This week was a long time in politics, but a two day conference debating how banks can harness the power of FinTech witnessed thought-provoking debates with opinions from both sides.
Joined by representatives from the UK's leading High Street and Challenger banks, along with a mix of international FinTech players and overseas banks, Icon UK co-partnered this event in London. Organised by market analysts GlobalData, attendees were treated to a showcase of innovation, ideas and best practice success stories.
Embracing Partnerships Between Tradition and Tech
Just as the Conservatives have learned over the last week, Icon UK also found partnerships to be at the forefront of the FinTech discussions. Whether this is the banks embracing FinTech providers as allies in bringing agility and new thinking to traditional banking processes, or multiple FinTech businesses coming together to combine offerings into even stronger solutions, it is clear that FinTech companies are not the enemy, as many banks perhaps too often demonstrate in some of their behaviours.
Banks traditionally plan their budgets a year in advance of projects starting, so by the time the planned projects start and then deliver results it could be two years or more on. FinTech moves much faster than this and banks can't react quickly enough to integrate one innovation before the next is available, so collaboration is becoming the key buzzword in the industry now.
Bank Hackathons and Supplier ecosystems are springing up, along with 'Heads of Innovation' increasingly recruited from outside the traditional banks. It's a small step forward as the entire bank culture too often needs to change and not just, as one of the UK's leading banks' Head of Innovation said, "a handful of people being recruited to sit in internal meetings telling the old guard that they're wrong".
Culture First, then Technological Advance
Mark Fields, CEO of Ford Motor Company, credits the late management guru, Peter Drucker, with the quote "Culture eats Strategy for breakfast". There was much discussion at the FinTech event about an Innovation department springing up in a bank as being too little too late.
The entire culture of the bank needs to embrace change and to put the customer first. Starling Bank, a mobile only retail bank platform, is a good example of a challenger bank embracing this approach. Faced with the classic 'Build or Buy' decision, they adopt 'Buy' wherever possible as this both reduces risk and time-to-market. For example, they give customers a very simple solution harnessing multiple payment methods, like PayPal or Stripe, linked to a current account, with simple yet effective analysis and notification of what is bought most so users can consider changing their spending patterns or, at the very least, be aware of purchase patterns.
Contrast this with traditional bank approaches that are still focusing 90% of IT spending on maintaining the legacy environments, whilst adding 'lipstick to pigs' at the front end. Standard statements and disconnected internet, mobile and branch channel strategies illustrate the problem. A change in culture with relation to matters such as 'Customer First', 'Fast beats perfect',and cross-functional co-operation is critical, as well as a change in the use of technology as FinTech providers start to reshape the banking landscape.
While regulations are being relaxed by the Bank of England to allow more challengers to enter the market, the lowest hanging opportunities are being 'cherry picked' by the new entrants. The more established High Street banks are not only increasingly bound by strict compliance and governance controls, but they have the added challenge of maintaining a wide variety of back-, middle- and front-office applications and, in many cases, multiples of each, across physical and digital environments.
Financial services firms are preparing for multiple regulatory challenges over the coming months. MiFID II - which is only 9 months away - is a game changer that makes financial advice and investment management more complex than ever before. GDPR (General Data Protection Regulation) is coming in May 2018 affecting all companies that collect any customer data within the EU, while PSD2 (Payment Services Directive 2) brings great opportunities for asset managers to access and collect account information from every banking relationship one has (enabling new banking products).
Can you afford an army of IT staff?
Banks don't have the time to rewrite their multiple systems into one (if that were even possible) and neither do they have unlimited budgets to hire an army of IT staff. With all of this to contend with, banks need to leverage FinTech providers like Icon UK, harnessing modular technologies that link all of the systems they run in order to expeditiously and effectively enable cost-effective interfacing without the need to rip and replace.
Connecting the legacy and heritage systems that exist in every major bank is the key and Icon UK's DOPiX platform has been proven time and again to deliver this capability to financial services firms across Europe.
Providing ways to extract value from the 'system spaghetti' behind the scenes and to deliver that in a format that works easily on a mobile device including HTML5, chat, video, biometric security, e-signing, audio, analytics, web, etc. is the utopia that Icon UK's solutions can deliver today - or at the very least be implemented at scale in time for the new regulations to impact banks.
A week might be a long time in politics but with multiple deadlines for further regulatory compliance looming for the banks, the time to embrace change and to foster FinTech relationships is now. The answer to the old question "FinTech: Friend or Foe?" is clearly swinging in favour of the former, at least as voted by innovation departments.
The challenge of modernising the back-end and integrating new FinTech front-to-back is one that needs full senior sponsor participation, a will to change, the right mindset and the right toolsets. In matters of customer communications, identity and engagement processes, Icon can assist. If interested, let's talk and find out how we can help you achieve your innovation and integration objectives.
Richard Marsden is a Director of Icon UK, specialists in customer communications management. You can contact Richard at firstname.lastname@example.org or call us on 0203 150 1081.