Last week’s Shaping FinTech webinar was all about innovation. We spoke to Alex Mifsud, Co-Founder and CEO at payments FinTech Weavr.io, and James Green, VP for innovation and intrapreneurship at Société Générale.
In financial services, there has been a huge shift in the way innovation is looked at. FinTech has moved from a disruptor, with challengers cropping up in competition with incumbents, to a possibility for collaboration and enablement. Within banks, innovation has gone from an optional extra to a must-have in order to survive, but there are many barriers in place that must be tackled.
You can watch the full webinar below, but here are three key things we learned:
The language has changed
The way innovation is dealt with, and even talked about, within large financial institutions such as SocGen is almost unrecognisable from 10 years ago. As Green explained, banks have moved away from “how can we build it?” to “who can we collaborate with?”.
Even within collaboration, the conversation has shifted from banks considering what companies they might acquire to looking for long term partners. Incumbents recognise the need to leverage the technology, speed and agility of a FinTech rather than buying a product or trying to build their own.
Some of this has been driven by regulation – for example, open banking means banks now need to open up their data to FinTechs and are using APIs to plug in services. It has also been led by the industry: as banks consider changing their business model they may look at Banking as a Platform and will become more of an ecosystem.
Financial institutions have a big responsibility
For many FinTechs who have looked to build a partnership with a large incumbent and found it to be a lengthy process, they may be forgiven for thinking the institution lacks the willingness to innovate.
However, this isn’t the case and it’s important for startups seeking to build partnerships to understand and empathise with the barriers the bank is facing.
Financial institutions have to play by a lot of rules such as KYC, ensuring their systems are secure and that nothing is missold. All this compliance and security is a huge responsibility which comes before creating a slick user experience that’s natural and appealing for the customer.
At Weavr, a problem to solve is how to create the right structures that allow FIs to play with untrusted and unregulated parties so they can improve the user experience while considering all their other responsibilities too.
Labs, accelerators and incubators are useful – but must be truly part of the institution
It’s exciting to see banks are open to reaching out to FinTechs and this is often through innovation labs, incubators and accelerators. In many ways this is a fantastic opportunity for startups to begin building and scaling their products.
However, it’s not as simple as that. A roadblock often comes in when startups need to use the bank’s data. Often, though supported by the innovation team, a FinTech can run into a governance labyrinth when they try to get access to the data they need from the wider bank.
When it comes to the project truly progressing as part of the incumbent, often the level and sensitivity of data needed makes this unfeasible and therefore the tool being developed within a lab can’t be incorporated into the wider organisation. This is a gap Société Générale is currently trying to bridge with its Capital Markets incubator.
There is also a cultural challenge surrounding these kinds of innovation programmes. People “doing innovation” are seen to be away from their desk and therefore it’s viewed as taking time and attention away from a staff member’s day job.
To solve this, a mindset shift is needed to promote innovation across the workforce and organisation as a whole, for example dedicating some of each employee’s day to innovation. Employees must also understand they don’t need to be the “tech person” to get involved in innovation. A culture must be promoted whereby anyone with an idea can bring it up, and the tech can come later.
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