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Banks & Fintech – Frenemies?

11 May 2016

On Tuesday 19th April we held the third session of our second payments breakfast series which brought together guests from banking institutions, large Financial Services organisations and FinTech businesses. Now in its second year, the series have continued in momentum, and the energy and communities coming together show that collaboration is  happening across the sector.  

When we planned the series last November, we were hopeful that the sessions would be lively and full of debate – we were not disappointed. As the months have gone by, we have seen that change in this fast paced market has happened very quickly; relationships have formed and with this collaborative approach, we are now in a very exciting place. 

FinTech is revolutionising the financial services markets and rebuilding the boundaries of the financial institutions. We discussed around the table how we have already made huge steps forward, but that there is much more to be achieved and further challenges around the corner - accepting these challenges is key.

In previous thought pieces, I have touched on how consumers now have a greater level of control and decision-making over their financial decisions in relation to which products and services they can use. This is due to an increasing amount of products becoming more readily available.

According to Ernst & Young in their latest FinTech report, the FinTech industry generated £6.5 billion in revenue in 2015, with a workforce of circa 60,000 employees. There are more people in London that work in FinTech than there is in Singapore, Hong Kong and Australia combined. Furthermore, there are more FinTech deals done here than the rest of Europe – a fact that everyone at the breakfast session felt proud to be a part of. 

A few days prior to the event, the government announced that they are developing a new UK FinTech strategy and are therefore keen for experts, like we had in the room, to get involved. This topic was discussed around the table and it was agreed that the UK government are encouraging growth in the already vibrant ecosystem by providing a dynamic regulatory environment that can develop open banking standards to make sure that bank data can add value to their customers. 

Another topic of discussion was centred on talent and the effects of culture and change. Attracting talent, especially niche talent, in a growing and evolving market is still a big discussion point for all organisations. It was apparent that FinTech organisations looking to grow are trying to attract talent that can raise the bar internally and evolve the culture to the next stage so that they can attract investment or a tradesale. Likewise, the larger more incumbent Financial Services firms are looking for talent that can make them more agile or help them become more cost effective across the organisation. This particular talent has either grown tired of the corporate life and just wants to add value elsewhere or the institutions don’t know how to capture the talent because of the restrictions it imposes on itself with trying the ‘traditional’ recruitment methods. 

Hiring talent was one part of the discussion but talent retention and keeping the best employees is also high on everyone’s agenda; it is a growing concern for all financial services organisations.  The breakfast attendees were in agreement that this is a challenge and we will be discussing this in more detail in the autumn series. Odgers Interim understands this journey and that it’s only at the beginning for a lot of companies when hiring senior executives.

The conversation progressed onto investment within the FinTech sector. As we have seen over the past 12 months the froth has come out of sector in terms of the valuations; investors are now looking at the underlying economics of a business rather than just raw growth, which is a good thing for those building robust and sustainable businesses.

To summarise the overall event, we had a lot less talk about disrupting the incumbent institutions and more talk about partnering with them. The FinTechs are recognising that banking and large Financial Services organisations offer the best route to scale, and the banks and large Financial Services organisations are recognising that FinTechs offer a route to the innovative products and services that their customers are demanding. So right now, it’s friends, for the time being at least.

See you all in September when the breakfast series returns. 

Tim Muzio is a Consultant in our Financial Services Practice


Categories: Financial Services

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