The battle between banking behemoths and new-age fintech
firms may seem like the classic David versus Goliath. But dig a little deeper and there may not be much merit in pitting one against the other.
While some collaborations are already underway, others are likely to take the following routes.
Banks can act as incubators or accelerators for fintech
start-ups. Banks like Barclays, HSBC, and Royal Bank of Scotland
are part of Innovate Finance that promotes global fintech
firms in the UK. Back home, most banks are supporting fintech
firms through various accelerators.
Banks could acquire youngish fintech
firms to plug their own gaps or provide a wider set of services to their customers.
This could be better compared to setting up units that require them to go through significant re-engineering. A new product, a more agile tech team, and customer integration—all of these could be tough to weave into a bank’s fabric. It is not surprising, therefore, that a recent study reported that 60 per cent of banks worldwide would collaborate with a fintech
firm, while 25 per cent would consider acquiring one.
start-ups could take care of several non-core businesses or processes for banks, allowing them to remain focused on their areas of expertise even while unlocking new ways to add value to their offerings. A few fintech companies
have ensured that they ace in areas like P2P lending, payments, financial marketplaces, online investment, and trading advice. A good example is JP Morgan Chase & Co using On Deck Capital to develop a new online loan for small businesses.
This is an excerpt from an article published on TechInAsia. You can read the full story here