Seen once as a threat to the established banks, there is now an appetite for all things FinTech, underpinned by the belief that they hold a key to unlock the next big consumer proposition. This appetite used to be subdued by fear, fear of being surpassed, that the status quo was threatened, that someone else, someone new was going to eat from the cake.
The brazen rhetoric of commentators and challenger banks that forecasted a demise to the very existence of the bank’s status quo a few years ago has been replaced by more collaborative speech and established banks, in turn, are engaging. In the past year, Santander have begun to build their FinTech ecosystem through quasi VC fund, InnoVentures, and Barclays have launched their successful accelerator and collaborative working programme in partnership with Techstars in London.
More than just a fashion statement
The past year has seen banks translate their curiosity to open questions, ‘How much should we invest?’, ‘What is the most effective model?’, and ‘How can we best collaborate?’ Generally, my answer is to concentrate on the customer, think with the end in mind and work out what experiences you would like your customers to have and what you want to be known for. Partnering with a FinTech company can take your organisation, brand and product to many areas, the key is to shift the thinking beyond the credible and fashionable.
In finance in particular, networking might get you into the room, a good demo might stir interest and a polished marketing campaign can get people talking; ultimately, however, the product is the crux. The additional complexity in banking arises from the overlay of further considerations; regulatory compliance, heightened sensitivity of consumer data, security and authentication (an industry in itself), and integration with traditional legacy systems that can harm both uniqueness and scale of any proposition. Indeed the latter is a big blocker – in some cases banks are struggling to understand how to incorporate new propositions and services into a myriad of systems and complex IT infrastructures.
What is becoming more common between the two is the methodology that sits behind proposition development. Taking a customer centric view and embedding a fast-fail testing method is nothing new for small-scale development teams, but for banks it goes against years of development practices that are advocated primarily from a financial perspective. The agile methods that some FinTechs employ have been noted. New divisions of banks such as Customer and Innovation departments are being formed with new proposition development methodology on their remit – and in this regard, from my experience, is where the FinTech companies are leading the way.
The golden chalice
In developing the perfect product, banks are seeking the golden chalice… building a proposition that will harness customer loyalty without relying on rates. Having recently worked with a bank around the positioning of their brand and product portfolio to a ‘Generation Z’ consumer base, customer lifetime value, a metric that has historically been subjected to varying definitions seems to be the flavour of the month. This holistic perspective is in turn having some effect on product development, emphasis is being placed more on loyalty and service and less perhaps on rates. To get these products right, the big players in financial services, like Barclays, are taking a longer-term view, and are starting to understand that a high investment initially that leads to the right product, might ultimately bear fruit in the long term.
The question for the FinTech community
I recently attended a panel discussion where the topic moved to ‘association’. Representatives of FinTechs on the panel and around the room were pretty unanimous; there is a question at the moment of where they themselves want to play and who they want to be associated with. Some of the best FinTech companies will not need help from the banks, those who are independent, have an end-to-end servicing system and a growing customer base. Others see an opportunity, both from a reputational perspective (to have the clout of a bank behind them) and also to learn about the current issues around integration.
The divide is closing, branches are being given and opportunities exist. Have we seen a multitude of products that integrate the best from both the banks and the FinTech community? Not yet, but the way things are going, the appetite is growing.