Let’s face it, banks are having a hard time trying to meet expectations of small business owners; especially delivering integrated solutions that go beyond the traditional non-customized offers. Archaic systems and huge institutions have brought tech entrepreneurs into an expanding arena of financial technology.
FinTech innovators introduce different points of view regarding financial services and digital technology that questions the status quo of traditional banks. New businesses are focused on constant innovation and serve their customers so much faster than traditional banks. They help to ease the payment process, save money, reduce fraud, promote financial planning, and most importantly – they move the huge financial industry forward.
The global investment in FinTech ventures tripled to $12.21 billion in 2014, clearly showing that the digital revolution has arrived to the financial sector. Moreover, established financial players are starting to take small steps to engage with emerging innovators.
Many of those businesses are long after the experimental phase, but they have to be tested in a downturn. It is important to match the convenience and security of a current account in a bank. Nevertheless, many banks will gain a lot from FinTech innovators. Square, for instance, is a system that makes it easier to take card payments and there is no doubt that companies like that will boost banks’ financial volumes. “The Silicon Valley is coming”, says Jamie Dimon, the CEO of JPMorgan Chase.
According to interviews and analysis of FinTech Innovation Lab London, there are three behaviors that enable banks to work successfully with fintech companies and reimagine themselves digitally:
1. Act open
Open innovation is the heart of the digital revolution, says Accenture report about Future of Fintech and Banking. For large banks the process of engaging with external technology solutions often requires opening up banks’ intellectual property and expertise to outside FinTech innovators in order to help them discover new areas of growth. For example, an open Application Programming Interface (API) offered by FinTech players can connect third parties to existing core banking to offer various new financial services. API is a glue for modern application integration in complex B2B ecosystems.
A huge challenge for big banks is to adopt a collaborative approach with innovators and start-ups in order to generate new value for their customers. So far over 80% of banks from Accenture’s survey believe that working with start-ups will bring new ideas. Take the Shopbox and Nordea partnership which provides a simple and relevant solution to Nordea SMEs accounts: the idea is to provide small business owners with the best possible tools. The CEO, Christian Clausen recently announced that the bank will invest more than one billion pounds in IT development over the next few years.
A venture investment is the heart of a start-up innovation model. Now more than ever, well-established banking players are taking this route in order to generate innovation to their business.
The funding that FinTech companies receive is booming. There is no doubt that those companies are the future of the financial sector.
It is clear that a digital revolution in the financial industry is inevitable, and it has already started. Banks have to open up for new opportunities that fintech innovators are bringing so it can help them to create inexpensive, improved and faster services.