Working successfully with a fintech requires a bank to change its culture. Best to get busy on this right away, writes Brian Caplen.
While in a recent blog I raised doubts about what banks would bring much to the party in collaborating with fintechs in the remittance space, the bigger picture is one of fintechs and banks either working together or losing out to competitors which do manage to co-operate. They must ‘partner or perish’ as an EY report puts it.
Payments is the area where the threat and opportunity from fintechs appears to be greatest but innovation is so widespread that almost every area of banking activity could benefit from developments in AI, robotics, cloud storage and surveillance pioneered in the fintech space.
But the challenges for banks in working with fintechs are many, from culture clash to reputational risk to just investing in the wrong project and losing lots of cash.
The banks that get it right will almost certainly be those that transform their own culture away from the traditional hierarchical version to a more flat, team-oriented format that strives to generate ideas. This way the fintech entrepreneurs will not find the bank environment so alien and the bank will better absorb new ideas rather than killing them off through bureaucracy.
Fintechs for their part will need to get real about regulation if their innovations are to be taken to a broader audience. But if their tie up with a bank fails they take their money and go back to innovating in a garage. The bank, on the other hand, loses its money and its first- (or at least second-) mover advantage. As the bank has more to lose it needs to change the most. It needs to start working on this even before any tie up with a fintech happens.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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