3 Reasons Banks Love Fintech Startups
Image courtesy of Price Waterhouse Cooper's FinTech Start-up Bootcamp
Following Foundation East board member David Martin’s recent post about leveraging technology to aid access to finance, I was interested to recently read these 3 Reasons Banks are Collaborating with Fintech Startups in Huffington Post.
In this post I summarise the author’s key points and reflect upon the potential impact fintech can have on delivering financial inclusion …
So what is Fintech and why all the noise around it?
Fintech is just one of those trendy, blendy words (like Brexit) that has made it into popular parlance. Fintech simply means Financial Technology.
Many banks (including Barclay’s, who last week announced the launch of Europe’s largest co-working space for financial technologies in Shoreditch are ramping up their fintech ambitions.
Fintech companies leverage big data, artificial intelligence (the simulation of human intelligence by computers and machines) and machine learning (a type of artificial intelligence (AI) that provides computers with the ability to learn without being explicitly programmed) to create better financial services. Banks, which used to consider fintechs as competitors, are starting to realise the value in partnering with them.
In fact, according to Huffington’s Rachel Wolfson, they’re a heaven-made match.
Here are her three reasons why:
1. Fintech accelerates innovation
Unlike startups, banks are unable to match the speed and agility that fintech is capable of providing. Yet partnering with these companies allows banks to expand and grow at much faster rates.
2. Fintech ensures more accurate decisions
Fintech’s machine-learning algorithms help people make faster, better and more accurate decisions. Rachel explains: “For instance, bank customers wanting to get a loan might encounter bias, as bias naturally exists when humans make decisions. At the same time, many fintechs have started implementing machine learning algorithms in which data collecting and decision making is performed without human interference and therefore without bias.”
She presents the case of Creamfinance, who use smart data to enable one click loans.
3. Fintech solves specific industry problems
From ensuring secure credit card processing, to transforming the money transfer space and providing customers with one-click loans, fintech is solving specific industry problems.
All this is great, but businesses - especially SMEs, and especially especially SMEs that have good business ideas but do not make it through technologies’ algorithmic decision making pathways – still need the human touch.
Responsible Finance companies will always provide this human touch, offering business advice as well as loans. SMEs know they can trust us to look beyond the algorithms because it is written in our constitution.
That said, I do agree with David. It is time to disrupt the status quo and plug the SME funding gap and I am witnessing the evolution of more and more fintech initiatives that might just help us humans help more humans.
So do, please, watch this space …