Banks and fintechs: the time is now to join forces
Digital innovation has the potential to radically transform the payments arena, through solutions that enhance end-to-end speed, efficiency, transparency, security and cost effectiveness. Anthony Brady, global head of business strategy and market solutions, treasury services at BNY Mellon, discusses how banks are being spurred to drive forward new technology initiatives – with collaboration at their core – to deliver an enriched global real-time payments experience to clients.
The rate of change occurring in the finance space is dramatically accelerating, and frankly, it’s exciting. Digitally-driven transaction enhancements are coming thick and fast, having a monumental impact on the culture of payments (where, when and how they are initiated and processed), the solutions offered and the players involved.
Indeed, a multitude of new non-bank “fintech” companies have entered the payments space, vying to launch innovative, high-tech capabilities that cater to the needs of today’s clients. The retail sector has seen the lion’s share of the changes thus far; indeed, new solutions that offer multichannel accessibility and improved speed and efficiency have already been rolled out, and further substantial change is expected to follow.
The surge in the rise of new digital solutions is resulting from a number of forces and market pressures, which are converging and creating an ever-growing urgency to modernise payments. These include growing technology capabilities, globalisation, the increasing influence of the millennial generation, and a very real need for financial systems to be brought in-line with today’s demands. With few substantial changes to core payment systems in the last few decades, fintechs from all over the globe have spotted an opportunity to reimagine the way clients interact with payment transactions using cutting-edge technology.
However, while fintechs may have set the ball rolling with regard to upgrading payments, banks are leveraging their unrivalled sector expertise, scale, and considerable client bases to drive forward industry initiatives that ultimately aim to deliver a significantly enhanced, digital global payments experience.
Banks driving change: the value of bank-fintech partnerships
It is clear that we are on the brink of a new era of corporate payments, and banks are increasingly taking the lead in driving new client-centric strategies to digitise corporate transactions. There are a number of approaches that banks are taking to help achieve this and, while fintech companies were initially regarded by many banks with uncertainty and trepidation, banks are now increasingly partnering with the fintech community; working together to tackle the challenges of bringing transformative concepts to market. Certainly, both banks and fintechs have complementary strengths that can help address collective shortcomings.
Fintechs, of course, have the tech wizardry required to develop creative solutions that are in-line with the needs of emerging generations and their preferences for interacting with payment systems and services. Furthermore, without the legacy infrastructure that banks have to contend with, they are free to innovate nimbly and can dedicate their energies to exploring enticing, client-friendly, modernised solutions.
A solution alone is not enough, however. With their deep-rooted standing at the very heart of payment processing and as the guardians of society’s capital (indeed, banks have been in business for nearly 550 years), banks’ experience and expertise in the world of payments cannot be matched, and can be invaluable to fintechs…
This is an excerpt. The full article is available in the September 2016 edition of Banking Technology.