Fintech’s early stages have been all about small startups taking on the banking goliaths, but the next phase will see the more established players getting a piece of the innovation game.
Brian McCabe, who chairs the fintech working group at the Fintech and Payments Association of Ireland, says existing banks and financial players won’t get weaker at the expense of new entrants.
Collaboration will be a feature of fintech’s next phase as traditional banks, financial institutions and insurance companies in Europe seem to recognise the importance of becoming smarter, more efficient and customer-focused.
“Many appear to have realised they cannot make this transition alone and have started partnering with fintechs in order to advance their own capabilities and create distinct competitive advantages in the marketplace,” says Anna Scally, partner and head of KPMG’s fintech practice in Dublin.
The phrase ‘open innovation’ will become more prevalent in the next phase of fintech, McCabe predicts. “While most companies have been internally focused, there’s now a need to bring outside thoughts in, and to understand the market more,” he says.
“The term ‘open innovation’ is about the need to understand where new products are going to come from, and to do that, you need to think outside the four walls of your own organisation, such as setting up external research labs with third-level institutions. It’s all about bringing in other views, and other methodologies like design thinking. Banks are pushing the envelope a little more because they’re having to become more consumer oriented,” McCabe says.
Now is the chance for banks to take what fintech pioneers have to offer, and use it to make themselves more competitive. “Banks have to evolve and find new markets, build more demand, and create new products. You can lead the change, or be part of the change, but if you’re a passive entity, you’re vulnerable to being outdated. If you are leading, then you’ve a better chance to align your product sets towards changing consumer behaviour,” McCabe says.