Recently there has been a spate of articles describing the symbiotic relationship between the established financial services sector and the FinTech challengers. For those looking to take on the banks around the fringes, it’s a different story. For them, it’s keeping one step ahead and offering new services before the lumbering giants’ catch-up – or more likely – eat them up. But for those looking to add and sell services to existing banks, maybe the direct approach isn’t necessarily the best one.
There’s no doubt that the recent proliferation of FinTech offerings has created some fantastic innovation that will shape and possibly redefine the banking industry. However, there’s also a large majority that will inevitably fail. With $90B of investment into the FinTech bubble last year, how does a bank pick the few winners from the inescapable majority that won’t be around when their VC funding dries up?
So it’s no surprise that banks aren’t stopping what they’re doing and falling over themselves to partner with these new FinTechs. Banks don’t act impulsively and budgets are worked out a year or more in advance. Of these budgets, a large majority will be spent on regulatory change and keeping the show on the road (KSOR). Discretionary spending will be squeezed and haircuts to approved budgets are inevitable.
People are waking up to the fact that gaining confidence and selling to the financial services is no easy feat, no matter how good your recently recruited sales team is. The usual financial incentives don’t wash; the banks won’t be rushed into anyone else’s timetable but their own, which is subject to frequent change and reprioritisation.
Banks are keen on trying things out, proof on concepts, small user pilots – very few of these undertakings are paid for but with the potential carrot so large, the new-to-market FinTech, looking for their breakthrough sale, can’t turn them away. Some will be able to ride out the storm or will have such a great product it will succeed but the majority won’t and not through the fault of their offering.
Also the banking IT landscape is complex. It is rare that you’ll be interfacing with just the bank’s staff. There’s likely to be a myriad of different vendors, system integrators, and contract staff all with their own agendas not necessarily in step with the bank’s needs. The procurement and change process of each bank requires a small team of specialised staff to navigate effectively, with each bank’s systems and processes being different. How does a small outfit with less than 50 staff in San Jose and a few international sales people navigate all this?
That’s why I believe that FinTech should be looking for a new partner instead of going straight to the banks themselves. FinTech might live in the Agile world but it needs the assistance of traditional system integrators to help with the mundane and project-based work. Too many start-ups end up over stretching themselves trying to be the project manager, business consultant, technical integrator, documentation producers, change managers, etc., etc., etc.
And while you might have a great solution running on AWS, what if the bank wants four 9s reliability, is concerned about General Data Protection Regulation 2017, has other concerns such as FINMA, or the need for 24/7 – 365 global support?
This is where partnering with a SI like Fujitsu with a global presence, a network of data centres, and first class delivery teams can free up FinTechs to carry-on innovating and letting the bank work under an existing master services framework and support package.
Fujitsu is actively creating an ecosystem of partners not only within FinTech but in all sectors and areas of expertise to help banks and other customers access the latest innovation without the hassle and complications of dealing with hundreds of SMEs that would not traditionally make it past the first hurdle of any large corporation’s procurement process.
That’s why I believe FinTech should not only try to sell themselves to the Financial Services world but to the SI market. They should be looking for partnering opportunities not only to exploit the SI’s existing customer base but to add confidence and certainty to the question “Which FinTech should I back?”