Michael Concannon
Head of Strategy and Development,
Fintech and Payments Association of Ireland (FPAI)
Perhaps the greatest transformation in financial services in the last five years is the digitisation of the economy and the rise of fintech. When customers evaluate financial institutions, they don’t compare banks, they compare experiences.
A major challenge for banks has been to service the new digital demands of customers — while transforming their core legacy systems and the processes built around them.
Modern banking and finance
Big digital programmes — such as the migration of banks’ technology to Cloud infrastructure and implementation of Open Banking and API services — have changed how banks learn about and engage with new technologies.
Innovation comes from having the ability to understand and identify where a business could be doing a better job. Fintech companies were quick to realise the importance of user experiences, and they combined this with the ‘dot.com’ model of providing their services at a low cost — or even for free. As a result, they have recruited new customers at an exceptional rate.
Fintech advantages
Today, banks can look to fintechs to provide a signal as to where disruption can happen. Being able to partner with fintechs is incredibly important, as there are things that fintechs will do better — because they have the advantage of expertise to solve a very specific problem. They also tend to use newer technologies and have a small group of people running them that is passionate and fast-moving.
Collaboration and partnerships can
also bring real benefits for fintechs.
Challenges for fintechs
Collaboration and partnerships can also bring real benefits for fintechs. Many are discovering the huge cost and difficulty of building a customer base from scratch while maintaining regulatory compliance. Evidence has shown some firms having to refresh customers’ credentials as some may have been onboarded too rapidly.
Rich partnership opportunities
Banks typically have the scale in terms of customer base and trust; regulatory understanding; and awareness in terms of how to operate in a compliant environment. Working with a bank can remove many of these challenges for a fintech while potentially bringing necessary funding.
Ruth McCarthy, Chair of the Fintech and Payments Association of Ireland (FPAI) says: “In a relatively short time, Irish fintech has grown from being a fringe activity into a core pillar of innovation in financial services. The importance of this sector to the incumbent banks is reflected in the scale of collaboration underway across all areas of financial services. In the past five years, the retail banks have spent some €420 million in partnering and investing in over 100 Irish and international fintech companies.”