How banks and FinTech startups are partnering for faster innovation

The FinTech industry has received over US$12bn of investment from venture investors in just one year, and has attracted enormous attention from not only venture capitalists, but also banks, consulting firms, traditional financial services, product vendors and the government. The early days of the bank worrying about the disruption potential of the FinTech start-ups, which are quick at launching simple, intuitive products for the market, have now receded and banks are looking actively at collaboration opportunities with FinTech firms. Banks have used various channels like in-house incubator or accelerator programmes, open core platforms and even investments as a means to keep a tab on FinTech start-ups. They have used these to track any emerging new technologies that could be integrated within the bank, as well as opportunities for high returns. Most tier 1 global banks have now launched such FinTech initiatives, and the smaller and regional banks are beginning to launch similar programmes and create ecosystems. Banks will also use these technologies to proactively go after markets that were traditionally difficult to capture due to the high costs involved. Rural and geographically remote areas can be tapped into with the help of technology for the underbanked, and Millennials with a high degree of technological sophistication can be targeted with niche offerings. Banks are expected to continue working closely with start-ups to innovate faster and to create offers that can improve customer experience and widen the customer touch points, and thus loyalty.