The industry is seeing a rise of fintechs and banks working “hand in hand” in the payments space, according to a panel at this year’s Sibos event.
Although banks need to work with fintechs to evolve, the panel emphasised why it is also important for fintechs to collaborate with banks.
The panel suggested that fintechs should partner with banks in order to expand into different countries and understand the different requirements that need to be met for each jurisdiction.
Jeremy Warren, managing director of financial crimes compliance at J.P. Morgan, explained that there are more partnerships being formed, as well as in some cases the acquisition of fintechs to help support banks.
In the last couple of years, the industry has seen a global rise in fintech firms, and while many are experiencing global growth, Ron Giammarco, partner of financial crime compliance innovation, technology and operations at EY, noted that they still rely heavily on traditional payment methods and financial institutions.
Warren said: “Fintechs are able to do things that banks are not able to do or have the ability to build as quickly or execute as efficiently.”
He highlighted that there is a “big opportunity” in this space.
Also weighing in, Matt Brown, group head of compliance services at HSBC, suggested that the industry has reached “the tipping point” in terms of innovation.
Brown said that banks are adapting their services to meet customer expectations and they have already started to innovate.
He commented: “I think it was Bill Gates that said banking is necessary but banks are not, I would certainly challenge that statement. Banks are needed at the end and at the start of most transactions.”
Banks are evolving, and Brown noted that there are many examples where banks have reached the tipping point.
“If anything the financial crisis demonstrated that banks can evolve quicker than perhaps we first thought.”
He explained it would be key to build on what was experienced over the last few years. “There has been an acceptance that improved technology has the potential to make banks nimble and better at meeting customer expectations as well as being compliant legally and regulatory.”
“It’s going to help us identify financial crime, which is really important. It is going to help us protect our customers and also facilitate real-time services to the customer bases which we know that they absolutely expect now,” Brown added.
Looking at the challenges around fintechs, Erin Zavalkoff, global head of anti-money laundering compliance risk management for foreign correspondent banking at Citi, said that fintechs are very technology-driven and compliant-focused firms, meaning that they might not “appreciate the outset of regulatory constraints that banks have operated under and continue to operate under”.
Zavalkoff suggested this makes fintechs “ripe for training” so banks can assist them in coming to appreciate regulatory obligations.
She said: “Because of their focus on customers and getting products to the customer quickly and efficiently, I think the whole concept of evolving business flows is probably the biggest challenge for us. Having to understand the client on day one and appreciating as they evolve - which will be a quick evolution - their products and nature of their business will evolve very quickly.”
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