To be a part of the technology-driven revolution disrupting the financial services industry, traditional banks turned their attention to mobile platforms. But that alone may not be enough.
Industry players at the Fintech Week London on Monday said banks need to get smart with data to measure up with fintech companies that are changing the finance industry for businesses and consumers.
“The physical organisations still rely on the old broken business model of banking; they believe they can distribute everything through branches of humans and now they have automated it using cloud services. They haven’t changed the model of the business at all,” Chris Skinner, CEO of Finanser Ltd, a research and media firm focused upon FinTech and the future of finance said.
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According to Skinner who serves as the chairperson of Fintech Week London, banks are not going to be disrupted or destroyed rather they are going to be bought. “The banks that are broken will be bought by those that are not-banks that are smart with data.”
To be smart with data means being rationalised, consolidated and organised leveraging through artificial intelligence, analysts at the Fintech Week explained.
“You can’t be artificially intelligent if you are dumb with data. There are so many banks that are dumb with data because it is fragmented product-focused and not customer organised,” a Sweden-based Fintech consultant said.
A London-based fintech company, 10x Future Technologies, recently raised $187 million to help larger, established banks build both next-generation services as well as tools to help their older services work more efficiently.
“While fintech may have been around in more developed economies, we are beginning to see that in emerging markets, the central banks are taking it from, say, fourth on their item list to first,” Zeiad Idris, Co-Founder and CEO, Algbra, said.
Fintech, according to the industry players, are the organisations that are leveraging and using their networks and day-to-day data.
While data from the Fintech Week estimated the number of fintech that launched globally in the pandemic year to be between 12,000 to 14,000, the industry players at the event backed by the UK Department of Trade said fintech start-ups around the world has attracted about $5.2 billion in the last year owing to their digital-native cloud-native nature.
“My favourite example is Stripe. The reason why it is my biggest example is not that they are the biggest in value; it’s because of what the Collison brothers (founders) created -using open finance through APIs. And they are highly valued because what they created is beautiful,” Skinner said.
Stripe, in 2020 expanded into Africa for the first time after it acquired Lagos-based payments company Paystack. Paystack was at the vanguard of a group of companies that have made Lagos the hottest fintech ecosystem in Africa, as investors seek to tap into a severely underserved market of 200m Nigerians, tens of millions of whom lack bank accounts.
Explaining the product of the fintech companies further, Skinner said: “code is art.” According to him, it is the heart of fintech, – “code is art,” he said again, adding that it “is what banks don’t get.”
On the meaning of the term ‘code is art’, Skinner said “if you design a brilliant code, API or an App, then other companies take it and appreciate the beauty but big banks don’t get that, they think their developers and engineers are just working with machines and don’t see them like an artist.”
On where most banks are currently with technology, the chairperson of the Fintech Week London said “If you look at in the last year, so many big old banks globally have signed cloud computing contracts. They have become cloud-based but they are not cloud-native.”
That, according to him, is the fundamental difference between the digital organisations on the outside cave and the physical organisations on the downside of the cave.
