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Technology has remarkably changed societal modus operandi. We now stand at a nexus between an internet economy and a digital consumer economy, leading to a direct connection between consumers and businesses via technology. The banking industry is no exception to this seismic shift with the advent of financial technology or Fintech services which are upending traditional modes of businesses.
The Rise of Fintech
Fintech as an industry term has undergone many revisions over the last 10-15 years. What was once a simple enablement of traditional banking activities using technology backend services is now seen as the fundamental disruption of global finance. No longer is fintech simply about servers and software that ease global finance, instead, it is an industry that seeks to simplify, optimize, and revolutionize how money is borrowed and invested anywhere in the world. But in more instances than one, its entrepreneurial DNA of rapid and unpredictable shifts can prove dangerous for large global financial partners.
Role of Financial Institutions
During this dynamic and transformative period, large financial corporations have little choice but to adapt and excel as they compete against new fintech powered start-ups. However, they need to remain focused on their core capabilities and work with fintech start-ups in the following ways:
- Be the Leader
The first among them was the importance of collaborating with fintech companies and teaching them how to conduct business on scale. This requires a mode of work that prioritizes predictability and stability over all else mainly due to their varying business models. Institutional players need to assist their fintech collaborators on how to work with regulations, compliance, and the shackles of red tape which are a necessity for stable operations.
- Be the Visionary
Secondly, large institutions need to define the final vision of the technology’s role when they partnership with fintech firms. While these firms may have the technology innovation, it is up to large financial companies to devise the business models and economics that will make them sustainable in the long run. Large financial firms need to work towards building cutting-edge partnerships that are backed by their experience and the start-ups innovation.
- Be Un-disruptable
While venture capital driven fintech enterprises may “fail fast, fail big”, large financial firms have to tread a different path. Large organizations need to practice mediation and moderation, especially during times of crisis. The final and foundational goal should always be to ensure that fintech services propel growth for their corporations in a long-term manner, especially during times of economic turbulence when “technology disruption” can prove devastating.