Have you seen an increase in the number of fintech start-ups?
Definitely. I can’t quantify how many start-ups there are around—although estimates put it at between 10,000 and 12,000—but the number that have applied for the Innotribe challenges has continually increased since we started the programme. This year we had 370 applications, which is a 32 percent increase on last year, and I think that is representative of the increasing number in the market.
We are also seeing a lot more investment, and more headlines about the value being invested in to start-ups. In 2013, the reported investment was about $3 billion, and by 2014 that had quadrupled to $12 billion. There is increasing investment, and that investment is helping to prompt the creation of more start-ups.
There are a lot of venture capital companies looking to invest, and a lot of banks that are investing as well. When Innotribe started seven years ago, financial technology wasn’t really a buzzword, and the idea of a start-up wasn’t particularly well known, at least not in the financial industry. Now, most of the big banks have their own start-up challenge programmes.
What kind of issues are this year’s Innotribe finalists addressing?
There is a really wide range of topics, but there were four big ideas that most of the applicants seemed to concentrate on. There was a lot of focus on compliance, so looking at risk mitigation and financial reporting. Security was another key area, which focused on authentication of users and identity, as well as how clients communicate with banks. Big data featured a lot, specifically how to take what is often a lot of unstructured and unrelated information and derive some kind of insight from it, for example, credit scores and determining whether a person or a company is credit worthy. Finally, a lot of applicants looked at peer-to-peer and business-to-business flows, including faster payments and mobile banking.
Compliance, security, big data and payments were the most featured ideas, and I think that is probably representative of the challenges the industry is facing at the moment.
How can these small start-ups compete with the big banking giants, and should they?
I actually see it more as an opportunity for cooperation. The banks themselves are interested in investing in start-ups, so there is a lot more cooperation happening already.
Banks like the idea that start-ups are looking at new technologies and exploring things that banks might not naturally consider. Big entities tend to a be a bit slower to move, so if they can work with these young and nimble companies, it can be a great way for them to engage with the new ideas and technologies, and then there is obviously an acquisition possibility at the end of it.
On the flip side, for a small start-up, it can be very difficult and time consuming to try and get the product out to whichever end customer is being targeted. By cooperating or partnering with a bank, the start-up gains the scale of access to hundreds, or even hundreds of thousands, of customers. There is a natural fit for a start-up and a big bank to work together.
Do you think there is a need for more innovation in the industry?
There is, but I don't think it ever really stops. I can't think of a time where there isn’t going to be a need for innovation, whether that’s within banking or outside of it. While previously we had the likes of Google and Facebook emerging, now we are seeing a significant number of tech start-ups emerging on a grander scale, and ‘fintech’ has become a buzzword in its own right.
But there is still innovation happening in bigger entities. Banks are taking an innovative approach by running these start-up challenges and working with small fintech companies. It’s not just a case of an individual having an idea—it can also be a large player taking a different approach to solving a problem or creating an opportunity.
SWIFT itself was an innovative creation born from a group of banks that realised they were communicating in a very manual way that could in fact be improved upon. We continue to innovate and are always looking to create new products and services. Innotribe is an example of SWIFT innovation, whereby we created a dedicated brand to engage with the fintech community.
Peter Ware is head of partner framework, Innotribe and the SWIFT Institute at SWIFT
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