"Financial institutions and Fintech companies need to work together"
27 de December de 2018
27 de December de 2018
The rise of Fintech is unstoppable. Research by the financial advisor Finanbest reveals that, at the end of 2017, there were 238 fintech companies and 63 insurtech firms in Spain, adding that this sector had grown by 120% in the country that year. Based on these figures, revenue in the sector in 2018 is expected to increase by around 90 %, to exceed 1.6 billion euros.
This topic was the subject of the latest edition of the Focused Program held at EAE's Barcelona Campus. Entitled "Fintech, evolution or revolution", the session was led by Jordi Carrillo Pujol, a lecturer at the School and an associate consultant at Altria Corpo & Invest Services. He explained that this concept refers to the application of technology to financial services. "Fintech companies now provide their services to the banking sector, giving added value and technological support to the existing services".
Jordi emphasized that, while the banking sector sells its products, Fintech firms have cornered part of the market that was not catered for: giving finance and investment. The EAE lecturer gave an overview of the recent history of the financial market and the emergence of Fintech, which coincided with the crisis in the sector in 2008, when the effects of banking problems rippled throughout all levels of society and "the image of the financial sector really suffered".
In the early stages, Fintech firms were well received because they emerged as part of the sharing economy. "Proposing the reinvention of the financial sector was a new idea". The problem started when these companies began trying to sell their propositions because, as Jordi Carrillo explained, although the image of banks was not the best, they still inspired a level of confidence that these new companies did not have.
At that point, financial institutions were focused on survival and stopped being concerned about the market. "Customers' expectations of their service providers increased and technology lowered the barriers of entry to the financial sector".
Fintech companies strive to offer a better customer journey. "The customer experience is the focus of their efforts and their value proposition is based on low cost, accessibility to the greatest number of customers, personalization of services and transparency".
The lecturer went on to explain that, later, the banks also started to be concerned about this phenomenon because the GAFAs (technology giants such as Google, Facebook, Amazon and Apple) entered the financial sector, "always through payment platforms, but this really represents a small part at the moment".
It was at this point that the financial institutions realized that working with Fintech companies is essential for all of them. "We have to make the most of the best from each sector: taking the ideas, market improvements and technology from Fintech, and the banks' branding, access to capital and ability to bring products to market". Moreover, the expert emphasized that the authorities and legislation advocate the collaboration between the two agents.
The finance lecturer at EAE placed the focus on financial institutions, emphasizing that they have to improve their branches, attract the best talent and modernize their technology. While he added that innovations take longer to reach financial institutions and the must be scaled up for use by the general public, there is cultural resistance to change, as well as complex and cumbersome structures. Moreover, Fintech is also under threat, to a certain extents from the restrictive regulation currently in place.