For some time now, one of the favourite themes of mainstream financial media has been the supposedly epic battle between banks and fintech. The most colourful versions of this saga contain a lot of bloodshed and slaughter, and without exception the banks are always at the receiving end.
The lure of these stories is not hard to see. This is David vs Goliath, the small but smart and nimble fintechs battling the big banks. One of the most archetypal stories of humanity, it has gathered people around the campfires for millennia. Now, of course, it gathers clicks on websites.
Beyond clicks and retweets, however, the whole concept suffers from a lack of substance. Sure, fintechs offer many excellent services – and indeed many of them outperform banks. By a margin, even. But banks are still far from having lost the game. Banks have the resources, the overall financial knowledge, and the insight into compliance and regulation that most fintechs lack.
So all is good? Goliath can lean back, relax and wait for David to calm down? Ehm... not quite. The change in our industry will probably be even bigger than we can imagine today. That’s usually what happens with predictions like these: they tend to materialize a little later, but more profoundly game-changing than initially expected.
But the big changes, and more importantly, the most significant value added will come not from rocks thrown at giants, but from co-operation between banks and fintech. It comes for combining innovation with knowledge about compliance. From the synergies of great service design and the resources needed to distribute those services. From adding cutting edge financial products to a wider portfolio of banking services. In short, maximal value comes from combining the best of two worlds.
The most important part to understand is that David is already hurling his stones. Some banks still have a strong position and bright future, but only those who can adapt to the changing environment. The division line between future winners and losers is not drawn between banks and fintech, but between those who can embrace change, and those who cannot. Personally, I’d like to think that we at Nordea are in the first camp. What do you think?
/Sebastian Wikström, Head of Alternative Finance Solutions at Nordea Markets.
Follow me on Twitter: @seb_wik