With a Financial Services workforce of 36,000 people, capability in the areas of blockchain, compliance, cybersecurity, trading technologies and mobile payments along with a renowned talent pool from local universities, both of which house trading rooms, Northern Ireland is very much positioning itself as a global FinTech hub. Simply put, FinTech is the use of technology to deliver financial services processes within the digital age which are fast, secure, simple and accessible. Northern Ireland’s capability in this area is certainly attracting inward investment with companies such as Options, a financial cloud provider embarking on ambitious growth plans.
Most FinTech companies specialise in particular areas of the value chain from providing market insight analytics through to offering customer centric products and services. A key driver of the growth in FinTech companies is their ability to be innovative within an agile way of working. This is due to not having the same level of regulatory requirements and governance structures as Financial Institutions and they are not restricted by ‘clunky’ legacy systems which is often the case with large organisations. On the other hand FinTech companies often lack the capital, infrastructure, customer base and trusted brand to disrupt the market independently. However, these challenges can be addressed by joining forces with established Financial Institutions whereby FinTech companies are able to apply their expertise to supporting institutions enhance their operations and customer experience offering. In doing so a competitive advantage is created against any new digitally focused banks which are required to overcome entry barriers such as, attaining a banking license and building a customer base.
Examples of local FinTech companies and Financial Institutions bringing innovations to the market together include Redline Trading Solutions which serves four of the top five leading investment banks. Additionally, Danske Bank has recently partnered with Swedish FinTech Company, Minna Technologies, which will see its personal finance management solution integrated into Danske Bank’s new mobile app to help private customers manage their subscriptions.
Financial Institutions engaging with FinTech companies must be aware of the complexities of managing such relationships, from the procurement phase through to implementation. The Financial Institution should be conscious that much of the compliance requirements they need to meet will also extend to their partnership network meaning they will need to prevent any breaches of regulations such as PSD2, UK Open Banking and GDPR. Similarly, in the customer’s eyes, they interact directly with the Financial Institution and will therefore hold that brand accountable for anything which falls short of expectation. On the development side a ‘sand box’, which processes data offline in a safe environment, can be used to configure a proof of concept followed by a full testing cycle and perhaps a pilot project before the wider implementation.
Ultimately, collaboration between FinTech companies and Financial Institutions can enable a ‘win-win’ go-to-market strategy. There are however many complexities to address along the way to deliver an enhanced customer experience, manage risk and meet regulatory requirements.