Banks need to think collaboration rather than competition
by: Rachel Nienaber
Over the last decade the financial sector has witnessed many impressive innovations and technological advancements. However, the innovators are rarely banks, but small FinTech firms, which are often led by former bank employees who identified a gap in an offering or service.
Currency Cloud is frequently approached by alternative banking institutions and payment companies, who are looking to reap the rewards from API technology — to send money internationally through Currency Cloud’s API, rather than having to develop proprietary technology.
In contrast, while banks have invested enormously in technology and paid close attention to the FinTech movement in recent years, many retain their R&D behind closed doors.
Understandably, security is one of their utmost priorities. Rather than risking sharing information with anyone else, the banks trust only themselves. This means no outside threat, but also no outside development. And we know how valuable the latter can be from success stories within Apple and Google, who routinely open up their APIs to outside creative minds.
Yet, the rise of these newcomers doesn’t need to send banks panicking about the challenges involved with overhauling their entire IT infrastructure. The majority of tech firms are not out there to try and replace banks, but optimise particular segments of the financial value chain (whether that be international money transfers or payment processing) and offer their specialist services to other businesses, via APIs. Using an API, banks can incorporate the technology from FinTech firms into key areas in which support is required, much like a financial Lego.
Using API capabilities delivered in this way can help banks to expand services, reduce development costs and unlock fresh revenue without having to invest in and build new architecture. The alternative? Developing their own costly, bespoke solutions, or worse — ignoring significant change that is sweeping through the industry.
Editors Notes: This entry has been submitted to the FINTECH Book, the world’s 1st globally crowd-sourced book on FINTECH. Readers that enjoyed this innitial abstract are invited to share and like it so that it may be featured in a longer version that will published in the FINTECH Book due to be released November 2015.