Dateio, being a venture providing services to small and medium-sized enterprises (SMEs), we were excited to attend and partner with the recent SME Banking conference in the heart of Prague inside Zofin Palace on November 25th, 2022 organized by SME Banking Club.
This gathering of experts and professionals not only provided a valuable opportunity for us to learn about the latest trends and developments within the industry but most importantly, our Head of Partnerships, Simon Koci, had a chance to host and moderate a panel discussion on the topic of Cooperation Between Banks and Fintechs.
The speakers discussed the challenges and opportunities of collaboration between traditional banks and fintech companies. They emphasized the need for open communication and a willingness to learn from each other in order for partnerships to be successful. Regulatory support and a conducive environment were also identified as important factors for the success of such partnerships.
Fintech partnerships have become increasingly common in the financial industry as traditional banks seek to keep pace with the rapidly changing technological landscape and improve the customer experience. These partnerships are driven by the potential for increased innovation and the ability to leverage each other’s strengths.
65% of banks and credit unions entered at least one fintech partnership over the past three years, and 35% invested in a fintech startupCORNERSTONE ADVISORS 2022
The process of procurement and scouting in banks typically involves identifying the specific goods or services that the bank needs, and then sourcing and evaluating potential suppliers or vendors to provide those goods or services. Similarly, when banks are looking for potential fintech partners, they may go through a process of identifying areas where fintechs have developed innovative solutions, conducting due diligence on the fintech’s technology and business model, and negotiating the terms of the partnership.
“We focus on AI solutions and supporting young entrepreneurs through our incubator program. We also invest in startups, typically seeking 50/50 partnerships and eventually acquiring the companies. Our approach is not solely focused on fintech, but can be applied universally. The incubator program has been successful and has produced many successful companies that have raised significant funding. We also have a separate program for investing in Czech startups and partnering with other banks.” said Michaela Bauer, Member of the board at ČSOB (part of KBC)
The launch of innovation ventures in banking groups can be an effective way for banks to explore and develop new technologies and business models, and to stay competitive in an increasingly digitized and rapidly changing financial landscape. By creating dedicated innovation ventures, banks can provide a space for experimentation and risk-taking, and can foster a culture of innovation and collaboration within the organization. This can help the bank to identify and capitalize on new opportunities, and to develop and implement innovative solutions to challenges facing the industry. However, the success of innovation ventures within banking groups depends on factors such as the level of support and resources provided by the parent organization, the quality of the ideas and projects developed by the venture, and the ability to effectively integrate the venture’s innovations into the bank’s existing operations.
Elma Saric (Elevator Lab by RBI) commented: “Banks have trust, customer base, respectability, and influence, while startups have agility and new ideas. We work with startups through our elevator lab program, which includes a structured onboarding process where we test their solution through a POC. This helps us determine if the solution meets our KPIs.”
Cooperation between banks and fintech companies is key to driving innovation in the financial sector. In recent years, we have seen a shift in the approach of banks, moving from a mindset of competition to one of collaboration. There are several models for cooperation that banks and fintech companies can use to support innovation.
The “build” model, where banks develop technologies and services internally, is the least effective according to some experts from the panel. This approach can be costly and time-consuming and can distract from the core business of the bank. Instead, many banks are turning to partnership models, either by investing in fintech companies or forming strategic partnerships with them. This allows banks to access new technologies and services more quickly and cost-effectively, while also allowing them to focus on their core strengths and priorities.
The fast-paced nature of the fintech industry means that banks must be agile and responsive in order to stay ahead of regulatory changes and market trends. In some cases, this may require outsourcing certain functions or partnering with fintech companies to ensure compliance and maintain a competitive edge. By adopting a cooperative approach, banks and fintech companies can work together to drive innovation and support the growth of the financial sector.
At the conference, we had the opportunity to hear from leading experts on a wide range of topics, including digital banking, fintech, and financial inclusion. We were particularly interested in the discussions around the role of technology in supporting the growth of SMEs, and the ways in which banks and fintech companies can work together to drive innovation and support the development of the financial sector.
Overall, we found the SME Banking conference to be a valuable and enlightening experience. We are grateful for the opportunity and we are excited to continue exploring the opportunities and challenges facing SMEs in the financial sector.
Below you can hear the full insights shared in the panel.