Will the future belong to the banking establishment or fintech innovators? Are big and small locked into terminal battle? As part of London tech week, a pop-up at Old Street Station hosted a series of short talks devoted to the hot question in finance.
Terry Cordeiro, Head of Digital at Lloyds led the pitch from the big banks, backed up by some bigwigs from Barclays and RBS. All came decked out in casual tech attire. Were they making a point?
Cordeiro quickly conceded that the banks are under pressure from all angles – from the new “challenger” banks (like Atom, Starling and Metro) to the proliferation of online payment services. Traditional players could be reduced to mere “financial plumbing” if they cannot demonstrate their value in a new technology driven and customer centered ecosystem.
The solution, he said, lies in using big data to “humanize” banking services. Banks amass a huge amount of personal data from us but don’t use it beyond our balance sheets. There are a host of untapped opportunities to help our “moments of life”. Forward spend analysis can show how buying an item impacts your monthly budget. Digital receipting tagged to your balance will remove the annoyance of losing your receipt.
The tone to the challengers was conciliatory. We are already working alongside a host of fintech start ups. The buzzword is “co-opetition” – the theory coined back in 1997 to say competitors who co-operate as they compete can benefit innovation.
Competition not “co-opetition” was the uncompromising response from Fintech. Tom Blomfeld, formerly of Go-Cardlesss and now Get-Mondo Smart Bank, argued that the future of finance is disaggregation. The old model of a bank selling a customer a comprehensive range of products is fading fast. Financial services, including conventional retail banking, will be characterised by a range of specialised new entrants doing one thing extremely well.
Advantage is with the new. Banks are trying to build technology on top of outdated bureaucratic structures. Smart banks like Mondo are driven by technology bottom up. No need for print outs, back office processes and cumbersome web to branch transitions (three day wait times).
An interesting aspect of the discussion was the positive perception of regulation amongst Fintech speakers. The EU Payment Services Directive in particular and its two-step application process for almost all financial service, they say, has cut barriers to entry and has made Europe a hub for local financial innovation.
Whether, underneath the responsive rhetoric, the banks really view these niche challengers as an existential threat is open to contention. As the Economist asks this week – won’t the banking giants just buy them up when they have to? What can perhaps be said from this engaging set of talks is that Fintech is confidently shaking up a long entrenched sector.