3 Factors That Help Fintechs and Startups Secure Partnerships with Banks
Brilliant ideas aside, it’s about understanding how your solution fits in with the bank’s vision.
By Medhy Souidi
In the DBS #differentkindofbank campaign, you may have seen the tagline, ‘more like a startup, less like a bank’.
This is one of the mantras DBS adopted to drive innovation across our organisation. In addition to transforming the way we work — through data analytics, cloud computing and API connectivity — we have also increased collaborations with our fintech and startup partners. This has not only introduced new ideas and solutions to the bank, but also enabled DBS to position itself as a leading partner in the digital economy.
As the Head of Fintech at DBS Bank Hong Kong, I would like to share some of my experiences around driving collaborations with startups for our Hong Kong franchise, as well as my top tips for what banks are looking for in strategic technology partners.
Hong Kong’s Flourishing Innovation Culture
From when I first arrived in Hong Kong in 2014 to today, the transformation of the city’s fintech and startup scene has been nothing short of remarkable. In a report shared by Invest Hong Kong, the number of startups stood at 3,985 in 2022 — a 52% increase compared to 2018.
DBS was the first bank in Hong Kong to launch a startup accelerator programme in 2015. Back then, the bank partnered with 10 local startups to develop proof of concepts. In the years that followed, the programme raised over USD 16 million in funding for startups such as FinChat, Perx Technologies, HyperAnna and Squirro.
Collaborating with Fintechs and Startups
In 2018, as DBS’ relationships with fintechs and startups deepened, our accelerator programme evolved into Startup Xchange as a way of creating a dynamic and global ecosystem. Through Startup Xchange, we have been able to adopt a more collaborative and nimble approach to working with startups — facilitating the matchmaking of tech ventures with DBS teams, as well as linking our network of clients with customers.
Since the onset of the global pandemic in early 2020, the needs of our retail and corporate customers in Hong Kong and the APAC region have rapidly changed. Factors such as social distancing, lockdowns, border closures, as well as the rise of fintech companies and virtual banks have meant that:
1) There is increased competition in the marketplace.
2) Customers are looking for digitised and personalised banking and financial services solutions.
3) Employees are demanding digitised and enhanced internal processes.
Established financial institutions are therefore keen to explore startups’ and fintechs’ innovative solutions as a means of improving on the status quo. The challenge, however, is whether organisations are willing to make the necessary changes, and more than that — sustain them. Solutions in emerging spaces such as artificial intelligence (AI), for example, often involve the introduction and adoption of new operating models. This can prove a significant hurdle for large and established financial institutions.
At DBS, we strive to change the way we work by operating more like a fintech and less like a bank. Steps we’ve taken include enhancing our infrastructure and embedding data into all of our decision making. As a result, we are able to position ourselves in a more agile manner and easily collaborate with startups and fintech companies. Some examples include our consumer banking unit’s collaboration with Perx Technologies to create an e-Stamp Loyalty Card for consumers’ mobile wallets. Another example is our risk management team’s collaboration with Perfios to leverage AI Optical Character Recognition to extract transactions from customer-uploaded statements. This in turn, has helped us streamline underwriting and eKYC processes for our SME customers.
Three Things Banks Look for in a Startup Partner
Over the past 10 or more years, DBS Bank has made massive strides in bringing our technology capabilities in-house. We now have more than 10,000 technologists across the bank — making us comparable in population to a mid-sized technology company. As an organisation, we are always open to innovative ideas from our fintech and startup partners as we believe that there are opportunities for synergy. And at DBS Bank Hong Kong, doing so signals our commitment as a bank to foster the city’s fintech and startup ecosystem.
During my four-year journey supporting fintech innovation at DBS, I have had the privilege of collaborating with numerous startups and fintech companies in Hong Kong. Our bank’s dedication to innovation, along with our extensive network, and established connections with key players in the industry have positioned ourselves as a highly sought-after partner in the fintech ecosystem. Here are my top three tips for startups and fintech companies hoping to secure partnerships with a bank.
1. Provide Solutions that Leverage Alternative Data
As referenced above, innovation must always serve as a means of improving customer experience and/or enhancing internal processes. Using alternative platform data, we see great opportunity to make faster and more accurate decisions, as well as reduce onboarding and transaction times for our customers.
Alternative data is inextricably linked to the digital transformation of financial services. It consists of both financial and non-financial information obtained from non-traditional sources — this includes invoices, geolocation and social media data. Take for example the customer onboarding process. While an onboarding journey may have once included looking at bank statements and a person’s work history, banks are now exploring leveraging alternative data to create AI/ML models that take a host of other factors into account.
2. Provide Solutions that make Banking Invisible
One of our visions is to transform DBS into an ‘invisible bank’; this means embedding our products and solutions into platforms to create a seamless user journey for our customers. Through our digital capabilities and API connectivity, we have connected with our ecosystem partners to create innovative new experiences for our retail and SME customers. What’s more, through partnerships, we are able to understand our customers’ pain points more effectively, and create tailor-made solutions for them.
3. Understand the Regulatory Environment
It always adds value if our fintech and startup partners have an acute understanding of the regulatory environment as it ensures alignment from the start. The central banking institution of Hong Kong is the Hong Kong Monetary Authority (HKMA). In recent years, the HKMA has launched initiatives and frameworks to drive digital transformation and fintech adoption for the city’s financial institutions, businesses and residents. Examples include the Open API Framework, the Commercial Data Interchange (CDI) platform as well as the Fintech 2025 strategy. These are all areas that our Hong Kong franchise are keen to explore further.
What’s Next
The next six months of 2023 hold a lot of promise for Hong Kong’s fintech scene and collaboration with the startup community remains a key priority for DBS Bank Hong Kong. With the launch of innovative new platforms such as HKMA’s CDI, as well as the emergence of Web 3.0 and new AI solutions such as ChatGPT, we are committed to finding new ways to bring new solutions to our customers.
Medhy Souidi is the head of fintech at DBS Hong Kong. He is a board member of the Fintech Association of Hong Kong, as well as the founder and producer of the web media series & podcast What the Fintech. In recent years, Medhy has been named by the Asian Private Banker as ‘Fintech Change Maker of the Year,’ on the Tatler Gen T List, as well as by global fintech Hub LATTICE80 as one of the top 50 fintech influencers in Hong Kong.
