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Insight


Fintech: this time it’s different

Tags

  • Financial Institutions
  • Technology
  • Transaction Banking

SREERAM IYER, CHIEF OPERATING OFFICER, INSTITUTIONAL, ANZ | SEP 2019

 

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For banks - and their customers - now is the time to jump aboard the fintech train. 

 

 

For a long time, banks were criticised for not taking the growing slate of financial technology startups - or fintech - seriously.

Some of that criticism was misplaced. In truth, banks have been a huge supporter of technology is financial services since the inception of the industry. I’ve read there are about 25,000 banks in the world today and every twelve months, an extraordinary $US600 billion is invested in technology. There is extraordinary experience in this area.

Even still, when the disruption hype was at its peak, a number of developing players with intriguing ideas lacked the development, ability to scale or maturity truly required to make an impact on a long-established banking sector.

Even two and a half years ago, banks like ANZ found it difficult to identify suitable fintech players to partner with our institutional business.

But this time it’s different.

At ANZ, we deal with a number of fintech groups and while there are still some which need improvement in various areas, the quality of some of the ideas continues to rise exponentially.

Overall, there is finally enough maturity among fintech in the corporate and institutional banking space to solve real, tangible business issues.

I see real capability for these groups to scale up and work with big institutions like ANZ – and help banks provide customers with powerful and innovative solutions to help drive their business into the future.

VIDEO:CNBC

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“There is finally enough maturity among fintech in the corporate and institutional banking space to solve real, tangible business issues.”

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Opportunity

It’s not just ANZ which has this view. In recent weeks, JP Morgan has moved to invest in banktech 10x Future Technologies, according to the Financial Times, while 84 per cent of commercial banks in the UK are considering partnering with fintech just this year, Business Insider reports.

New technology is both a challenge and huge opportunity for the financial services industry. The macro environment is currently tough for most banks, with declining returns in several key areas. Fintech can help improve this and has the potential to solve many issues.

Discussions on retail banking applications of fintech are numerous but the talk is not as busy in institutional banking, at least at a mainstream level.

However, I think this time around the capability of these new technologies has now increased so much institutional banks are being forced to figure it out.

The question for these banks is how to integrate these ideas with existing, legacy platforms and systems - and how to liberate precious capital to be able to invest in the tech just to keep up with rising customer expectations. Therein lies the challenge.

The solution, of course, is partnerships - and I do think that’s what we are increasingly seeing. Through this process banks will be forced to change their old ways of working.

Banks can't expect to have 100-page terms and conditions documents presented to fintech companies. But it goes both ways – equally, fintechs can’t expect banks to commit to six-week product development and deployment deadlines. In reality it will take years.

Mindset

Part of ANZ’s approach in addressing these changing tech trends is to have a growth mindset and stay open to new ways of dealing with technology. We want to figure out how to work with fintech and how we can help them scale up, to the benefit of both parties and our customers.

At ANZ, we have our own innovation labs around the world - including in Bengaluru - and a strong internal team tasked with developing valuable intellectual property in machine-learning platforms.

The bank is actively working on ideas in many areas, including trade, and has seen marked improvements in productivity – in some cases, up to 40 per cent faster turnaround and an improved customer and staff experience.  Ours are no longer mere ‘ideas’, ‘proof of concepts’ or ‘pilots’.  This is part of a multi-year agenda that will continue.

ANZ believes the combination of technologies such as artificial intelligence, blockchain, cloud, data and the composition of all of those toolkits allows banks to be more ambitious in their institutional banking capability – which can only be good news for customers.  

Sreeram Iyer is Chief Operating Officer, ANZ Institutional

This story contains edited comments made to CNBC. You can watch the original conversation HERE.

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