Fintegration: a silk route for Banks and Fintech

Aug 2018 | Team Rubique

Fin-tech has been on a steady rise and is causing a significant disruption in the services which once used to be a stronghold of the traditional banking behemoths. Owing to this, fin-tech has garnered much acceptance from the investors and even banking firms themselves seeking to tap into their potential.

The immense success of the fin-tech can be attributed to the recent wave of data-driven and cloud-based technologies. According to Accenture, globally, capital into the fintech startups has tripled from $4 billion in 2016 to $12 billion in 2017 indicating the dawn of a digital era in the banking world. It will be interesting to see how the banking ecosystem reflects on this changes. It might be the best time to start-up a fintech venture, however, this doesn’t mean they’re going to topple traditional banking anytime soon. If anything, they’ll either co-exist and collaborate or, challenge each other for the control of the industry.

Possible scenarios

Over $25 billion has been pumped into the fintech startups in the past five years, though it is a sliver of the entire industry. Yes, the fintech sector is growing. However, it is not devoid of its fair share of challenges. The traditional banking industry is yet to form a stance over going along with fintech or ignoring it.

At this stage, there are three approaches taken by the banks and financial start-ups to collaborate with each other:

  1. Still skeptical about the new waters, banks have gradually begun to extend their hands for a collaboration. ICICI bank’s Hackathon is a prime example of such kind of approach. The competition provided the programmers with a chance to weave creative solutions to the intricate problems in the Banking and Financial services sector. Winners were awarded a sum of Rs. 20L and an opportunity to potentially engage with ICICI Bank for a long term.
  2. A few banks have started acting as incubators for the relevant start-ups. For example, Singapore based DBS bank recently provided a 5000 square foot co-working space for fintech startups in Hong Kong as a part of their accelerator program. Along with office space, the selected startups will also receive mentorship from DBS executives.

Additionally, banks should discover creative approaches to establish long haul associations with the fintech network, to such an extent that it is a win-win situation for both the organizations engaged with the relationship. An excellent case of this would be the Accenture-supported Fintech Innovation Lab in New York City. New businesses that join the program get coaching from one of the 14 noteworthy finance and banking corporations cooperated with the lab, and the guides work to enable every start-up to build up a pilot with their bank.

In India, SBI has started InTech to group with new businesses to make Finance related Technology (FinTech) answers for banks. Intech will be space inside SBI’s start-up bank InCube where intrigued startups with information on finance-related issues will be offered access to SBI’s Application Program Interface (APIs) to try.

  1. Although a few banks appear to come terms with Fintech, they have kept on battling with how best to incorporate technological developments into their activities keeping in mind the end goal to remain focused. With considers and overviews demonstrating a sizable move towards advanced, there is a glaring reduction in the significance of branch connections. Fintech has just asserted the reimagination of the banking system. Be that as it may, if incorporated successfully, technology won’t signify “disturbance” of banks yet instead the passage to rethought saving money. Banks, for example, Chase, Goldman Sachs, Capital One and so on have all sloped up their Corp VC and innovation arms to put resources into the eventual fate of Fintech. Goldman is the most dynamic speculator among financial services players and has put resources into Circle, Motif, Square, Perseus and so on. JP Morgan has additionally acted accordingly and made interests in a large number of the significant new businesses, for example, Motif, Prosper, Square, Symphony, Can Capital and so on.

A considerably more intriguing fact is that not merely banks and natural money related establishments are indicating premium yet, besides, major group players. For example, Google Ventures has completed 37 financial tech bargains over the most recent five years. The other invested individuals are Intel, Salesforce, SoftBank, Naspers and so on.

Disruption in Banking and co-operation

The landscape of banking ecosystem is about to change soon, in fact, drastically over the next decade. However, upon enquiring the executives of the top fintech firms, nearly 27% acknowledged lack of experience in risk management and 25% claimed lack of investment as their biggest hurdle. Then again, some trusted that restricted product (34%) set and the other cited lack of a legacy framework (33%) were their strongest points. In such a situation, collaborating starts making much sense.

Fintech startups and banking corporations are now realizing that there’s more to gain by working alongside each other. IT spend in banks are quickly expanding to put resources into digital managing an account, and after they have a firm establishment, banks will never again need to fear Fintech organizations yet turn into the empowering influence for developments to come. Startups need to continuously innovate and master the art of mitigating risks to scale up. This is where the legacy of banks comes into the picture.

The connection between fintech firms and banking organizations may appear to be an entangled one, yet like any good relationship, utilizing each other’s essential abilities would procure extraordinary profits for all partners including the essential one – the bank client. It’s an industry that is long due for disruption and with the assistance of Fintech organizations, banks can use APIs to incorporate with Fintech items or services to proceed with their strength and relevance.