Banks v fintechs – the Blockchain battle of the brands
All financial services companies will tell you they’re technology companies now.
Today’s guest is Charlie Kerrigan, Banking Partner at CMS Law, who explains that this new ecosystem of Blockchain, ICOs and cryptocurrency is really capital raising by new routes. And everyone’s interested in using Blockchain technology to provide efficient, speedier payment services.
He says that most banks in the market today already have relationships with smaller fintech businesses, in a competitive, but symbiotic, market.
For their part, the banks see their own value in their customer relationships; but they can also see that as things change quickly, it may not be possible for them to innovate organically - especially given the challenges inherent in their legacy systems.
Which is why banks want relationships with maturing fintech companies - and for the fintechs, the banks present as large customers.
There is a point, however, where symbiosis yields to competition - and both sides are acutely aware of this.
In the future we are likely to see more of the technology companies looking for a greater share of the consumer wallet, and this is a conversation taking place in the public forum about brands.
There is a lot of trust in bank brands, but (as yet another day goes by without resolving the TSB online banking) not all of them have had success with their technology and getting it integrated with new products. On the other hand, consumers generally have great relationships with technology companies, which is very powerful.
So should we worry whether banks will survive this battle?
Charlie says not, as they’re full of smart people who have survived many, many decades, who have seen off competition from challenger banks - some based on technology platforms, others selling themselves on customer service - so the age of the banks is unlikely to be over any time soon.
But they will significantly and increasingly partner with fintechs and use technology in order to develop their own brands and win this competition.
- Transmission of data, payment services and intermediation of capital are all information problems that can be solved by technology.
- From here it’s a short step to Fintech, and an even shorter step to Blockchain and Cryptocurrency.
- A key driver for banks is decreasing and making more efficient settlement times. One thing Blockchain can do is reduce settlement times, while increasing security and efficiency, which can only be good for consumers.
- Technology developments have generally provided deflationary pressure on costs and timeteable.
- There has already been a convergence between technology, media and telecommunications for many years; now this Blockchain space is offering another convergence between the big, traditional banks and the nimble new fintechs.
- When it comes to regulation, from a business perspective, ICOs provide a relatively quick and cheap way to raise funds; and as long as they are developed in way that is consistent with the principles of financial regulation, they shouldn’t pose a threat to consumer protection.
- Many of those working on ICOs have a background themselves in financial services, and will have seen the rules around IPOs, so generally take account of those to ensure consumer protection.
- Transparency is vital on all sides.
- Partnering with fintech companies on better solutions makes banks not only the pipes through which money flows, but to be trusted keepers of consumer info where their financial health and history is a positive part of relationship with that brand.