Banks and fintechs realise they’re better together

The rela­tion­ship between banks and fin­techs has evolved sig­nif­i­cant­ly over the last two decades. Dis­rup­tion is increas­ing­ly giv­ing way to col­lab­o­ra­tion, mov­ing the indus­try past the now out­dat­ed nar­ra­tive that pit­ted new entrants direct­ly against incum­bents.

Banks are not only now part­ner­ing with fin­techs, but also fos­ter­ing them through accel­er­a­tor pro­grammes and ven­ture arms, while the UK leads the way in open bank­ing to facil­i­tate valu­able col­lab­o­ra­tions. In a study by Tink ear­li­er this year, three quar­ters of UK finan­cial exec­u­tives had a pos­i­tive atti­tude to open bank­ing, com­pared to 48 per cent in 2019.

Banks rarely step into the API (appli­ca­tion pro­gram­ming inter­face) econ­o­my to pow­er emerg­ing use-cas­es in the ways fin­techs do. Yet, while fin­techs are often born with agili­ty and a pace of inno­va­tion that banks strug­gle to emu­late, banks have some­thing fin­techs know will take them a long time to achieve: trust built over decades or even cen­turies.

Trust cap­i­tal resides in large insti­tu­tions, as does vast behav­iour­al data around cus­tomers, pre­sent­ing a strong incen­tive for fin­techs to part­ner. Recog­ni­tion of their com­ple­men­tary qual­i­ties has brought a new dimen­sion to the clas­sic build-ver­sus-buy conun­drum that banks have long delib­er­at­ed.

“It’s a very impor­tant deci­sion, because banks will live with the con­se­quences of that deci­sion for quite some time,” says Rafa Plantier, coun­try man­ag­er, UK and Ire­land, at Tink, which is pow­er­ing the new world of finance by allow­ing banks to quick­ly build smart and per­son­alised finan­cial ser­vices.

“Banks used to do every­thing, but have been grad­u­al­ly out­sourc­ing more things over the last 20 years. They are large­ly designed to work on projects and once a project is com­plete, those resources come back to do some­thing else. That’s fun­da­men­tal­ly dif­fer­ent to fin­techs, which have high­ly spe­cialised, small and sprawl­ing teams who take care of more nar­row­ly focused engi­neer­ing prob­lems.

“While a bank will typ­i­cal­ly have a team who looks after all dig­i­tal chan­nels, fin­techs work at a much more gran­u­lar lev­el, look­ing at things like onboard­ing con­ver­sion. Banks will see mort­gages as a prod­uct. Fin­techs will see the onboard­ing expe­ri­ence as a prod­uct. There is a very fun­da­men­tal dif­fer­ence in how they approach tech­ni­cal prob­lems. Insti­tu­tions increas­ing­ly pre­fer to have it as a ser­vice so they can focus on their core busi­ness, fuelling part­ner­ships for ser­vices pow­ered by open bank­ing.”

By enabling peo­ple to have the fun­da­men­tal right to own their own data, open bank­ing is equal­ly impor­tant for soci­ety as it is for fin­techs, finan­cial insti­tu­tions and how they ulti­mate­ly work togeth­er.

“Open bank­ing takes what is avail­able in the high end of finance and brings it to the mass­es,” says Plantier. “Just like a devel­oped trea­sury knows where every sin­gle pound resides, peo­ple will one day be able to see every sin­gle piece of their finan­cial puz­zle in one place in real time and across all finan­cial insti­tu­tions in Europe and soon glob­al­ly. They will have the abil­i­ty to share that infor­ma­tion and move funds by sim­ply grant­i­ng con­sent. We are already there for most of the ‘trans­ac­tion­al’ assets – cur­rent and pay­ment accounts – and are now mov­ing on to include high-val­ue, low-fre­quen­cy finan­cial assets, like mort­gages, pen­sions
and invest­ments.”

Found­ed eight years ago, Tink has been trail­blaz­ing the open bank­ing path. As Europe’s lead­ing open bank­ing plat­form, Tink enables banks, fin­techs and star­tups to devel­op data-dri­ven finan­cial ser­vices.

Through one API, Tink allows cus­tomers to access aggre­gat­ed finan­cial data, ini­ti­ate pay­ments, enrich trans­ac­tions and build per­son­al finance man­age­ment tools. The open bank­ing plat­form con­nects to more than 3,400 banks, reach­ing over 250 mil­lion bank cus­tomers across Europe. Tink’s tech­nol­o­gy is trans­form­ing cus­tomer expe­ri­ences across Europe, enabling busi­ness­es to help their cus­tomers make smarter finan­cial deci­sions.

“Ear­ly on in our tra­jec­to­ry, we won some of the largest part­ner­ships that have been signed in this indus­try, includ­ing SEB, ABN AMRO, NatWest and BNP Paribas,” says Plantier. “We help our clients come to mar­ket with data-exchange appli­ca­tions, stream­line their user expe­ri­ences and help them take more valu­able finan­cial ser­vices to their cus­tomers.

“The data exchanged on these APIs, from the indus­try per­spec­tive, is quite raw. We make the data more read­able for the end-user, but also more machine read­able for our clients. By mak­ing sense of trans­ac­tions from sources with­in the bank, as well as accounts held exter­nal­ly, a bank can get a sin­gle overview of a customer’s econ­o­my and cre­ate insights that are eas­i­ly actioned by the user.

“In the future, I imag­ine every large British bank will ulti­mate­ly have a hand­ful of very large fin­tech part­ner­ships. There are things hap­pen­ing in dig­i­tal iden­ti­ty, con­sumer finance and pay­ments, mer­chant acquir­ing and open bank­ing that are advanc­ing so rapid­ly on a tech­ni­cal lev­el it would be very dif­fi­cult for any lead­ing bank to devel­op and then man­age in-house. By estab­lish­ing the right part­ner­ships, banks can focus on what they do best, which is serv­ing end-cus­tomers with their prod­uct vision.”

When NatWest want­ed to inte­grate a new fea­ture in its dig­i­tal bank­ing ser­vice, it grav­i­tat­ed towards a fin­tech to help do the job. The bank want­ed to give its mobile app users a more fric­tion­less, time-effi­cient and intel­li­gent way of man­ag­ing their mon­ey. That amount­ed to a spend­ing fea­ture that tracks and cat­e­goris­es cus­tomers’ spend­ing habits and pro­vides insights to help them meet their sav­ings goals. Find­ing a part­ner that could align with its val­ues was a pri­or­i­ty and Tink’s “imag­ine, build and iter­ate” phi­los­o­phy sealed the deal.

Since launch­ing last Novem­ber, the spend­ing fea­ture has empow­ered mil­lions of NatWest’s cus­tomers to take con­trol of their finances. Around 4.6 mil­lion cus­tomers use it on a con­sis­tent basis, approx­i­mate­ly 53 per cent of the bank’s active mobile bank­ing cus­tomer base. In July 2020, a per­son­alised and action­able news feed was added to the app, which has deliv­ered 6.8 mil­lion insights to cus­tomers, 1.6 mil­lion of which peo­ple have act­ed on to save mon­ey.

Wendy Red­shaw, chief dig­i­tal infor­ma­tion offi­cer at NatWest Retail Bank, says: “We look to part­ners to work with us col­lab­o­ra­tive­ly and bring in fresh per­spec­tives. Tink brings a wealth of expe­ri­ence in open bank­ing, per­son­al finance man­age­ment and get­ting insight from data, along­side deep con­nec­tiv­i­ty. When you add that to what NatWest Group brings – more than 200 years of finan­cial exper­tise, close rela­tion­ships with cus­tomers and a deep under­stand­ing of their expec­ta­tions – you get a caul­dron of inno­va­tion that has real val­ue.”

For more infor­ma­tion please vis­it tink.com

Pro­mot­ed by

Tink