Sometimes in hot competition with each other and at other times model collaborators, financial technology and financial services are still sorting out the ideal business relationship.

Author: Andrea Fiano

One message comes quite clearly out of Sibos in Geneva this year: fintech companies and financial institutions are re-thinking their relationships. And in general both sides are ready to consider different models of collaboration and coexistence.

Few possibilities are excluded. It’s not that anything goes, but that anything could go, that is, with no clear formula for success, every model is worth trying. Thus many players, particularly on the banking side, are using several different strategies at the same time: becoming partners with fintechs through direct investment; financing and running internal incubators for fintech startups; and, most of all, experimenting jointly with clients on new fintech solutions.

Not all financial institutions are working all the angles at once, but there is a clear readiness to explore different approaches. And the same flexibility and openness is also found at fintech firms that have realized banks can be partners in developing technology, not just clients or investors.

What’s more, these ideas are also increasingly taking hold among regulators. State and regional governments are considering partnerships with fintech companies, and see in some of them a potential ally. In Singapore, for example, the government is direcly involved in the project of Smart Country. Likewise, Chinese regulators seem to be supportive of fintech initiatives.

Alex Manson, global head of transaction banking at Standard Chartered, was both host and panelist of a Sibos roundtable with Brad Garlinghouse, COO and president of Ripple, a distributed ledger developer, and Mike Sigal, entrepreneur-in-residence with 500 Startups, a venture-capital seed fund. Standard Chartered just announced a strategic investment in Ripple, a long-time tech partner, which gives the bank an observer seat on Ripple’s board. Asked why the bank had made a large bet on Ripple, Manson said “we chose to take part in the discussion instead of dealing with solutions” from fintech companies “looking for a problem to tackle.” Standard Chartered expects the partnership to facilitate development of more commercially viable applications.

The new attitude changes the role of the tech firms, too. “[Ripple] is no longer selling innovation labs like a year ago, like a science experiment,” Garlinghouse told the audience in Geneva. “We think that innovation should be in the DNA of companies. And we believe that innovation comes from companies that take thoughtful risks and tolerate failure.”

Still, there is no single type of relationship between financial companies and fintech firms widely viewed as “best practice.” Timothy Bosco, who leads the innovation program of Brown Brothers Harriman, where he is a SVP in the investor services area, says his bank does not make direct investments in fintech companies. Instead, it has “a portfolio of products that we can show and several prototypes of projects that fintech companies are working on” that can be provided to clients. This approach allows a financial services company to tap the knowhow of multiple technology providers, while the fintech providers maintain a diverse customer base. “They need clients but do not want to deal exclusively with one,” Bosco answers. “Both [sides] fullfill needs for each other.” 


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