On a flight to Boston yesterday morning, I found myself reading various research and analyst reports about forces effecting change on the banking community. As Bruce Livesay, executive vice president and chief information officer for First Horizon National Corp. in Memphis, Tennessee recently shared with our team, “you can’t have a discussion about banking without having a discussion about technology.” As such, today’s piece about finding your FinTech edge.
A simple truth with a profound impact: the interaction, communication, coordination and decision-making in a large, regulated bank is vastly different than those of an up-and-coming FinTech company. No matter how much both sides want to work with the other (to gain access to a wider customer footprint, to incorporate emerging technologies, etc.), the barriers to both entry and innovation are high. Still, the need for institutions to better target customer segments while rolling out product offerings that differentiate and cross-sell naturally intersect with the use of technology.
Over the past few months, I’ve looked at nine technology companies that I think are doing interesting work (you can find write ups here, here and here). As I go deeper into this space, I realize defining the FinTech sector might prove as elusive as understanding the genesis of each company’s name. Still, let me take a crack at it and define “FinTech” as those financial technology companies that sell or enable:
- Acquisition & engagement tools
- Mobile payments offerings
- Lending options
- Security products
- Wealth management support
- Money transfers
- Asset management
- Automated planning / advice
Regardless of the FinTech companies populating each product line, it is clear that the cumulative effect is a transformation of the fabric of the financial industry. As I read in a recent Deloitte report (2015 Banking Industry Outlook), FinTech applies not just to customer-facing activities, but also to “internal processes, including balance sheet management, risk, and compliance.” Moreover, learning from non-bank technology firms and establishing partnerships is fait accompli for most bank executives and board members today.
As I’ve shared in the past, I am a big believer that many banks of all sizes have immediate opportunities to expand what banking means to individual and business customers. If you’re curious for examples on what’s working — and why, take a look at this special supplement to Bank Director magazine that highlights a number of interesting technologies that have re-shaped the fortunes of various community banks. For more on the board’s role in oversight of this important sector, take a look at our Editor, Jack Milligan’s, white paper on the topic.