The paper is a call to action to banks, financial institutions and financial technology (fintech) businesses to work together to undertake a fundamental ‘reboot’ of the core processes, systems and infrastructure of the banking industry.
According to the paper, capital has flowed into the fintech sector: USD 23.5 billion of venture capital investment in 2013/14. Of this investment, 27% has been in consumer lending, 23% in payments and 16% in business lending. Fintechs have two unique selling points: better use of data and frictionless customer experience. But to date these have been limited to relatively simple propositions such as e-wallets and P2P lending.
After a slow start, fintechs are now capturing a growing market share. Yet their overall effect on the banking market has been minor. Banks have not crumbled in the face of this new competition. The paper characterises this first phase of fintech as Fintech 1.0.
Yet the conditions for significant change are present: policy shifts towards open data and APIs, the emergence of enhanced technologies such as cloud computing, changing customer dynamics and intense pressure to cut costs in banking.
The paper recognises the disruptive impact of the first wave of fintech businesses. These primarily focused on improvements in customer experience and payments. The paper now calls for closer collaboration to realise fundamental changes in a new, more radical, phase of fintech evolution.
Whereas the first generation of fintech pioneers worked outside, or on the fringes of the industry, fintech businesses now need to collaborate with banks in order to benefit from immediate access to product distribution at scale, established relationships of trust with customers, and extensive compliance and regulation capabilities.
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