Home Business Insights & Advice FinTechs are creating a new financial ecosystem globally: How banks could sustain the change

FinTechs are creating a new financial ecosystem globally: How banks could sustain the change

by John Saunders
26th Feb 20 1:11 pm

Traditionally, banking has been one of the industries that were resistant to changes and technological disruption. However, undoubtedly today is the era of fintech companies that have rapidly conquered the market. The accessibility of innovative services, especially in payments, attracts millions of consumers that choose fintech instead of traditional banking.

The emergence of Open Banking and Payments Services Directive II along with the General Data Protection Regulation (GDPR) has also added value to the table – consumers are gaining more control over their data stored in banks.

Fintech companies face high costs of acquiring new customers and challenges in cross-border operations that banks are good to address. Meanwhile, banks are searching for effective ways to sustain and start looking at how to better adapt the tools powered by artificial intelligence, robotics, and blockchain. Thus, both fintechs and banks have to cooperate with each other in order to succeed in a highly-competitive environment.

As you can see in the picture introduced by the Ey agency, banks are mainly occupied with choosing innovation operations model, developing a fintech innovation framework, assessing fintech engagement strategies, managing talent architectural change, whereas fintechs are articulating value proposition, differentiating with regulatory prowess, building robust business cases, preparing and establishing networks.

How banks can embrace the innovation

Many banks puzzle over the best ways to adapt to new conditions and realities. The main challenge they face is what technology to choose. This decision should depend on how complex and legacy the existing banking system is, and how easy it would be to integrate new solutions.

Today, a lot of international banks start cooperating with fintechs to reduce fees for payments transfers and introduce modern banking products. However, to succeed in that cooperations, banks need to present a clear vision of the new model and the tasks to be done to implement the right technology effectively. Basing on the vision, banks should follow four basic steps towards digital transformation:

  1. Think of and design a fintech model that fits the bank best.
  2. Decide on the new operating model that aligns fintech with business needs.
  3. Count all the pros and cons of cooperation with fintechs.

Manage staff and architecture changes carefully.


Investments in fintechs break the records, and banks must be sure that a new framework will bring value. When assessing the possible ROI, bank executives must consider all the risks and threats that can be caused by either unstable economical environment or delays in technology development and implementation processes. Check this guide according to this article about how banking apps are developed to capture all the nuance.

So, banks need to identify the key pillars of their new frameworks and communicate those to the companies they would like to cooperate with. This negotiation should include how the technology will be chosen, developed, and implemented, by whom, in what timeframes, and so on.

A bank must decide on how they want to differ from its competitors, what significant products to create, how much they are ready to invest in that. Once the feasibility analysis and capability review are done, the bank can proceed to the value chain mapping and the development phase.


Traditionally, banks work according to one of the three operating models that are as follows: centralized, decentralized, and hybrid. Centralised models assume that CIOs are responsible for managing teams occupied with technology innovation tasks and activities. These teams must closely collaborate with CEOs and CTOs to clearly understand current business needs and how those could be addressed with the help of innovation.

The decentralised model is more typical for regional institutions. Oftentimes, small banks don’t have specific teams responsible for digital transformation so that fintechs find it difficult to cooperate with them. Thus, to sustain, small banks need to put central teams together for effective collaboration with fintechs.

The hybrid model is one of the most flexible ways to embrace the changes. Here, the team has a strong understanding of what should be adopted and implemented. Usually, it has a leader who is very skilled in technology innovation adoption and could freely negotiate these issues with fintechs.


Each type of cooperation has its pros and cons. Today, banks can decide either they want to develop new functionalities or solutions in-house or outsource the development from offsite companies. Their collaboration with fintechs may be different depending on how they calculate this path from the very beginning till the product launch. All over the world, banks have opportunities to take part in specific training programs and workshops on gaining the maximum of fintech adoption. The programs may include some learning sessions on how to gain the right talent, skills, and technology stacks or focus on risk assessment methodologies, etc.

Skills and architecture

Any change made in banking systems will inevitably impact the data and system architecture. The effects caused by new requirements development should be considered beforehand. Expert IT companies solve these issues with developing a detailed traceability matrix which shows how this or that functionality change will affect another functionality and the whole system.

What is also important for any digital transformation process is to consider talent changes. For effective work with new technologies, banks will need people who are skilled and experienced in delivering solutions powered with AI, blockchain, RPA, and other technologies. These specialists can be hired or outsourced from overseas depending on your budget and required skills. Most banks prefer outsourcing to putting an inhouse team together as this model is cheaper and sometimes more efficient. Outsourcing allows banks to focus on core business activities and let expert developers, analysts, architects to manage their innovation processes.

To sum it up, if a bank wants to differentiate itself from competitors, it has to clearly articulate the new business value. To create a new value chain, they first need to understand which customer demands are the most critical and must be met first. Next, a network of fintechs and expert companies should be developed to create a basis for further negotiations. The path from legacy systems to next-gen banking products is complicated and full of different challenges but it is worth investing in.

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