Recently, I wrote a piece for Techvibes on Fintech predictions for 2017. All of the Fintech leaders I interviewed predicted that Canadian banks will work more collaboratively with Fintech companies in the new year. At the same time, these leaders identified many obstacles we are currently experiencing that may limit the collaboration we so desire.
Speaking from my own experience working with Canadian banks as the head of marketing at RateHub—our company has worked with each of the major ones in some capacity—there’s a long way to go. Corey Gross, CEO of Sensibill, shares a similar view: “Canadian banks must make a philosophical decision to work with Fintech or against it. Right now, they don’t know how to liaise with startups or to deploy solutions under short product cycles.”
Indeed, our biggest challenge is also lengthy project cycles, and finding the right person at the big banks to connect with and move projects along. At RateHub, we’re still waiting on one major Canadian bank partner to approve our ability to market its credit cards through email marketing after two years (and yes, we are CASL compliant). Another major credit card provider has cut many of its digital partners simply because they “can’t monitor the compliance of added partners.”
It’s frustrating to see compliance officers or hierarchies override innovation teams and limit business growth. And in many cases, the innovation teams don’t put up a fight. One must assume these teams are not empowered, or they’re discouraged (or both). I would like to see this change, as I know many other Fintech leaders would as well.
At the same time, it’s important to celebrate the progress we do see. We started out six years ago chasing the banks, and now they are increasingly coming to us with partnership proposals. RateHub has seen interesting partnerships launch in mortgages, insurance and deposits with major and smaller financial institutions. The credit card affiliate channel in particular is reasonably advanced, and it’s (technologically) easy for a fintech company to begin marketing the banks’ credit cards in exchange for affiliate fees.
Still, keeping in mind there’s still a long way to go, here are some ideas on how Canadians banks can succeed at working with fintech startups this year.
Accept the changing reality
According to a 2015 report by McKinsey & Co, banks that do not adapt to the digital disruption could see profits decline by as much as 35%. David Berliner, CEO of CoPower, suggests that “there’s more to gain from collaboration than disruption. Their size and complexity makes it difficult for major banks to adjust to change as fast as the trends demand. Fintechs are small, nimble and can innovate more quickly.”
RateHub’s 2016 digital money trends report found that monthly online searches for financial products are in the millions, and that 77% of Canadians are using online banking and 73% of Gen Xers and Millennials are using sites like ours to research and compare products. Banks need to adapt to changing consumer demands. Yes, Canadian banks all have an online banking service, but that’s a very basic service in today’s market. Customers desire more online tools and services, and greater transparency on things like credit card rewards, bank teaser rates and transaction fees.
Sean O’Connor, VP Partnerships at Grow, asserts “banks that fail to partner and make customer-centric innovation a priority will suffer and lose customers.”
Empower digital and innovation teams
In order to drive solutions, innovation teams need to be empowered and supported to achieve the digital mandates set out for them. Deloitte Digital points to the rise of the Chief Digital Officer (CDO), who works closely with other core C-suite functions such as the CEO, CMO and COO to drive digital transition from the very top.
Gross suggests setting up “research groups in core areas to modernize—robo-advisory, lending, digital banking, P2P payments—and bring to proof of concept quickly.”
Shorten project cycles to 8 to 10 months
As I mentioned, the biggest challenge RateHub and many others have faced in working with the banks is long project cycles. It should not take two years to get an email approved, let alone launch a revolutionary new product or service. Within two years a Fintech has most definitely moved on, if not become obsolete.
Banks should have a mandate that no innovation project takes longer than 8-10 months, or it gets escalated, preferably to the CDO or C-suite level. Innovate or die, as they say.
Kerri Lynn McAllister is the chief marketing officer at RateHub.