Legacy banks expect the new wave of financial technology companies to look to them to collaborate, but many among this generation of innovators consider them to be obsolete, according to a heated panel discussion at the Sibos Innotribe session.
The Future of Money session pitted representatives of small and youthful financial technology firms against speakers from large banking institutions. Moderator Udayan Goyal, co-founder and a managing partner of Apis Partners, began by pointing out that technology usage among customers has superseded that of the banks, for the first time.
Goyal also said that new technologies could start to disrupt credit distribution, and that innovators and banks can “collaborate and compete at the same time”.
Christoph Rieche, CEO and co-founder of Iwoca, pointed out that even after years of quantitative easing, lending to small businesses is still in decline. He put this down to the high cost structures in legacy systems, and the manual processes involved.
He suggested that data collection should be automated in order to reduce administrative costs, and that significant trade data is already available in electronic format through the online platforms that these businesses use every day.
SWIFT CEO Gottfried Leibbrandt was more matter of fact, saying: “I have learnt from banking that the hard part isn’t making the loan, the hard part is getting the money back.”
While Leibbrandt accepted that efficient use of data was a challenge for banks, he also questioned: “Are we allowed to use that data?” If so, he suggested that start-ups may be in a better position to make use of it than larger banks.
As the discussion moved to big banks, Claire Calmejane, director of innovation at Lloyds Banking Group, argued that while ‘fintech’ is an important area for investment, “it’s not the only one”.
She said banks can invest directly in financial technology, and highlighted that there are other important innovations also deserving of attention. While Calmejane advocated collaboration between banks and start-ups, she said that this collaboration should also involve governments, technology giants, and other areas of financial technology, pointing out that small start-ups will have to scale up their technologies.
Steve Ellis, executive vice president and head of the innovation group at Wells Fargo, also agreed that there is a need for innovation, and controversially suggested that large firms should be looking externally, saying: “The smartest people in the world do not work for your company. They are somewhere else.”
Finally, Alexander Graubner-Mueller waded in, saying that while he had heard talk about innovation from the legacy banks: “I haven’t heard anything innovative”.
He suggested that there is a “new ecosystem” developing in financial services, and compared the bigger banks to telecoms companies of today.
Currently, cell phone users care more about their handset, operating system and apps than about their network provider, he said, and in the future bank clients will not care who their bank is, only about the services they’re receiving, which the fintech firms will provide.
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