There is a current explosion of activity in the financial technology sector in the UK, led by innovation and also political push factors, with David Cameron’s backing of the Innovate Finance Manifesto: UK 2020 aiming to advance the UK’s standing as a leader in FinTech innovation.
An investment boom is being driven by the innovation of an ever growing number of FinTech startups. Global investment rates are projected to reach $46bn by 2020, making it evident that the ongoing technology revolution is on track to change our financial habits and the way we interact with financial services and organisations.
Banks are desperate to keep up with these agile start-ups to deliver value and stay innovative. However most are still busy with the onboarding of customers to mobile banking.
According to a recent report, just over a third (34%) of UK adults are estimated to be currently banking on their mobile. This is expected to almost double to 60% by 2020, meaning there will be 14.8 million more mobile banking users over the next five years.
For many banks their rigorous procurement processes and compliance requirements mean they are unable to contract with the small and agile players of the industry. This has created an enormous gap between innovation, the latest technology and the millions of customers of banks and large financial institutions.
Bridging the innovation gap
Banks want to access this external market but are currently held back. This is where large technology providers could come into play by providing a link and access point to innovation. Providers could act as a link to the latest technology and create an ‘App Store’ of curated technologies with reduced risk and standardised contractual relationships that they can chose from and adapt.
As a suggested model for the industry moving on, larger technology providers could assist in integration with third parties, be the primary contractual partner, curate the marketplace, and set up a standardisation process for connecting to the banks by requiring technology providers to comply with certain measures.
This would give banks an assurance that the provider is being backed by a trusted partner.
FinTech companies as enablers
Large technology providers are in a very good place to lead the way and step in to provide that contractual and technical bridge by providing an integration access point and capability, almost as a managed service for banks.
This will allow existing partners to manage the service, give them the ability to carry out integration and testing, and provide a level of accountability as well as ongoing professional services.
Big banks move slowly and have to deal with legacy technology, which can be a barrier to innovation. As much as they would like to, they are not able to make the necessary changes within their organisations to be nimble, and that’s why they rely on external players to provide them with innovative technologies.
By using their existing relationship with large technology providers, financial institutions can solve the issues they have in dealing with smaller organisations and bridge the gap between the latest technology offered by innovative start-ups and their own customers.
Sourced from Travers Clarke Walker, CMO, International Group, Fiserv