Fintech is “banking’s cooler cousin”
Recently, we talked with David Brear about the seemingly inevitable clash between FinTech and the banking industry, his best guess at the industry’s next step, and what exactly happens if banks don’t change with the times.
David M. Brear, renowned speaker and CEO and co-founder of 11:FS, believes that banks can and should put the current technological innovations to good use. We talked to Mr Brear about the FinTech movement’s “disruptive” label and whether banks will “evolve or die.”
In this interview, Brear, weighs in on the inevitable clash between FinTech and the banking industry, banks’ next step and what happens if they miss the boat and not adopt new technologies.
JAXenter: How can one innovate in the financial space?
David Brear: The same way you innovate in any existing market, you listen to customers, you look for unmet needs or unsolved problems, and you create and execute a great solution. The digital transformation happening now has not really affected banking yet. At 11FS, we believe digital banking is only one percent done. The products of today are simple, blunt and from another era.
The financial space brings extra regulatory demands due to the fact that you are likely handling money or information about money. This makes the barrier to entry higher, but thankfully in some markets we are seeing regulators drive innovation. The FSAs Project Innovate in the UK is an excellent example.
JAXenter: What’s the difference between failure in fintech and failure in finance?
David Brear: I think there are parallels as all FinTech companies need to make money to exist. A failure in their technology will eventually lead to a failure in their finance. This applies the other way round also.
Technology can make things quicker, cheaper, and easier. Used badly, like any tool, it can also make things slower, more expensive, and complex.
If you are billing yourself as FinTech, then you need to show your technology credentials. There have been some notable security lapses in the FinTech world of late. How a company recovers from that both technically and culturally will tell you a lot about any company.
JAXenter: Still, some people claim that technology does not go well with finance. Should we blame technology for these unfortunate events?
David Brear: Frankly, no! Saying technology doesn’t go with finance is like saying macaroni doesn’t go with cheese. From earliest forms of physical money where people built in mechanisms for spotting fakes to today–where we try to use blockchain to rethink the sins of technology forefathers– Tech and Fin are completely intertwined. I’m a big believer (in the same way they say there is no such thing as bad children– just bad parents); I do not think the banks have a technology problem, they are just terrible at times at putting it into action. Technological innovations will be the heart and blood of the banking industry for many years to come and if big banks do not make the most of it, the new players from FinTech and large technology companies surely will.
JAXenter: Should banks be the ones to take the lead and ease the transformation towards the future and BaaP (Banking as a Platform)?
David Brear: I’d see this as a great way to maximize the opportunities that the banks have and the new players don’t in a significant community. Millions of customers make not only a BaaP play interesting from a partner’s perspective but also a sustainable (if they do it right!) advantage. I think the hardest part in this for them to get over is going to be the cultural barriers that such a shift in sharing and working will bring to make BaaP work. If I was a bank CEO right now I would be setting up a team of people to make this happen along with the traditional setup.
JAXenter: Do you believe the feud between traditional banks and FinTechs is real or is it just a stunt performed by one of them?
David Brear: Yes, it’s real because lots of people are using FinTech players. The banks last year have tried to move the dialogue to one of collaboration rather than competition as I think anyone would try to switch the narrative in a losing PR battle. The big shift was that – I think– the current biggest battle is actually between more the traditional suppliers and FinTech than the Banks and FinTech. Companies entering markets and being able to provide services that the big companies cannot offer, or worse, the ones they can for significantly cheaper, has really had an impact on the industry and I think will be a trend that will continue on.
JAXenter: Is FinTech a global pandemic?
David Brear: Without doubt it is, yes! It’s the cool cousin of banking that everyone wants to be involved in. I think we are at a real tipping point with it. We are seeing the excuses for banks providing poor customer experience losing credibility and in a market where technology players are providing personalized and contextualized experiences into the daily lives of all walks of life then how long can banks continue to underwhelm?
JAXenter: Do you think the phrase “evolve or die” describes banks’ situation right now?
David Brear: Sure. Evolution for me though is clearly optional. Not all banks are going to survive in the way that they have in the past. The thing about evolution is that it works one death at a time in the wild while in banking its really one retirement at a time. The cultural shifts required and the adoption of new and challenging technology is beyond where most comfort zones are.
JAXenter: Does FinTech still deserve the label “disruptive” or has it outshined this tag?
David Brear: I think the term disruptive has been overused a lot in the last five years. If something isn’t being disrupted, maybe you shouldn’t be doing it? Bullshit! People like to attach silly titles to things!
Thank you very much!
To read more about the marriage between software and finance, download the latest issue of JAX Magazine:
Does working in the finance sector pay off for software developers? The answer is “yes”. IT is a must have for most banks these days – a massive change from its previous “optional” status. That being said, if banks are trying to win developers over, why shouldn’t the latter learn a bit about this sector?
The technological needs of the finance industry include aspects such as Continuous Delivery, Java, Big Data, machine learning, low latency etc. By embracing these elements, the finance sector can change the status quo and co-exist with what appears to be a fierce opponent: FinTech. How should banks respond to FinTech? We invite you to open the magazine and find out.