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Banks adopt different engagement approaches with fintechs
Innovation by financial technology companies (fintechs) has led to many banks opening their doors for collaborations. The strategic approaches, often multidimensional, vary from investments to building an ecosystem and technology partnership

December 18, 2018 | Neeti Aggarwal

Fintechs have become a catalyst for innovation in the financial services industry. Their entry resulted in a rapid change in the operating models of financial institutions forcing them to adopt emerging technologies with speed. These companies targeted the inefficiencies in the financial service sector from the start, bringing in new services and experiences to customers but they lack the market reach that banks have the advantage of. As new fintech innovations promise to change and improve the customer experience, institutions seek solutions that best meet their business objective while optimising their resource requirements and time to market. The strategic approach has changed rapidly, earlier considered as competitors and disrupters, fintechs are now increasingly considered as enablers and partners by banks.

Fintech strategy of banks

A survey conducted by The Asian Banker across 33 financial institutions in Asia Pacific and Middle East showed that a significant high 82% of banks surveyed have a strategic fintech approach in place while only 18% of banks said that they are in a ‘wait and watch’ mode. The fintech strategies vary among institutions. A significant 48% of surveyed banks said that they are making active generic investments in fintech towards developing the community, these include initiatives like setting up innovation labs, co-creating space, conducting hackathons among others. 30% of the companies surveyed have made active equity investment in start-ups that fit their strategy while 36% said that they are making active co-investment with partner institutions. A smaller 21% of banks said that they are developing a fintech start-up. A significant 39% of institutions said that they are taking other fintech initiatives, including collaboration with fintechs for specific technologies.

The strategic approaches to fintech and innovation vary

Banks continually evaluate evolving techno...

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