Fintech revolution fizzles as startups seek engagement with banks

https://www.finextra.com/blogposting/14709/pure-lack-of-knowledge-marketing-gimmicks-silly-hysteria-or-hate-speech-

Precisely so.

The idea that a bunch of FinTechs could just turn up and earn a living sitting atop an incumbent ASP platform whilst fishing from their pool, when the immediate returns of engagement for the ASPs was all cost and zero income, was naïve in the extreme.

FinTechs with such an MO are unsurprising now grounded: caught up in the enduring saga of how that’s all actually really and truly going to work.  Fair to say it's currently akin to a playground tantrum … “he was my friend but now he’s both our friends, so who gets to sit next to him at lunch and break?”. 

The ongoing squabble alone as to how a customer consents a TPP looks set to rumble along for a couple of years and let’s not even go into how the TPP then accesses the customer’s account once consented.  

This is in all in stark contrast to the Open Banking scenario where both TPP and Bank mutually reap benefits from a symbiotic alliance …. 

Whilst much attention is paid to the debate engaging the EBA, the EC, the ECB, the ERBP, the European Fintech Alliance and more recently the new ‘API Evaluation Group’ … Challenger banks offering current accounts such as Starling and Monzo are quietly getting on with the business of forming mutually beneficial alliances with TPPs and developing a platform to deploy new live services devised by, inter alia: TrueLayer, Flux, Tail, PensionBee, WealthSimple, MoneyBox, Yoyo Wallet, Yolt, Habito and Kasko.  Many of which they have already taken live.  

I particularly like the Flux solution.  They capture SKU level data at point of sale (via software integrations) to enable digital e-receipts which they route back to the card owner's bank (via API) so that when the card holder clicks on that £127 spend at M&S that's tuned up in their bank app, not only are they reminded what it was for, but it usefully also acts as their proof of purchase for return or exchange. 

Kind of incredible isn't it that we’re only just getting to this in 2018 but that's an aside, it’s a fine example of an overlay service where the retailer, the Fintech, the Bank and the customer all get to benefit and that's where the future of Open Banking surely lies.

Worth noting too Flux achive that without using an API that is the product of the vast Open Banking machinery (OBIE for UK) because it's what I’d call a ‘permissioned-API’ being agreed upon by the TPP & ASP, who both stand to benefit.  

In the case of Starling say and their fresh approach using 'MarketPlace' philosophy .... maybe the early bird really will get the worm?

With respect to the CMA9 in the UK's example and perhaps beyond: once the fighting's over and the music stops Banks will perhaps at least be equipped with a secure interoperable API platform and can focus on the task of recouping construction costs by developing new revenue streams.

A secure API network will be capable not just to connect TPPs & ASPs but to handshake with wider business and Gov’t entities for Non-Financial token exchange.  Non-Financial APIs might well be the unintended consequences – banks taking an identity arbiters role via attribute management for instance, but that's of course if they get off their hands in time before others do it for them.

I don't think that a recognition that collaboration makes sense is the same as the fintech revolution being over. I think it's a natural and sensible evolution of the messaging around this. It's far more realistic to expect fintechs and traditional FS businesses to collaborate - they each have things to bring to the table. All sides getting better at collaboration has got to be the way forward.

I hope banks go easy with this fintech partnership bit. Just because that's perhaps the only way for fintechs to survive doesn't mean banks should get into it blindly. From recent personal experience with a leading fintech, incumbents are perfectly right in perceiving that fintech partnerships will have "negative impacts on customer trust".

It's the old "hype curve" again :-) - see http://www.collinconsulting.co.uk/images/technology_innovation.pdf 

On second thoughts, I needn't worry too much - Fincumbents will kill fintechs' aspirations of collaboration.

(For the uninitiated, “Fincumbents” refers to B2B technology companies that have been supplying IT products and services to financial institutions for ages; “Fintechs” are direct-to-consumer financial technology startups that began life with the mission to kill traditional banks.)