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Disruptors disrupted?

The new role of disruptors against financial services and banks

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14 December 2018

Financial technology – fintech – is shaking up traditional financial services. From payments to wealth management, from peer-to-peer lending to crowd funding, a new generation of start-ups is competing head to head with banks for a share of their business. These disrupters aim to be faster, cheaper and more efficient than the market leaders. But financial institutions are fighting back and investing heavily in their own technology to take on the fintech companies at their own game.

We hosted a lively panel discussion with a number of industry experts exploring whether banks should compete, concede or collaborate with fintech challengers. Here's what they said.

For a more in depth version please download the full thought leadership article.

Size versus agility

Clifford Chance partner André Duminy, says: "A typical financial institution is basically a huge technology stack with products on top. The bigger you get, the bigger the challenges to refresh that technology. As fintech start ups grow, their own technology stack will grow and so they will they be disrupted by the next generation. It's going to be an interesting cycle."  Banks and fintech start-ups also face competition from other sectors, says Martin Prescott, Executive Director of Capita, an international business process outsourcing company. "Major retailers are looking to enter the bank loan market and the mobile telephony market and capitalise on their brands." 

Collaboration

Collaboration is common in the fintech industry. However, collaboration is not without its challenges:  Who owns the clients?  Who owns the IP? How is it exploited? How do you take the collaboration forward? How do you exit the collaboration?  

Creating value with technology

Fintech isn't about technology for technology's sake but is about creating solutions to real problems, says Funding Circle's Martin Cook. "Technology is hugely important to our business but the big idea is providing access to finance for small businesses. Technology is an enabler, it's not the outcome," he says.

Barclays is amongst the most tech-driven banks in the world and is working with a number of fintech companies.  George Osborne, Barclays Innovation Director says that it is not cannibalising its own business "because none of them is big enough to threaten our business. It's about creating value. They are helping us to change our own culture and improve our systems and we are helping them with regulation."

Regulation

Fintech companies face a range of challenges as Izabella Kaminska of FT Alphaville says: "As they grow they become more like banks and with that comes all the headaches of regulation, compliance, risk and cross-subsidisation and legal structures."  

Financial institutions and regulators from the US and Europe have called for a standardised approach to fintech regulation and the Financial Stability Board has flagged fintech as a sector that needs "close attention." Martin Cook of Funding Circle says he welcomes proportionate regulation. It's not in our interest in work in a wild west environment."