Banks looking for cultural alignment with fintechs

“I understand in the past there was that fear – Are the fintechs that are emerging going to be competitive to us?” asked Mohamed Zaraket, EMEA digital lead at BNY Mellon, during a panel at FinTech Connect in London this week. “Now that’s completely immature and everybody knows that we want each other, but when [banks] look outside we need to understand: How are you helping us? Are you actually helping us solve a problem? … If you are a viable partner, how does your culture fit with our culture?”

The panel featured retail, investment and challenger banks.

Zaraket said he is wary of cultural differences between banks and fintechs, as a fintech’s culture of disruption is unlikely to match that of a bank.

His point was echoed by Gonçalo Santos, head of digital platforms at challenger bank BNI Europa.

“I think finding the right culture fit is the ideal situation … Fintechs are always focused on the client, always focused on innovation. Us banks have to deal with so much regulation and internal formalities, that it’s very hard to be in touch with the fintech mindset.” He said both sides need to be willing to adapt and not get frustrated by cultural differences.

Fahd Rachidy, founder and chief executive officer at ABAKA, a cognitive financial advice platform argued that the space for experimentation provided by fintechs is their greatest strength for financial institutions.

“What partnerships with fintechs provide is actually an environment where you can do a lot more of these experiments,” said Rachidy.

Magdalena Kron, head of rise at Barclays suggested firms could be nimble in their approach to the fintech ecosystem.

“There are ways to be able to experiment in a safe environment…There are a few start-ups that are doing this, creating data silos that you can play around with. So that’s not an excuse for financial institutions to not experiment and not adopt a more agile or lean mindset.”

Still, willingness to experiment is not the only factor banks look for in a fintech. Emma Huntington, director of innovation and venturing at Nationwide, said banks tend to invest in fintechs that already possess a strong sense of purpose.

“When we partner with organisations that are more propositional in nature, there tends to be a slightly longer timeframe … What we’re all trying to do is de-risk what we’re going to invest lots of money in by testing with real people with live data, and that’s the challenge. That’s what we all want to get to.”

Another way to reduce risk is to focus on several partnerships at once, according to Santos.

“Something we’re trying to do to reduce the risk is that usually we don’t put out a new business or a new tool that is fully reliant on one partnership. We try to bring together a number of different functionalities and technologies that put together, will bring possibilities for the bank.”

An Accenture report from September predicted that banks could lose up to $280bn in revenue by 2025 as non-banks grow in the payments space.

Huntington said partnerships would benefit both parties.

“We want to learn from [fintechs]. Because these people are immensely smart and focused on one problem – that’s fantastic for us to partner with them, and it works both ways. There are areas in the fintech business that aren’t necessarily as mature, and that’s where we can partner and help.”

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