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Cultural misfits slow fintech collaboration

…especially between banks and start-ups.

A cultural misalignment between large corporate organisations and fintech firms appears to affecting the rate of collaboration and partnerships between the two, particularly in the banking sector.

Speaking at a recent Fintech Innovation Summit, Liesl Bebb-McKay, head of RMB’s innovation hub Foundery, said banks are aware of the need to partner with fintech firms in order to accelerate their development but finding the right partner and attempting a cultural link proves challenging. “A fintech by its very nature is not a cultural beast that aligns with a bank…We need to figure out the rules of engagement.”

“There is tremendous innovation, by collaborating real innovation can happen. But it is really hard to do. It is not the technology that is an issue. It is very much about the cultural fit [but] even that is a bit of a cop out. It is just about figuring out how big organisations and small organisations can work together in the most productive way to deliver something new to the world,” said David Milligan, chief executive and founder of KPMG Matchi. He went on to add that the very idea of collaboration and partnerships between the likes of banks and fintech firms is relatively new – the initial fintech wave saw many predict that start-ups would “eat the banks’ lunch” or take over the industry – and has recently extended into the insurance industry. By his estimations, insurers are at least five years behind banks when it comes to making use of available technology to innovate.

However, it is now generally accepted that fintech firms will not replace banking entirely but the form of banks, as we know it, may change going forward.

Peter Crawley, a managing director at Citi Bank South Africa, said financial intermediation is considered ripe for disruption as it comprises a balance sheet wrapped in data and information access and that emerging technologies provide banks with endless opportunity. “I think banks – all banks – have always been major consumers of the best technology. I think this is an opportunity to use the best technology and still have that balance sheet and still be regulated… I think opportunity is right in front of us. It is a matter of adopting the right tech at the right time and in the right way with the right approach to client led innovation”.   

He said such innovation could come not only from collaborating or partnering with fintech firms but also by empowering client-facing teams within banks. “We need to create entrepreneurial culture within Goliath corporate organisations that allows them (people) to grow and allows the best ideas to flourish from seed stages right through to giving them seed funding, innovating their ideas, allocating resources [and] learning from them.”

But Milligan, having previously worked in innovation within a large South African bank, said real innovation comes from smaller firms outside of banks as their approach to these solving customer problems typically differs from that of bankers or people who work within large organisations. He suggested big firms need to figure out how to effectively partner with small firms, which may challenge the theory of their businesses and may even lead to structural changes. “Until we have a revolution in how we organise our businesses, being firms are not actually going to innovate,” he said.

Bebb-McKay added that fears over security should deter innovation. “It becomes a very good weapon not to innovate because we have this fear of the regulator [and] we have this fear of security. In actual fact, the tech that we are seeing helps us – there’s a whole regtech industry growing that’s helping us to be more secure as banks. We’ve got to constantly walk this line between innovating and our intense inherent nature to be over-regulated and afraid.” She said banks shouldn’t fear technology but should fear being left behind.  

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The thing is there is no such thing as normal bank anymore – it is all Fintech but the people running the banks come from the old ‘normal’ and thus are difficult to communicate technical issues and motivating to move away from legacy systems and embrace newer systems.

That Bob is the problem – technocrats want to convert bankers to their way of thinking, but the banker on the other hand wants to deliver a product that works and has no glitches to a customer. As a banker delivering a product to a customer with certain attributes that satisfy the customers needs/wants is all that banker is interested in, how it operates in the background is immaterial. A simple analogue a forklift truck driver is not interested in the mechanics of the truck all he wants is to move a palette from one location to another, so his mechanical knowledge extends to using the forklift truck as a driver not as a mechanic

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