Wintech

The banking industry is going nuts over Fintech. The question I have is why? Fintech’s aren’t new. Firms like FiServ and FIS have existed for decades and certainly meet the classic definition of a financial technology firm. The start-ups have brought real excitement to the banking industry and have pushed traditional banks to think of new business models and ways of operating which is fantastic. However, let’s understand that while certain Fintech disruptors have been able to poke at the bear, the bear is still the bear.

Should banks take disruptors seriously, absolutely! But is this Blockbuster vs. Netflix again, I don’t think so. Banks have learned to take these threats seriously, just for that reason. I chatted with American Banker a few weeks ago and I made it very clear how excited I am about the growth and attention of Fintech’s. I believe that instead of destroying our industry, Fintech’s will make our industry better. These organizations will force our hands as bankers, forcing us to keep up with their innovation, partner with it, or buy it outright. Remember a few years ago, analysts were predicting that marketplace lending would turn traditional lending on its head. Well today marketplace lending still represents less than 5% of all lending and with the challenges faced by some of the biggest players in that industry, expect more and more partnerships with traditional banks to flourish.

If this were a prizefight, here would be the tale of the tape:

Fintech Advantages

• Innovation in their DNA
• No legacy systems or business models
• Limited regulation
• Talent

Traditional Bank Advantages

• Money and lots of it
• Customers and Brand Recognition
• Distribution
• Talent

Banks real threat might actually come from outside the Fintech space. The real threat could come from the likes of Facebook, Amazon, and Google. With the data these firms have on their users and the cash they have in their coffers, it’s these organizations that have the ability to be the real disruptors. The question though is whether or not these firms want to get away from their core business models or if they can take advantage of a potential huge payday by getting the banking experience right in their own platforms. Could Facebook Messenger become the portal in which people bank? Maybe, if China is the precursor to the rest of the world, then there is your real threat.

Bottom line I believe there will be an inevitable marriage between traditional banks and Fintech’s, unless the banks squander this amazing opportunity to cultivate great talent, great ideas, and great solutions. And of course if the Fintech’s themselves don’t recognize the value of big bank partnerships, particularly in the U.S., because as their “Uncle” Sam gets more curious about their businesses, partnerships might become their saving grace. At the end of the day both banks and these incredible Fintech start-ups will begin to understand just how much we need each other.

Share your thoughts or push back if you disagree – lamont@digitalsince99.com, @digitalSince99