FinTechs: Threat or partnership opportunity?

FinTech sector raising record sums

The UK’s fintech sector raised more money in the first half of the year than in any equivalent period on record – a remarkable £1.7bn according to data just release by the growth company market analyst Beauhurst.

The sector raised so much money that 2019 is already a record year for investment in UK fintechs.

Partner or threat?

It is just too easy for Banks to consider the rise of FinTechs to be a threat to its long established business and profitability?

Perhaps banks should regard FinTechs as potential partners – maybe even as a partner to rent capability from?

FinTechs calming the perfect storm

Incumbent banks are facing significant headwinds – the perfect storm:

1: Competition

Over 1,600 FinTechs in the marketplace

High FinTech adoption rates

Banking competition remedies driving innovation and speed to market

2: Legacy IT

Constraints of managing significant legacy IT

Lack of API architecture

Difficulty in meeting regulatory timelines (e.g. PSD2)

3: Evolving customer needs

Products and services are increasingly consumed via mobile devices

Users of banking services are millennials

Customers expect full integration

FinTechs are well placed to help incumbent banks calm the (perfect) storm.

What could a Bank / FinTech partnership look like?

There are four broad types of partnership models to consider:

– Software as a service (SaaS)

– Referrals

– Equity

– Co-creation of IP

Disrupters or enablers?

Although some FinTechs are clearly disruptors there is a strong case for some FinTech’s to be the perfect partner to address the incumbent headwinds and weather the FinTech storm.

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