Fintech innovation: staying on fringes or time to become core?
Astrid Froidure, Open Reply: Technology is a catalyst for change
In the face of an ever rising digital agenda in Europe, banks are jumping on the fintech bandwagon, hoping to jumpstart innovation. Technology stands today as a catalyst for change in established banking institutions, write Astrid Froidure, digital transformation lead at Open Reply, and Fausto Jori, owner of E-finance Reply.
The spark comes in a variety of shapes and sizes. Financial institutions are exploring various types of strategies from joining existing programmes to leading them or shaping their own ventures. Barclays, Deutsche Bank, Citi and RBS are among those aiming to attract fintech disrupters to their innovation centres. Such approach has yielded positive results such as deals between Barclays and Market IQ, a technology that uses social media data to predict events such as ATM power cuts, and Dopay, a cloud-based payroll solution for the unbanked.
Fintech industry, projected to grow to $8 billion in 2018, looks to use cutting-edge technology as entry point to financial systems.
Such technologies are striking a cord because they bring a much needed and timely relief to what are often perceived by customers as cumbersome and tedious processes. They provide easier and faster access through instant authentication along with reducing cost-to-serve. As per Gene Ekness, senior vice-president of United Bankers’ Bank, on the introduction of biometric signature: “I can’t remember the last time we had a call into our help desk for a forgotten password.” A clear case of a win-win innovation.
Fausto Jori, E-finance Reply: The spark comes in a variety of shapes and sizes
When we talk about new pushes for financial services, we cannot avoid mentioning the rise of blockchain protocols, which promise to disrupt how we understand trade, property and trust. The big opportunity offered by such distributed ledgers consists in eliminating the need of a trusted third party for regulating trade processes, from the change of ownership of a vehicle to the clearing and settlement of financial securities. This goes beyond the mere digital currency application: first introduced by Bitcoin protocol in late 2008, blockchain fundamentals are in continuous evolution and refinement.
Blockchain systems are a standard shareable between multiple actors based on supply and security of a guaranteed information layer. Main financial institution are experimenting with the technology and working on the definition of common protocol rules facilitating adoption at consortium level. This is the case of R3 CEV, an innovative start-up promoting blockchain tech among over 40 institutions around the world. Such initiative, involving major players like Goldman Sachs and JP Morgan, aims at realising real proof-of-concepts in different areas, which include payments solutions, trade finance and post-trade activities, corporate bonds, swaps, repurchases, and insurance products.
This capabilities have caught the attention of traditional institutional players BNP Paribas Securities Services which recently announced working with investment platform SmartAngels on a pilot that is planned to be launched in the second half of 2016 – pending regulatory approval.
Indeed, when it comes to leveraging blockchain capabilities more widely, integration seems to come with a word of caution fueled by the evolution, refinement of protocols and changes in regulations. Bringing such innovation into the core banking processes will affect areas such as transactional systems, risk management or security and call for operational process re-engineering and new competencies.
