The United States Fintech Symposium took place Sept. 16-17, 2019 in Chicago. It was full of great content from a seasoned group of speakers and panelists from every corner of the fintech universe. Every year, the conference delivers a pragmatic approach to fintech strategy for finservs, fintechs, and everyone in between.
Open banking, the concept of banks sharing data to improve financial products and lower costs throughout the industry, is a European concept that will see worldwide adoption in the near future. While domestic regulators haven’t required banks to publicize their data, banks might anyways. It benefits banks to harness the potential innovation from that data.
Arizona launched the first regulatory fintech sandbox earlier this year, and the industry can expect other states to follow. Innovation never stops. Getting out in front of it by engineering structures that let incumbents harness innovation by opening up data sets in a controlled environment is a smart move for banks. Opening the data before regulations force banks to do so gives banks more control.
It would seem that blockchain is a contentious topic, considering all of the articles written about cryptocurrency. However, beyond highly publicized digital coin projects announced by places such as JPMorgan Chase and Facebook, many finservs are looking to implement blockchain projects on the back-end. It’s good technology with a sound foundation that can have profound benefits if implemented correctly.
On the customer-facing side, blockchain regulation is stricter. Although regulatory bodies haven’t crafted a comprehensive plan to address blockchain applications such as cryptocurrency yet, they might. However, consumer-facing applications are more difficult to regulate than internal blockchain applications at financial institutions. The future possibility of blockchain based payments solutions or other customer-facing applications using blockchain still exists.
So many fintechs develop products that solve some of the issues at hand but lack the little touches that invigorate customers and garner a dedicated fan base. One session touched on the value of using emotional intelligence to ensure the entire product development process is consumer-centric. This way, you build better products and are more likely to target loyalty-engendering features.
One of the threads that stitched together multiple sessions was the different schools of thought about how financial services institutions (finservs) should collaborate with fintechs and vice versa. Potential strategies include three options: build, buy, or partner.
Build — Companies can use internal development teams to build their own fintech solutions.
Buy — Finservs can purchase technology from a fintech that has the best solution for their specific problem.
Partner — Finservs can partner with fintechs that have a solution relevant to them.
Finservs and fintechs are increasingly looking to partner with each other. Since many fintechs lack knowledge and connections in the financial services industry, most will not follow the disruption model. Finservs can eschew the difficulty that accompanies building solutions internally and the relatively arduous journey of purchasing tech by choosing to partner with finservs.
The key to finding and developing a fruitful partnership is to set expectations up front. There are various questions an institution should consider before partnering.
Some important questions include:
There are a host of potential issues that may crop up. Establishing boundaries and ensuring alignment at the outset of a partnership is vital to ensuring its success.
For the finserv, the key to implementing fintech wisely is to describe their goal in detail. Too often, high level employees are lured by a shiny new piece of technology everyone is talking about. Implementing this technology could signal a high profile win and a career making event. It could be robotic process automation (RPA) software, or a complex customer-facing chatbot with enhanced abilities such as database decisioning logic. It might be something that’s hot on the market. Whatever the technology is, the temptation to implement it is great, but antithetical to solving the actual problem. The problem may be easily solved without the implementation of a new piece of technology.
Showcasing how they can collaborate with finservs is important for fintechs looking for partnerships. For example, they might develop a lightweight pilot that doesn’t require complex integrations to prove the efficacy of their solution. A problem-based approach ensures the end product is not just new tech, rather a solution to the problem. Fintechs should take this approach when developing a piece of technology. Select a problem you know finservs have and tackle that specific problem only. Solve that problem for your ideal customer persona, and build out your platform from there.
All of the sessions at the Fintech Symposium were grounded in the reality of experience. From the venture capitalists that talked about how to secure funding and what they look for in a potential venture, to the finservs that know the ins and outs of dealing with fintechs. Each talk and every session gave useful, practical information. I’m looking forward to seeing these topics implemented across the industry over the next year and beyond.
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