As some estimations suggest, ~$4.7 trillion out of $13.7 trillion of the traditional financial services’ revenue is at risk of being displaced by new technology-enabled entrants which include FinTech players from lending, wealth management, payments and others. Even though there is a debate on the accuracy of estimations with some thinking of it as an exaggeration and others believing it to be more real than it looks like, there is a general consensus that FinTech has a substantial impact on the financial services industry and its traditional players.
In response to the changing environment and transforming consumer behavior, banks have come up with the ways to adjust – fight back, partner, incubate/accelerate, restrict, etc. Some of the most forward-thinking institutions have turned to building beautiful friendships with FinTech startups that may result in mutually beneficial outcomes.
This year hasn’t been an exclusion in interesting partnerships and initiatives from traditional financial institutions with the aim to foster collaborative and beneficial relationships with FinTech disruptors.
Among the most recent initiatives is the Bank of England FinTech Accelerator, which was launched in mid-June this year to work in partnership with FinTech firms on challenges that the bank faces. The accelerator will work with new technology firms to help the BoE to harness FinTech innovations for central banking. Partner firms will be selected to engage in short proof-of-concept projects (POCs) that are relevant to the bank’s mission with all commercial considerations being taken into account.
A little more than a week ago, Scotiabank collaborated with FinTech startup Kabbage to provide business loans in Canada starting July and in Mexico later this year. With this partnership, businesses will be able to apply for loansthrough Scotiabank’s website in the listed countries and get a decision within seven minutes.
Towards the end of June, JPMorgan announced the launch of In-Residence, a program for FinTech startups to sit ‘side by side’ with its businesses in order to develop innovations that could revolutionize the sector, enabling banks to operate faster, safer and at a lower cost. Emerging FinTech companies that become residents will join the bank for six-month periods and have access to the bank’s facilities, systems and expertise. Residents will retain control of their innovations and may receive continued support from the bank even after the residency period in an effort to bring their solutions to market.
As Daniel Pinto, CEO of the Corporate & Investment Bank at JPMorgan commented, “Our industry is going through a transformational time, driven by competition, regulation and advancements in technology. As a leading global bank, we are committed to driving industry change by investing heavily in internal development, but also by collaborating with the talent of determined, young startups.”
Axis Bank also aims to ride the wave of FinTech transformation with the launch of its innovation lab to tie up with FinTech startups. As reported by the Business Standard, the innovation hub in Bangalore will focus on curating startupsand work with them to develop value propositions. Axis Bank will also be looking to possibly absorb their technology.
Rajiv Anand, Executive Director (Retail Banking) at Axis Bank, commented, “We will work with startups and we can tell them the problems that are there and they can help us with solutions. Startups get the benefit of our domain knowledge and basic infrastructure. Also, the accelerator programme is interesting as they get to meet other startups as well and there can be cross-pollination amongst them as well.”
Capital One has recently launched Capital One Growth Labs in the UK, an accelerator program for early-stage startups and high-growth companies. The initiative aims to discover innovative new businesses and give them cutting-edge support to develop technologies for the financial sector.
Chris Owen, Programme Leader, commented in the official press release, “One of the key aims of the programme is to discover and partner with some of the most promising new technology startups and unlock the truly leading-edge and innovative ideas of tomorrow.”
Another North American giant, Canada’s RBC Bank has been eyeing Silicon Valley talent for its innovation lab, as Reuters reported in the last days of May. According to the source, RBC wants to team up with Silicon Valley’s brightest talent to position itself at the forefront of new financial technologies. RBC sets aside $78 million as “seed money” to invest in startups and talent. Further, as the Vice President of Innovation Gabriel Woo shared, the bank will look to open more labs around the world.
Woo commented, “We’re certainly looking beyond Canada and even beyond North America. There is always really interesting stuff that’s happening out in the (San Francisco) Bay Area, in Silicon Valley.”
RBC has also established a partnership with C100, a group of Canadian entrepreneurs in Silicon Valley, to set up Canada House in Silicon Valley, which Canadian startups will be able to use to meet potential investors and customers.
Mid-June, Barclays launched FinTech innovation platform Rise Mumbai in order to provide a physical space for startups in a co-working environment along with event spaces and meeting rooms. The site was launched in partnership with91springboard – a co-working community that helps provide space and organises events.
As Lubaina Manji, Barclays Head of Rise and Group Innovation Office commented, “At Barclays, we are embracing the opportunities and expertise of the startup ecosystem, working together to drive innovation in financial services. Rise Mumbai will give technology entrepreneurs in India access to a global network of experts, businesses and partners, setting them up for rapid scale and growth. We are very excited about the launch and look forward to tapping into India’s budding FinTech ecosystem, widening our global reach.”