• A handful of fintechs with global scale may threaten banks, though within niches
• Even though internal innovation is important, it achieves just incremental change
• Westpac’s partnerships with fintechs lead to non-linear leaps

 

With customer expectations and the world of financial services changing rapidly, Westpac chief development officer Macgregor Duncan said, “We need to change.” The bank needs to make what he calls “daring raids” and experiment to secure its base. At the same time, he noted, “You can’t forget that you’re running a large business. Twelve million customers are counting on you.” To make the changes it needs within its domestic market, Duncan said Westpac is partnering for new capabilities and developing new business models.    

Rather than seeing fintechs as a threat, he said, Westpac now sees them as an opportunity to partner on a mutually beneficial basis. “We joked, a few years ago, that fintechs were going to eat us for lunch. Now, we’ll get together for lunch. That feels more productive.”          

That said, he acknowledged that a handful of fintechs that emerge from the startup world and gain global scale can become a threat to banks, albeit within niches. “Payments is an example. For a local universal bank like Westpac, which manages many lines of business, it’s difficult to compete with flow monsters like Stripe, who are looking at moving into our market.” Global fintechs, which also include Square and Adyen, “have capex capabilities that dwarf ours within that domain. They’re investing billions in new payments capabilities, which they amortize across a global base. We find it difficult to invest to compete. We’re looking to partner with fintechs, global banks, to share that capex expense, to develop capacity which can compete. We’re being realistic about our own position, partnering with large...

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Keywords:Financial Services, Fintech, Mobile Banking