There have been many think pieces in recent months pitting traditional institutions against disruptors. They make for juicy reading, but do they actually capture the news of this moment? I don't think so.
It's true that it's been an eventful year. Amid chatter of a looming recession, we saw the fall of several midsize banks like Silicon Valley Bank, Signature Bank and First Republic Bank, while the country's biggest banks continued to post massive
As opposed to getting lost in a debate between adopting fintech's buzziest trends or falling in line with what "big banks" are doing, let's not lose the plot. Ultimately, what should dictate the finance industry's future is customer preference and benefit. Simply: How do customers — be they business owners or consumers — want to pay and get paid?
Modern customers have fundamentally different needs than they did in years past. For one, businesses are under increasing pressure to operate globally. Workforces are becoming globally dispersed by default. At the same time,
Modern business customers also want efficiency. Technology has trained us all to expect fast and seamless experiences, meaning people are less and less tolerant of things like tedious bank queues, financial paperwork and international transfers that take days to go through. And with a shaky economy and ongoing threats of recession, business leaders demand cost efficiency as well, and are keen to avoid hidden banking fees and high conversion costs.
Finally, with mounting compliance concerns and the backdrop of high-profile financial-related court cases, businesses want trust, regulation and stability from their financial providers.
Senate Banking Committee ranking member Tim Scott, R-S.C., released one of his first major public bank policy pushes in months after formally suspending his presidential campaign.
Here's my advice on how the industry can bridge the gap between old and new, and bring customer benefit back to the center of the conversation. First, work with existing, trusted banking organizations. Though some may cast doubt on the lagging innovation of long-standing banking institutions, banks provide the underlying foundation of society's financial system for a reason. Among other attributes, banks are subject to strict regulations and government oversight. This regulation is a critical advantage in making customer dealings protected and fair, but it's something many disruptive technologies severely lack. Banks also offer familiarity and trust. People are accustomed to traditional banking systems, as they have been reliably processing financial transactions for decades. Given their strengths, it's critical to leverage banks as both a core and a springboard in this next era.
Second, build and innovate via partnerships. Collaboration is key. For too long, companies across finance, business and technology have operated from a stance of competitive maneuvering, silver-bullet promises, questionable regulatory practices and walled gardens. In my experience, this stifles innovation. Instead, banks and fintech companies need to build bridges and work together.
This can take myriad forms, including banks partnering with fintech companies and partnerships between fintechs that are innovating with software integrations and new use cases for API-powered solutions. If you're a leader of any type of financial technology company, my advice is to pick up the phone and start conversations with your peers. You don't need to go it alone. Fostering strategic partnerships can help you provide even greater value to your customers and move the entire industry forward. Collective innovation will drive new use cases across banking as a service, payroll, expense management, online travel and e-commerce.
Third and finally, focus on modernizing the infrastructure. The financial services industry has made great strides in adopting technology. There are incredible digital solutions that are helping provide more seamless and accessible solutions to customers. Where there needs to be greater attention and innovation moving forward is the financial infrastructure that underpins banks and digital-first financial providers. For example, today financial institutions heavily rely on Swift for cross-border payments, a 50-year-old financial messaging system that facilitates the movement of money globally. Swift was a game-changer, but customers want a payments network that allows them to move and manage money across borders, without the delays and extra costs.
The 'big bank vs fintech' narrative presents a false choice that fails to ground strategy and innovation in customer benefit. I believe partnership and iterative innovation of core infrastructure is critical to create a stronger future for the financial services industry at large and the customers we serve.
