The FinTech Ecosystem

Last Friday, I had the pleasure to be invited to the White House’s FinTech Summit, where, as the Wall Street Journal reported, the half-day event “largely focused on how government agencies can tap into the innovation, in which new firms are offering small-business owners and consumers faster forms of loans and digital payments.”  Certainly, collaboration between technology companies and traditional financial institutions has increased — think proofs of concept, partnerships and strategic investments — but much still needs to be done.  As I took notes during the event, I did so with an eye towards the platform we built — and the ecosystem beginning to develop — with FinXTech.

FinXTech is a platform that promotes collaboration between the most forward thinkers in the industry – in order to create real innovation, change and a better future for all.

As new technology players emerge and traditional participants begin to transform their business models, there is growing sentiment that successful institutions need to enable financial services for life’s needs through collaboration and partnerships with the very fintech companies that once threatened to displace them.  I tackled this issue in a piece I wrote (A Fear of Missing Out).  A few things didn’t make the final cut that I thought to share here.  Of note:

  • I asked Michael Tang, partner and head of global digital transformation and innovation at Deloitte, how might bank executives determine the amount of money they should allocate to innovation.  He shared that industry metrics range from 2-7% of revenues (and also depend on incremental or moonshots-type initiatives).
  • Even as technology will force narrowing margins, there may be opportunities to develop new profit pools and forcing some incumbents to “move upstream” to serve more sophisticated and profitable cohorts (source: Disaggregating the impact of fintech).
  • The playing field will level as firms of all sizes will be able to take advantage of emerging networks and platform-based services. Ultimately lowering cost, improving compliance, and focusing on markets where they have a true competitive advantage (source: Disaggregating the impact of fintech).

The rapid transformation of the financial services industry — due to technological innovations and shifting customer expectations — is quite remarkable.  If you missed what Adrienne Harris, special assistant to the president for economic policy, wrote in a blog post following the White House FinTech Summit, it is worth your time to read.

Disrupt (or die trying)

Georgia peaches...
Georgia peaches…

If you’ve been on this site before, you probably recognize a pattern to my writing. Each Friday, I share three things I heard, learned or saw during the week.  In past posts, I’ve penned a number of “disruptive” stories that ranged from Brett King’s perspectives on banks (“Does Banking Need a Re-boot”) to John Cantarella’s on Time Inc.’s digital strategies (“Dass de Thing”).  So it should come as no surprise that I furiously began writing today’s column on a flight home from Atlanta on Wednesday evening.  I’d just spent several hours in the offices of the William Mills Agency, one of the nation’s preeminent financial public relations and marketing firms, and left inspired.  What follows are just three of the many Fintech companies the agency represents that are doing some pretty cool things.  IMHO, banks of all sizes might pay attention to these tech companies if they want to disrupt the status quo rather than have their status quo disrupted.

(1) In Bank Director’s home town of Nashville, TN resides the corporate marketing team for CSI, a leading provider of end-to-end technology solutions.  The public company delivers core processing, managed services, mobile and Internet solutions, payments processing along with print and electronic distribution & regulatory compliance solutions to financial institutions.  I like their resource center, but really appreciate their blog that highlights myriad client success stories.  For instance, “How One Bank “does” Social Media Right” shines a light on First Kentucky’s one and only social media strategy.  To wit: not a word about CSI’s involvement with the bank in favor of why the bank decided not to sell things to its social fans and followers.  A “fun and light” client example that shows a more intimate side of the bank vis-a-vis one of their preferred service providers.

(2) For many financial institutions, the gap between the strategy set by the board and subsequent execution can be quite wide.  As Steve Hovde (an investment banker and regular speaker at some of our larger events) shared with us, “bankers are conservative by nature, and the credit crisis served as a stark reminder why they should be. Still, many banks—particularly smaller, community banks—are reluctant to take advantage of strategic opportunities that could significantly enhance shareholder value.” So when First Midwest Bank (a not-so-small $9 billion institution based in Illinois) needed to measure product and customer profitability to support pricing and product offering decisions with accurate contribution margin results, I learned they turned to Axiom EPM.  The company, a provider of financial planning and performance management software, affords “visibility into profitability across the organization.” If you’re keen to learn how First Midwest analyzes profitability at their bank, you might take a look at this on-demand video.

(3) To wrap things up, let me pose a question: how fast would you switch to a different bank if you were the victim of online banking fraud?  Before you answer below (hint, hint), can you guess the percentage of your peers that would immediately?  From a banker’s perspective, such cyber risk poses a real threat to a business model.  Having worked in the IT space for 5+ years, I was curious if its possible to offer online and mobile banking with no possibility of this happening to a customer… ever.  Entersekt, a South African company with designs on the U.S. market, believes it is.  According to a few of the good folks at William Mills, the folks there are the pioneers in transaction authentication.  That is, the company “harnesses the power of electronic certificate technology with the convenience of mobile phones” to provide financial institutions and their customers with full protection from online banking fraud.  Authenticating millions of transactions globally, none of Entersekt’s clients have experienced a successful phishing attack on their systems since implementing the company’s technology.  A pretty impressive accomplishment, and nice way for me to wrap up this week’s column.

Aloha Friday!