KPMG’s Fintech Lead Warren Mead started off the session on Learning from Fintech – Can we fail fast and learn fast at Sibos this year by showing a video that depicted how we all might bank in the future using a system called EVA. The video showed a virtual assistant giving financial advice to a man getting ready for work in a similar fashion to Siri and reminiscent of the film Her, Mead highlighted that if we are to move on from the current reality, where we still scan cheques and use cash, banks will need to up their game, collaborate with the digital giants and learn from fintechs.
Vitality of partnerships
86% of the audience at the session believed that a partnership between banks and fintechs is vital for the future success of both industries. Cindy Murray from Bank of America Merrill Lynch highlighted that the key word here is partnership, but the cultural shift between both types of company is staggering because the banking industry is burdened with regulation compliance. “Where we’re not nimble is in security and technology and the RFP process to them is to get their foot in the door, whereas we use it for due diligence,” Murray said.
Murray went on to say that although banks are regulated, they still take risks and when working with fintechs, they do not introduce a new code until it has been tested end to end. Alongside this, BAML also introduced a real time technical associate called RITA eight years ago, but it didn’t seem to pick up. Following on from this, the audience were asked about the time scale that they think it would take for innovation to go from concept to implementation. 52.67% said more than a year, which the panel thought was a realistic answer, but 4.57% did answer less than three months, and this result was put down to fintech employees that may be in the audience.
Time and scale
Timothy Bosco from Brown Brothers Harriman, who started off his career in the fintech sector, said that it typically is a lot faster for fintechs to bring a product to market. However, he said that they were plagued by attention deficit disorder and should reign themselves in because they view innovation labs as test kitchens. “Done is the new perfect and we are moving away from having something with every feature,” Bosco said. He also advised fintechs to build high fidelity prototypes so that future failures can be dealt with before they happen: “when the developer is ready to show you the product, it’s too late.”
When fintechs focus on products that solve one problem and then try to iterate on that after it is sent into the market, Scott Mullins from Amazon explained how the risk isn’t any different. However, mirroring what Murray had to say, there is much more risk in an organisation like BAML because of the sheer difference in size. Bosco said that “we sometimes incorrectly think that our business is something that can be replaced overnight. Fintechs should that realise that and build products in order to collaborate with banks.”
Barriers to innovation
In the final question of the session, the audience were asked whether or not regulation is still a burden to innovation and as a result, partnering with fintechs. 18.4% said yes, 41.1% said sometimes, 9.2% said no and a staggering 31.2% said that actually, regulation is an advantage for innovation – and these are very interesting results. Christophe Chazot from HSBC agreed with this and said that the bank of tomorrow needs to be you in regard to the EVA product: “no one changes their portfolio while taking a shower,” he said. “Regulation is very interesting and regulation can be a motivator because you have to have an idea of how you can get around the regulation.”
Chazot highlighted that if the regulation is decisive and takes a particular and clear stance, then it will create innovation, otherwise people don’t know where they stand. Suresh Ramamurthi from CBW Bank’s advice was to take away the optionality from the fintechs and tell them how you are going to do processes in reference to compliance, and they don’t have to worry about whether or not they are being compliant. Chazot said that when working with fintechs, you discover that there are rules that you never knew about and makes you question why these rules exist in the first place. “The rules need evolution and it has to be done by regulation,” in a similar way to what happened with the introduction of PSD2.