Established financial institutions struggle with innovation, while startups have their own issues, including scalability.
Instead of competing against each other a better idea is to find ways to collaborate, Igor Khmel said.
Mr. Khmel is the founder and CEO of BankEx, a company seeking to incorporate fin-tech principles and the blockchain into existing financial structures.
“We work with financial institutions and others to enable organizations to get access to the crypto world,” Mr. Khmel said.
Igor Khmel sports an interesting resume. Armed with a PhD from Stanford, he has worked with McKinsey and Deloitte and was head of Moscow’s Innovation Lab, which he said is the biggest in Europe. He left to run his own innovation lab that developed Banking-as-a-Service products.
Mr. Khmel said he hopes to solve one of the biggest issues bogging down financial institutions, which is the slow pace at which they develop new products and services.
“It takes effort to go through bureaucracy, budgeting, and integration when you are developing new products at financial institutions.”
Each development stage takes months and a proof of concept could be years in the making. New developments are mostly done on a singular basis, and as their number grows it becomes harder to configure systems and transmit data between their many parts. Duplication further bogs down IT infrastructure.
Add strong regulation and a decidedly conservative approach and banks in many cases would rather let others create the revolutionary products and services and go through the early heavy lifting.
So the incumbents clearly have their issues, but so do the upstarts, Mr. Khmel cautioned.
“The current banking system is outdated and stifled by legacy issues while at the same time the emerging fin-tech industry lacks scalability.”
He said many startup founders have little banking background. Some are coders from university but lack the experience needed to solve consumer-oriented problems. That leads many to address surface problems such as payments, which Mr. Khmel suggests 25 per cent of all fintech startups are working on.
“We’re concentrated on the mental problem of making banks, making them more flexible, and changing speeds on how they collaborate with fin-techs and each other. Our philosophy is not to disrupt banks but to build products for them.”
Gone are the days when the fin-tech mantra was getting rid of the banks entirely. A more realistic scenario is to partner with banks to give them the best fin-tech has to offer. Large institutions naturally move slower without even considering regulation, so if you want to continue to disrupt, stay smaller, Mr. Khmel suggests.
There are many exciting areas where smart contract technology can be applied to new industries, Mr. Khmel said. Tracking products from origination and all throughout development and shipping until they reach their final destination. This will revolutionize the tracking of organic products and medical supplies.
Nonprofit agencies will benefit from reduced fees and improved transparency blockchain technology provides, Mr. Khmel said. Fund transfers are cheaper, leaving more money for actual tasks. More money on projects keeps donors happy, as will the ability to track where their money is going on the blockchain.
Mr. Khmel said he is excited about a water project in Africa where people get free water that is paid for by a charitable foundation. As people donate, coins are distributed to the mobile wallets of people in need.
“If you donate money to the cause, you’ll know how many litres are donated and where,” Mr. Khmel said. “It builds much more trust between the donor and the organizations.”
The BankEx ecosystem also includes BankEx Labs, an independent lab for tokenization technology that makes global fintech marketplaces, sells startups to banks and sources tokenization solutions to the problems of traditional securities trading for application on the BankEx platform. The BankEx Foundation is a not-for-profit open asset foundation focused on establishing global liquidity protocols. Its members include fintech tokenization startups, asset owners, legal entities, and exchanges.