Welcome to the future of banking where large tech companies, startups and financial services incumbents are competing for their slice of the pie in a deliciously competitive marketplace. This is the FinTech movement. Yes, you’ve heard of it! And so you know it’s getting a lot of attention because digital innovation within the financial sector is opening it up to new business models. You also know that these new competitors are making FinTech very attractive to investors.
With over 12,000 FinTechs operating successfully around the world, and many more just getting started particularly here in NZ, we’re seeing the exciting emergence of alternative financial ecosystems.
Yes, exciting not necessarily threatening.
Forward thinking banks are embracing this disruption because FinTech startups are benefiting society by lowering the costs of financial services. Putting our customers first? What’s not to like about that?
You can teach an old dog new tricks
A recent PwC report found that more than 80% of global banking CEOs consider FinTech to be a competitive threat. Why? Well, FinTech businesses are agile and have quickly identified common pain points in traditional financial services models. And they’re able to solve these problems through mobile and digital technologies. Without the hindrance of gigantic infrastructures (not to mention the multiple stakeholders that come with), FinTech companies may be able to offer faster, smarter, cheaper, and better customer-centric financial services that appeal to a broader audience. I’m looking at you, millennials. Simply speaking, it just makes sense for forward-thinking banks to back these emerging companies.
While FinTech may be disrupting the way the financial game is played, banks still have many competitive advantages. The number one advantage here is TRUST. Customers still trust banks more than other kinds of providers to keep their monies safe. As virtual trusted advisors, banks have the opportunity to serve up expert advice, and offer customers money and product recommendations that will benefit both parties. Combine this with the speed and agility of FinTech and suddenly we’re all winning.
Banks and FinTech: Officially dating
It’s totally official: banks and FinTechs are getting together to make banking better for everyone. The FinTechs are bringing the innovation and creativity to the yard, but banks provide the necessary frameworks and structures to nurture these budding relationships with NZ’s fintech startup communities. The Kiwibank Fintech Accelerator programme, not to brag, mentors startups as they work to bring breakthrough technologies to the financial services sector. And contrary to popular belief, it’s not about the bling bling. We genuinely want banks to engage with FinTech startups so they can work together to explore and bring their incredible ideas to fruition.
This combo of pairing the experience, strength and trust of established banks with the creative emerging talent in the FinTech space is a powerful relationship. And it gives these startups a better chance at successfully entering the market. Of course, as with any relationship, there are potential pitfalls. But we all know that the secret to all successful relationships is communication, which is why Kiwibank is here, having these conversations with the future of NZ FinTech, every single day for three months.
Think back to the first device you used to listen to music: record player, 8 Track deck, Walkman, ipod – I’m not here to judge! Then came Napster, iTunes, and Spotify. Sure, Napster got shut down, and rightfully so, but that didn’t stop it from playing a major part in changing how we listen to music. What I’m getting at is that change is inevitable, and it’s happening faster than we ever thought it would.
To fight it would be rather silly, especially when these innovative FinTech companies can offer traditional financial services so much in ideas. And what these startups lack in distribution networks, balance sheets and funding can be made up for by aligning themselves with banks who are willing and eager to build win-win partnerships. Bank-sponsored accelerators, like the Kiwibank FinTech Accelerator is the first of its kind in New Zealand, and depending on its success, these kinds of initiatives will only increase in popularity. We’re betting on it.
Innovation means collaboration
Here’s what we know: Both banks and FinTech startups want the best for our customers and we want to find a way to work together. The smartest, most ambitious fintech innovators know that working with leading financial institutions will only serve to amplify the reach of their tech, products, and services. You might assume that big, more risk-averse financial institutions would shy away from embracing innovation from upstart startups.
Over the last decade, banking has changed, and banks with it. Modern banks are embracing the trends and technology that benefit customers. We know that FinTech is an opportunity for the banking industry and we’re willing to put history and maybe even a bit of ego aside to cooperate. If FinTech have taught us anything it’s that we need to focus on our customers’ needs, even if this comes at the expense of profitability. The entire banking system is going through an evolution. Maybe even a revolution. I see it everyday in this programme, and I don’t see it as a threat. Call me naive, but with every pitch I hear, all I see is a prosperous future for FinTech and banks.
Want to learn more about FinTech in NZ? Read the rest of our blog.
Kristen Lunman is the Programme Director of the Kiwibank Fintech Accelerator.