Successful fintech companies will be those that accept that rather than taking business away from banks their technologies will be adopted by financial institutions, says Damien Jamet, chief digital officer and chief of staff at Societe Generale Securities Services.
Initially financial institutions viewed FinTechs as ‘barbarians at the gates’ - a threat and FinTechs felt they could take business away from banks. But that has changed - Fintechs realise they need to become allies of financial institutions and financial institutions know they need the help of FinTechs to integrate advanced technologies into their legacy systems. Both sides realise collaboration is the best way forward to deliver the services customers need.
FinTechs bring to the table processes and technologies that will change the way financial institutions deliver services. In working with FinTechs, we need to understand that failure sometimes has to be accepted, as does coming to a dead end in certain projects. Financial institutions need to move towards an environment in which they can build new products and services quickly with a minimum of cost. This requires funding, but it also requires a change in mindset. Typically, in the banking industry we like to study a solution from A-Z and be sure of the results before it is launched.
Traditionally, financial institutions have not been very fast when developing new products and services. FinTechs are teaching us that solutions can be developed quickly, however and that we can integrate the best aspects of what they provide into our own systems. Societe Generale Securities Services, for example, reshaped its custody IT using agile methodologies, which meant we could get to market much more quickly with the new architecture. Part of the methodology is to ensure that the business and IT sides worked in close collaboration.
FinTechs should no longer be seen as competitors, but as organisations that can help financial institutions to bring the best of technology to the table. There is no reason to reinvent the wheel.
Some financial institutions have been acquiring FinTechs, which is a way of deep-diving into the technology. The key here is to ensure that you keep the people that work for the FinTech as a big part of the value of FinTechs resides in the minds of the people who work for them. However, it isn’t always necessary to buy a FinTech company, financial institutions can benefit just as much by working with them and adopting their solutions and methodologies.
Some FinTechs positioned themselves as outliers and tried to occupy territories in the financial world that are borderline and do not come under a great deal of regulation. But they have come to learn that regulations are constantly changing and that changes in regulation can mean they have to come to the negotiation table and pay attention to the regulatory world. They have also realised that they require funding from financial institutions so taking a more conciliatory approach towards financial institutions, rather than stating they will take our business away from us, makes sense.
It is likely that there will be some evolution of FinTech companies as their technology becomes embedded in financial institutions. Financial institutions will learn to create a new way of delivering services and will feel less threatened that FinTechs will steal their business away because there are other factors, particularly regulation, that will prevent this. Successful FinTech companies will be those that accept that rather than taking business away from banks their technologies will be adopted by banks. They will then focus on leading the development of technology for banks to integrate.
FinTechs have had an impact on the way innovation is considered by financial institutions. The FinTechs rang alarm bells for banks, alerting us to the fact that innovation and research and development deliver results and are good things to do. Financial institutions are re-occupying this world, because they cannot let only FinTechs innovate in the banking world. It is not black and white, however; there is co-opetition, competition and collaboration taking place. This has led to a cross-fertilisation of ideas that is fostering much more innovation in the banking world.