Written by Terence Singh
The fundamental challenge of integrating fintechs with banks has been a lack of experience on both sides – banks are familiar with large scale implementations with technology companies that are themselves familiar with integration. These companies typically have teams dedicated to project managing these integrations. Small fintechs are generally resource constrained with little experience of dealing with large companies in terms of culture, compliance and other non-technical areas. As banks and insurers have come to realise that there are significant benefits collaborating with fintech solutions, several approaches are becoming apparent:
The first step in all cases though is one of assessment:
- Classifying fintech solutions according to degree of integration required. This requires an assessment of which areas in the bank will be impacted, which systems, compliance, regulatory etc. This will determine the level of integration required. For example, a data cleaning solution merely requires an anonymised data file which is enhanced by adding missing information (the file itself may not even leave the bank’s systems).
In general, the following main approaches are being used:
- Appoint a special team to deal with third party integration
A dedicated team set up to interface with current IT divisions to assess quickly the impacts it has on current and legacy systems and create a roadmap that is independent of large scale IT projects to prevent its priority becoming diminished.
- Developing APIs and/or other systems
Appointing a team to create APIs and/or other systems (like secured data storage) to enable fintechs to “plug and play” as far as practically possible.
- Using fintechs for technology only
A hybrid approach to collaborating with fintechs is to use the underlying technology that a fintech has (e.g. blockchain, AI) and to jointly develop a solution. This is used by the KPMG Digital Village practice that recently built a mobile banking app to spec while utilising a blockchain based technology from a fintech. Obviously, integration was an inherent consideration from the beginning.
Obviously there are other, more strategic, approaches like acquisition, licensing etc. – however, these either do not require full integration or alternatively do not have strict timelines and can be incorporated into existing projects, e.g. legacy modernisation projects