Why should banks and fintechs work together?
Regulation, competition and market changes: these are the three elements fundamentally influencing traditional banks’ business models.
With the Payment Services Directive (PSD2) pressing them to open up, big tech entering the financial arena, and consumer demands skyrocketing, most banks have understood that something must change. It will not be easy, but the business potential is great. All it takes is for banks and fintechs to work together.
Open banking regulation: the opportunities within
PSD2 brought seismic shifts for banks in Europe, which now have to offer payment services to third-party providers (TPPs) via an API. This is a true opportunity for banks to transform digital experiences and build meaningful customer journeys. APIs can really make a difference in the design and delivery of new digital products, as they provide a re-usable service layer that turns legacy systems into developer-friendly platforms.
Banks could offer their clients banking platforms that rely on different apps to enhance the traditional offering with partner products, services and tools. Based on API and using a micro-services architecture, these platforms could not only empower data sharing and security but would also be game-changing.
Banks would get the unique opportunity to become part of their customers’ daily digital lives, taking on the trusted advisor role. They could help them make better decisions, manage their finances more effectively or simply offer them personalised services.
Stay one step ahead of the competition
The banks are not the only ones ready to enter the door opened by PSD2 and seize opportunities.
We see non-bank digital competitors who have the funds, the technology capacity and the customer base to succeed. Banks risk being disintermediated, as payment processors can now hold the funds, handle the transactions and own the merchant relationship.
All traditional payment methods have well established infrastructure and consumer habits are on their side. But alternative solutions enter the market and they are faster, more efficient, and multichannel.
The only way for banks to stay relevant in the market is by putting in place the required capabilities to engage effectively with third parties and make the most of their innovating capacities. Partnering up with fintechs and leveraging their agility and technological edge is what will keep banks relevant and competitive.
‘I want it all and I want it now’ – the consumer-first paradigm
Consumers’ expectations are changing, and they ask for digital and mobile solutions, a great user experience, more convenience, high security and data protection. When it comes to payments, invisible, frictionless payments are the Holy Grail. The consumer is interested in the product or the service he is buying, not the action of paying. How do you get that in such a fragmented market as Europe?
There’s no reason why a person owning a bank account and a smartphone wouldn’t be able to make mobile payments. Thanks to the single Euro payments area (SEPA) and its credit transfer (SCT), fintechs can use banks’ secure infrastructure to provide everyone in Europe with a simple mobile solution for payments. No need for credit cards or e-wallets with a limited budget.
How do we know the fintech-banks partnership works?
Payconiq started as a strategic initiative of ING’s incubator, in 2014. The goal was to build a pan-European, multi-channel, mobile payments solution. This got the attention of another large bank, KBC, which joined the project in 2016.
Five years later, we’re a self-standing, international fintech, headquartered in Luxembourg and active in the entire Benelux area.
We took the opportunities as they came up and we’re still working on making the most of them. When you start as a small project financed by a single bank, you get a label. If you want to go big, you must overcome it and build your own credibility. Getting several banks behind us was not easy, but it was worth the effort.
We offer them a sustainable eco-system through an open-API approach and flexible microservices, as well as the payment rails for leading apps, including bank app integration.
Today, we have the support of 12 European banks, across three countries, and aim to lead the transformation of the payment industry in Europe.
Duke Prins became CEO of Payconiq in 2016, when the company transitioned from a start-up with an MVP to an international scale-up.
With over 20 years of experience in international management, corporate finance and advisory, he was also co-founder of bunq, a European neo-bank and transaction platform.