15 Aug 2022

Big banks and big tech: coopetition and the potential for new fintech communities. Highlights from Fintech Week London 2022

Highlights from Fintech Week London 2022

news

Masha Balanovich

Fill in the form below andget the latest PR insightsfrom Drofa Comms

Big banks and big tech: coopetition and the potential for new fintech communities. Highlights from Fintech Week London 2022

Our previous article has insights into The Fintech Week London 2022 Conference on the future of digital identity amid privacy and authenticity concerns. During the same conference, the issue of coopetition between big tech and big banks was also a key topic covered by David M. Brear (11:FS Group), Mark Hartley (BanKiFi), Ronit Ghose (Citi), Rita Martins (HSBC), and Karan Jain (NayaOne).

One of the critical aspects explored by the experts is the merging, acquisition, and partnership of big banks, tech companies, and other fintech startups and the impact on the fintech industry. Irrespective of the stiff competition, there are opportunities for big banks and big tech to collaborate and thrive together.

Technology has been vital in assisting the complex banking industry for a long time. In the 1990s, internet banking gained traction, and contactless payment is now an everyday thing. In recent years, fintech has become a disruptive force for the big banks in a big way. Some financial technologies are rethinking and transforming the ways to offer and access services. It appears to pose big competition to big banks. Nonetheless, many fintechs would like to scale up but face licensing problems.

Big tech corporations such as Google, Amazon, Meta, and Apple also pose great competition to the big banks in offering financial services in the emergence of open banking. What gives big tech an edge over big banks? Most tech companies use cloud computing, customer analytics, and AI to understand users and offer personalised digital financial services and exceptional customer experience. They’re pivotal contributors to the cashless society.

Google Pay and Apple Pay are the most outstanding examples of big techs challenging the monopoly of traditional finance systems. This year, Apple announced it was developing and planning to bring more financial services in-house among a payment processing technology and Buy Now, Pay Later (BNPL) product. This ambitious “Breakout” will reduce the company’s reliance on outside solutions and replace fintech partners.

Amazon Web Services also dominates in offering vital financial services big banks provide. They include Amazon Pay (a digital wallet and payment network), Amazon card, and Amazon Lending (which offers fast and flexible financing to small businesses).

These corporations not only have an advantage when innovating and using their user-based data to respond quickly to consumer trends, but they also often sweep up the brightest tech talent, leaving many traditional banks struggling to recruit for the roles.

The impact of big tech companies on the financial systems has even more power in developing economies. According to a Financial Stability Board report, expanding big tech companies in emerging markets has increased the efficiency with which financial services are provided. Surprisingly, the current markets in Asia (India specifically) and Africa have more developed payment technologies than developed countries. Why? Developing countries tend to benefit more from big tech solutions, having access to financial services that are cheaper, convenient, and tailored to users’ needs. Besides, citizens of such countries have minimal trust in big banks.

The question is, can big banks compete with big tech in offering financial services? Tech giants have already acquired a more profound understanding of some financial areas than their counterparts. Although big banks acquire excellent infrastructure and licenses, they can hardly catch up unless they rapidly adopt a data-driven and customer-centric mindset to change the narrative.  

Some banks and traditional institutions are building new partnerships with fintechs to help them stay up to speed with the IT sector. Such collaborations help them enhance their customer experience and offer exceptional financial products or services while improving their brand in developing nations. Its benefits go both ways: banks can assist in navigating the regulations and give API access to their fintech partners. In return, banks receive immediate access to advanced technology to save time and resources. 

More importantly, we can expect business models to change drastically with blockchain technology adoption. It will revolutionise the entire industry, introducing reduced transaction costs, enhanced networking efficiency, and increased security in digital transactions to minimise fraud. Implementing blockchain technology in the financial sector means streamlining everything from payments, retail banking, and asset trading to accounting. Considering that, traditional banks must negotiate a challenging path between capitalising on the services of their big tech “coopetitors” and becoming hooked on their capabilities.