Last week, The Floor hosted its inaugural Banking on Tech series entitled, “What’s next for fintech?” with senior executives from 4 of its Tier-1 bank partners. Sitting at the intersection of technology and finance, The Floor is able to deliver unique insights into the transformation of the sector. In our first panel, our focus was to provide a lens into the future of the banking industry and better understand the links between Banks, Fintech companies and tech giants. Here are the top 10 takeaways on the future of fintech:
The fintech market is not a bubble as we see structural trends across fintech, however we might find some side pockets of bubbles within the sector more broadly. Banks are continuing to rely more on partners like The Floor to help them identify the promising fintech and avoid the noisy ones.
2. Relationships between banks & fintech: competition and collaboration
Big tech can’t be tomorrow’s banks even if they will play on some businesses of the industry. Fintech will increase its partnerships with banks, as banks have started to understand the need to invest or implement Fintech to accelerate the transformation of the bank (vs legacy bringing inertia).
3. Banks and giant tech players
Banks can’t yet compete with GAFA regarding digital experience, but are quickly learning from them. However banks and GAFA might find areas of collaboration, having both of the players bringing their added value, we could see a new trend between the two in developing new businesses similar to that of Goldman Sachs and Apple Card.
4. Banks in the future evolving like the automotive industry
To imagine how the banking industry might look in the future, we can apply the use case of the automotive industry. Car makers gradually started to outsource parts of the process to now mainly focus on the motor engine, the distribution, and the relationship with the client through marketing. We can therefore imagine that banks might follow the same scheme with Fintech. Banks would continue to be an Intermediary managing client relationships and delivering high end value services.
5. Variety will ultimately benefit the client
The banking industry already started taking out some components of the offering and buying them on the market. This growing process has key benefits on the client’s point of view. Indeed, no banks can easily pretend that they have the full market of the best products in their overall shelve. However, if they can integrate external solutions into their offerings it will allow banks to propose the best products to their clients.. inclusive of both internal and third party solutions.
It’s getting harder for banks to increase their income while the cost of doing business is exponentially growing, regulations being one the reasons.
Better know their clients: This is particularly true for KYC and AML. However, beyond compliance, banks are collecting a lot of data. The challenge is how to get intelligence from these data points to predict what clients will need.
Customization: While mass consumption is increasing, consumers are asking for more tailor-made solutions.
7. Banks are working to overcome the challenge of technology adoption
Management team. By essence, bankers are not tech people building startups. The issue is to make these people understand that technology implementation is strategic to stay at the forefront of the industry.
Legacy system of banks. Banks are spending money on the legacy systems that have to be maintained. They now need to find a balance between legacy that should decrease and the collaboration with external solutions that has to be enhanced.
Link between technology and business. Banks should consider that technology has to be a backbone within the overall organization.
8. Customer behavior is changing, and bank offerings are changing with them
Customer’s perception of time is not the same as it used to be, and now more than ever time is precious.. To adapt to this trend some banks have developed instant insurance and instant lending for instance . Next step is to modify the offering. For example, more people are using different types of shared transports instead of a private car. This makes insurance companies think about moving the insurance from the vehicle to the person.
9. Buy what’s already available, and develop for a competitive edge
Banks will buy external solution if the product is ready and market compliant. They will build internally if the solution in the market does not fit the banks’ needs or if it’s less expensive to develop it. Also building internal solutions can bring competitive advantage. It can sometimes be strategic to pick some components from the market and then build the intelligence platform around the consumer internally.
10. The surge in fintech sometimes presents an overwhelming supply
Banks are receiving everyday proposals from various fintechs. It’s difficult for them to decide which one will really bring added-value for banks. Banks are going therefore to venture capitals or companies like The Floor that have expertise in the ecosystem to help them find out which fintechs are relevant.
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