FINTECH FABLES

Fintech vs Finlogy

Before jumping on the bandwagon, businesses must take up the 'finlogy' mindset to align a fintech outcome like cross-border payments with business goals.


Once upon a time, there was a blind man who lived with his wife in a small hut. He led a virtuous life. Impressed by his devotion, God decided to reward him with riches. God paid him a visit in his dreams and told him to expect some guests the next day.

 

The next day unfolded as predicted. A few monks visited the blind man’s hut. The man fed them, housed them, and when it was time for the guests to leave, they instructed him to touch them with his cane. The man followed their instructions and as soon as the cane brushed against the monks’ skin, the monks turned into solid chunks of gold. 

All this was witnessed by the blind man’s greedy neighbor. Unaware of the dream and the blessings of God, the neighbor also invited monks to his hut so that he could also have free gold. As soon as the monks had finished their meal, he started beating them with sticks. The monks were taken aback by the behavior and cursed the greedy man with a life of poverty and sickness.

Such incidents of suffering loss due to mindless replication have become much more commonplace today, especially in the case of digital trends. The industry of banking and finance is going through a digital revolution. Every organization is boarding the digitization bus, either on their own or in collaboration with Neo-banks and FinTechs. 

However, a lot of bank-FinTech partnerships are failing because of the blind replication approach by the incumbent banks. Some banks are dabbling with FinTech as a “hobby”, without considerable thought or requisite infrastructural changes that bear worthy fruit. While 65% of banks and credit unions have collaborated with FinTechs over the last three years, only 14% have reported at least a 5% gain in revenue from the new products developed through these partnerships. 

 

Why are bank-fintech partnerships failing?

Many banks lack the FinLogic required to exploit the technological as well as the competitive advantage that FinTechs could provide. Banks have been known to dive into technologies like Artificial Intelligence for predictive data analysis, or API(s) for real-time money exchange. Before collaborating with third-party firms that offer buzz-word solutions to pretty much all the problems in the book, banks have to explore a logical approach to address the weak points in their offerings. After this evaluation of their services, they can adopt a technological solution based on logic instead of the other way around. 

 

What is FinLogic?

FinLogic requires banks to identify the weak points and loopholes in their system of conducting business. It drives them to look for technology-based solutions that mitigate these challenges. Simply, do not adopt technology to sound “innovative and adaptive”. Set your strategic goals, find key areas for improvement, look for technology that could help you improve in those key areas, and set up a strategic framework to achieve objectives. 

For instance, an Indian bank has a strong hold over corporate finance and wants to improve its share in the retail market. They want to offer digital banking services to their retail customers. One of the key aspects of enabling digital banking is a seamless payment experience. Payment services can be divided into two categories: Third-party payment and Point of sale payment. Point of Sale payment (POS) is generally carried out by retailers, a consumer base that the bank is trying to attract. Thus, the bank collaborated with a FinTech POS provider that already has a considerable market presence in the retail industry. 

Had their objective been to make a presence in the cross-border payments market, they would have collaborated with a FinTech that has an international presence and could give them a considerable competitive advantage in terms of payment speed and volume. 

When you refine your objectives with logic and incremental goal-setting, you can choose a uniquely suitable solution from the available technology. It need not mean allying with existing players and becoming party to their rules. Remaining non-aligned is possible. Read more about non-alignment movement in international payments.

FinTech v/s FinLogic

Learning the lesson from the greedy neighbour, banks and financial firms must delve deeper into their own goals and visions for the future before investing in technology buzzwords that seem to take over the industry. Here are the things to consider before investing in FinTech collaboration:

  1.

Determine strategic goal in quantifiable terms.

  2.

Seek a developer community to gain the right information and advice on how to achieve your goal.

  3.

Evaluate whether you are seeking a strategic partner or simply an outsourced agent to develop a new product.

  4.

Check and analyse different offerings.

  5.

Form a dedicated team of experts from the financial as well as technology domains to manage fintech partnerships.

  6.

Be open to organizational changes for an agile production environment. FinTechs and banks evolved in different eras and their work models and processes reflect the difference. Banks, no matter how comfortable they are in their ways, will have to be open to new ways of doing business.

Conclusion

For banks to become successful platform players, a shift in the mindset must come before a technology shift. Mindless replication and trend following will do more harm than good in the long run. There is a plethora of FinTechs with dedicated offerings. A banks’ decision to collaborate with FinTechs must be guided by FinLogic which reflects their long-term strategic goals.

To know how you can leap onto the train of financial revolution consult a cross-border payment solutions expert,here

 

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