Mediaplanet spoke with EY’s Americas FinTech Leader, Matt Hatch about how enterprise banking institutions and financial technology startups benefit from working together.
FinTech Leader, EY Americas
For financial and banking institutions, what are the benefits of partnering with a financial technology (FinTech) player?
Partnering with a FinTech company can ignite innovation and accelerate speed to market. Innovation isn’t easy — it’s cultural, dynamic and in many ways contrary to how many large companies have evolved to operate as efficient and process-oriented machines. Financial institutions can emulate startup strategies with their own lab environments, or can tap into the investments and capabilities that exist within the FinTech startup ecosystem. The challenge then becomes the ability to effectively partner (considering legal, compliance and risk elements) and still move fast. The FinTech company must also anticipate this and put a risk-compliance mindset front and center in the sales strategy. While these challenges must be taken into consideration, the benefit to the financial institution is vast: lowering execution risk and accelerating speed to market.
For a FinTech company, what are the benefits of partnering with a banking or financial institution?
Banks and financial institutions have a legacy of building trust and extensive customer networks, and have established charters and licenses required for money movement, custody and advice offerings. Customer acquisition and maintenance is expensive and takes time; partnering with an established financial institution can allow the FinTech company to accelerate both customer adoption, and the impact the company can have on improving financial services.
How do you see consumers benefiting from the intersection of FinTech in the banking industry?
Customers will get products that integrate into their lives in a more meaningful way — the way in which they are becoming accustomed to interacting with the digital environment. In addition, financial products will become more integrated into other daily activities — social networks enabling payments, or sharing assets such as a car within a community and automatically settling the costs for the car, fuel, maintenance and insurance.
Products will also continue to become more personalized. Financial products are currently engineered to serve a mass market. In the future they will be engineered individually for each customer — leveraging the vast amount of information and data available to meet that customer’s needs in the best and most integrated way for them.
In addition, the benefits to the broader economy are significant. Through better collaborations between institutions and FinTech companies, there is the opportunity to bring many more people into the financial ecosystem through better access, simpler engagement and more open integration.
Technological integration appears to be a popular vaulting point into banking and FinTech collaborations. What technological transformations in the banking and finance sector are you most excited about?
I’m most excited about the financial products that will seamlessly leverage internal and external data sources to customize products and personalize the delivery: in other words, how and when a consumer wants or needs to interact with their financial activities. Some of that data sits within financial institutions today, and some externally, in social networks and via connected devices we control. We are only starting to understand the implications of this data on financial products that can effectively use machine learning and advanced computing technologies to accelerate development of products and services, and impact the customer in a meaningful way.
Also, the open application programming interface (or API) economy is creating brand new opportunities for both financial institutions and customers to create new experiences, enable new sources of innovation, and new ways of customizing value propositions for clients. The sharing economy will absolutely underpin many of the most profound innovations yet to come.
It seems that every day we hear about how technology is becoming more integrated. The implications on FinTech and the future of how financial services works and interacts with its customers are both compelling and exciting.