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Finergy - Can banks and fintechs together collaborate and shape a customer centric dynamic business together?

A subject we will explore with experts at the upcoming BIT’23 (The Banking Innovation & Technology Summit in Dubai )

Why Not?

Having been a consumer banker for three decades and now an entrepreneur in an advisory role for banks and fintechs, I can empathise with both sides and take a balanced view of their predicaments and challenges. During my banking career across Asia, Middle East, Africa and Europe markets, more specifically since 2010, there wasn’t a monthly executive meeting without an agenda on “What should we do to counter the fintechs”. While over the years, this trend has gradually shifted towards “How can we partner with fintechs”, there is still that uneasiness in the banking boardroom. Interestingly on the other side, fintech’s are by and large always trying to explore how their solutions can support banks and not compete with them.

With all due respect, banks aren’t the best in customer experience. Though the intent is very much there, the execution isn’t. Priorities like risk & compliance, balance sheet and p&l, managing costs and interest rate volatility, et all takes precedence. i do think these priorities aren’t misplaced as clients place trust & safety on top of everything else as an index to choose a bank. With the bankable segment now fast shifting towards those who haven’t lived in a non-smartphone environment, consumer experience is rapidly becoming an equal if not superior index. This means that given the trust & safety indices are hygiene, the tie-breaker is shifting to the Cx index. However, to me this isn’t an either/or. What then stops banks from partnering with fintechs?

If you peel the problem, the average age of any of the top 10 banks in any market is not less than 50 years and there are banks that are over 150 or even 200 years old in most large and mature markets. As against this, in any market the average age of a fintech is probably less than 10 years and most fintechs are less than fiveyears. This creates two challenges. One is that banks are too embedded in their thinking and practices, to be able to shed legacy. Two, trusting a fintech who has been in business for a few years does not come naturally to banks.

Having said this, to be fair, across a few markets especially UAE, banks have started their own fintech/startup incubators and accelerators and have started partnering actively for both funding fintechs and also embedding their solutions to solve mainstream banking problems where they find a strategic fit. This trend needs to accelerate and more banks need to come forward and support fintechs. With a good view on both sides, I see a lot of complimentary skill sets and capabilities. These partnerships will benefit the end consumer with a superior experience and the banks and fintechs with delta business plus delta NPS.

In fact, we will showcase at BIT’23 how a bank can successfully find solutions to their challenges including enhancing customer service by setting up a successful incubator, inviting and supporting fintechs with passionate founders and a proven ability to deliver smart deployable solutions. This is an excellent opportunity for fintechs who believe they have great ideas but need resources and access to target customers, to succeed.

I would like to leave you with a simple recipe and I urge bankers across the world to try this, if you haven’t already. Inventorise your client interaction volumes/value at a micro-transaction level in the last 12 months. Create a Pareto Chart and focus on the top 20 per cent of interactions that make up 80 per cent of your value/volume. This 20 per cent is what really determines your NPS and how your brand is perceived in the market. Now reach out to fintechs or accelerators/incubators who have deep-tech solutions for these 20 per cent interactions. If they don’t have one ready, they sure will create one for you. You may have more than one fintech solving many of your problems, which is even better. Choose three interactions at a time and put your teams and the fintech into a room for 90 days and set your expectation very broadly like a) world class consumer experience b) within an investment of XYZ c) flexibility to upgrade if macros change.

I can assure you that as a bank you will move ahead at 10X pace than before and see tangible outcomes at much lower costs and in less time than you would have ever achieved within the bank. I call this approach ‘bankerpreneurship’, which we need to accelerate in order to create operating efficiencies in the market and deliver world class consumer experience.

The author is a consumer banker with international experience across the value chain of consumer banking over three decades. You can connect with him on Linkedin here.