FinTech’s Are The New Rule Makers

Finocracy’s Head of Strategic Alliances, Tayyaba Ahsan, recently had a chance to attend a short yet crisp session arranged by HSBC UK, meant to cover the hot topic; “Banks and FinTechs, collaborating for a better future”.

This session was particularly of interest as Finocracy positions itself as an implementation partner bringing together banks and global FinTech players in collaboration to accelerate the digital agenda in GCC. Here is her personal insights blog below.

Very Few Know Why Collaboration Is Critical

In a hall full of some 80+ professionals, one wondered how this session will add value to what is already known – yes collaboration is the way forward, for banks boost years of heritage, legacy systems and customer base, while FinTech startups have the innovation/technology to keep these banks relevant for the millennials.

But beyond these clichéd words, very few people know the practical implication of why collaboration is critical at this stage, and what way forward are we referring to in every opening remark that introduces the concept of FinTech. Are these startups a piece of the missing puzzle? Is it an extra engine to boost performance and revenue?

Seldom have I seen an in-depth discussion that talks about the real challenges faced by banks resulting from significant shift in customer’s preferences, the pressing need to ‘collaborate’ with FinTech startups and finally, finding the most relevant strategic fit to embark the digital journey.

The session started off with some interesting insights shared by Raman Bhatia, Head of Digital, UK and Europe, HSBC. It came as no surprise that a place like UK, more than 90% of HSBC’s banking interactions are done digitally, and interestingly enough, the last 5 years have witnessed reduction of their branch footfall by 40%.

Globally, it is predicted that in a couple of years about a quarter of the world’s population will be mobile banking users, a number close to whopping two billion users, and that is happening in a very pronounced fashion in places where the use of technology is not yet prevalent. For example in Asia, the leapfrogging has already begun and we have seen the emergence of some very prominent and impactful financial eco-systems. So yes, the need for banks to embark on their digital journey and to ‘get it right’ is very real and very urgent. So what does this mean for the financial institutions?

FinTech’s Are The New Rule Makers

The rules of the game is now being set by the FinTech scene, and this digital era is more of a challenge than opportunity for large legacy banks. Suddenly, and not so, there is an urgent need for banks to invest heavily in improving their innovation cycle and match the speed of change and the very intuitive nature of change that startups are offering to customer now. HSBC has not shied away from openly declaring immediate areas that needs attention:

  • First and foremost, there is a pressing need to invest in technology platform that will address all the legacy challenges that can be expected out of a large enterprise like HSBC.
  • Secondly, if the digital era is a result of change in customer preferences, then there is an urgent need to transform the way bank interacts with customers. The real promise of digital is in many ways a return to the healthier days of banking where we walk into the bank and the teller behind the desk knows all about you, your family, your goals and if you could do that with scale now, digitally. Hence the challenge lies in the ability to digitally personalize banking, with heavy investment in data and analytics.
  • The third area of investment, and most important one yet, is changing or defining the banking of the future through collaboration and partnerships. In the next few years if you have to survive and thrive as a universal bank, you need to go from product manufacturing mind-set to an eco-system walking station one, where you are collaborating with select FinTech players, who share the same vision as you. In addition to having select partnerships around learning and testing, banks need to have a separate budget to invest in FinTech players to help launch platforms in areas such as big data, cyber security, open banking and automation.

HSBC’s New Strategic Partnership With Bud

At this stage, HSBC went on to announce its strategic partnership with Bud, who is building an app for HSBC’s subsidiary First Direct that will trawl databases for the best broadband and energy deals, personalized for each customer. To quote Bud’s CEO “We’re trying to change the banking app from the place where you do your banking to the place where you get things done in your life,” Rather than just going to the bank when you need a mortgage, Bud could help banks build an app that lets customers search for houses, sell their own property, and get a mortgage all in one space, for example.

At the end of the session, there was one thought-provoking query from the audience. What enables large banks like HSBC to partner and take small startups like Bud seriously?  In addition to this, what intrigued me the most was how did two under-30 co-founders, of a 2-year old startup called Bud, convince one of the largest banks in the world to collaborate with them? Upon doing a quick search, I not only found out that it has raised GBP 1.5 million from backers including investment bank Investec and Spain’s Sabadell Bank, as reported by Business Insider UK, but is currently in talks with 42 other banks around the world for possible partnerships. So what makes them so successful? To quote Bud’s cofounder and chief technical officer George Dunning:

“We have a completely full understanding of the end-to-end journey of every user, we can control that journey and we can tailor it however we see fit. When we were talking to the banks and they had a challenging technical question, we were prepared. If you get into those conversations and there’s ever a question that you can’t fully answer, then you’ve lost.”

I guess I got my answer.

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