disappear

27 September 2016  |  4866 views  |  0 comments | recomends Recommends 0 TagsSecurityPayments

How Banks and FinTech Start-Ups Can Work Together

16 September 2016  |  7887 views  |  2 comments | recomends Recommends 0 TagsSibosStart ups

Artificial intelligence in banking - will it manage your life?

12 August 2016  |  9973 views  |  0 comments | recomends Recommends 0 TagsTrade executionInnovation

Blockchain: a case for the general ledger

20 July 2016  |  8184 views  |  4 comments | recomends Recommends 1 TagsBlockchainInnovation

Dennis's profile

job title Vice President, Financial Services
location Charlotte, North Carolina
member since 2016
Summary profile See full profile »
Dennis Gada is Head of Sales and Global Client Partner for Financial Services Americas at leading IT consultancy, Infosys. He is responsible for new client acquisitions in Financial Services and has s...

Dennis's expertise

Member since 2016
5 posts0 comments
What Dennis reads
Dennis's blog archive
March 2018 (1)2016 (5)

Who's commenting on Dennis's posts

Ketharaman Swaminathan