“Two heads are better than one,” so the saying goes. This often rings true in business, where fostering collaboration has become paramount to launching cutting-edge products and services. We believe financial services firms can do the same.
While speed to market and mergers and acquisitions have become a competitive edge for many large firms, the likes of Lego, SAP and P&G have shown that even great, big organizations of all kinds can build and revolutionize their business through partnerships. Why? Because collaboration fosters far more innovation and creativity than simply acquiring start-ups (which often do not have a synergy with their core business).
This has been hard for financial services (FS) to get its head around, as creating these ecosystems is often a case of forgoing short-term profit. But in return, companies will gain speed to the marketplace, access to specialised knowledge and nurturing strong alliances with potentially disruptive partners.
Against a backdrop of non-stop change thanks to new technology, enhanced customer expectations and a swathe of new regulations, FS organizations must get creative. New market entrants are emerging all the time to rival Tier 1 banks, and not just fintechs and start-ups, but the likes of Amazon, Apple and Facebook. For example:
- Amazon’s Alexa is enabling customers to send cash to peers and businesses with a single voice command;
- Apple is partnering with Golden Sachs to carry Apple Pay as a physical credit rel="noopener noreferrer" card; and
- Facebook is exploring creating their own cryptocurrency for payments.
Partnership as a priority
It’s no surprise that fintechs are playing a significant role in shaping the banking platform of the future – they are renowned for their collaborative approach and forming partnerships in their communities.
Mindsets are starting to shift across FS as the likes of banks such as Barclays, NatWest, Santander, UBS and HSBC are betting big through the launch of accelerators in recent years. Creating a collaborative platform is allowing them react to trends that are right for their business.
It is also no great surprise that many longstanding financial institutions, with their more corporate mindset, ‘red tape’ processes and old legacy systems, are less innovative by nature. They are, unlike fintechs however, blessed with a decades-old customer base. Indeed, by and large, people seldom switch banks1. These institutions have many other advantages too, such as financial stability and access to capital, trust and the experience of navigating regulations and compliance requirements.
We feel that these strengths are being under-utilised by the fintech community, currently. In building meaningful partnerships which share each partner’s resources long-term, there’s an opportunity to build an exciting fintech ecosystem.
This will involve benefits such as:
1. The transfer of knowledge and talent
2. Technology and intellectual property (IP)
3. Scaling ideas quickly into the marketplace.
It’s all about the ecosystem
Throughout every industry, there has been a democratisation of technology and talent which has allowed a new wave of start-ups to attack and disrupt traditional markets. In just the past few years, there has been a large number of formidable new market players emerge on the financial services landscape, including Monzo, Revolut, Zopa, TransferWise, DAOPAY, Token, Chip, GoCardless, and Blooom. It’s too early to know who will succeed in becoming the next £ billion ‘unicorn’, but this all demonstrates that new start-ups and fintechs can spur new opportunities for Tier 1 banks. They can learn from their entrepreneurial mindset and through partnering to accelerate novel concepts into the market.
It has now become imperative that large organisations identify and track disruptive fintechs as early as possible, with the objective to build relationships and potential partnerships in the future. Only through fostering an ecosystem can real creativity thrive to support business growth, develop breakthrough technologies and customer needs.
All very well said and done, of course, but what needs to happen next? Institutions need to apply a more strategic view to partnering – and that involves going to the C-suite and asking them these questions:
What are we doing to create a community?
Why are relationships important to us?
How can we create a better environment?
A few diamonds will no doubt escape many big banks’ radars. Many do not feel ready to invest in their own accelerator, due to their risk-averse mindset. But it’s now more than ever that the financial sector should embrace partnerships - to share risk and work with fintechs who have a different way of thinking. In turn, this will create a community of start-ups that leads to a formula of innovation.
Involving the community
So what are we doing, you might ask? In pursuit of outstanding solutions, Capco Digital has fostered a partner eco-system and actively manages a fintech network; bringing innovation directly to our clients and coaching the next generation of digital leaders.
Capco Connect was created to develop a network of friendships, relationships and partnerships to support the great financial services and fintech ecosystem.
Our event on 31st May 2018 showcased how organisations can help participants go beyond the possible and to explore how different disruptive technology can be applied across financial services in the future. We are hopeful that this will create a chain-effect, leading to new business opportunities, identifying potential unserved markets that leverage both fintechs and our clients.
If you would like to learn more about our thriving fintech network, please feel free to contact Dan Jones (Daniel.Jones@capco.com).